41302 - WCS NMB Nepal

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Summary of Investment Information

Project Number

41302

Company Name

NMB BANK LIMITED

Date SPI Disclosed

Apr 2, 2018

Country

Nepal

Region

South Asia

Projected Board Date

May 7, 2018

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

May 20, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 27, 2018
Signed : Jul 1, 2018
Invested : Aug 6, 2018

Sector

Commercial Banking - Trade and Supply Chain

Project Description

The proposed project consists of a senior loan of up to US$15 million to be extended to NMB Bank (the “Bank”). The project will provide funding to the Bank to support the working capital needs of its clients, especially Small and Medium Enterprise (“SME”) clients in key sectors within Nepal’s economy.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

The Project is expected to increase access to working capital financing for SMEs in Nepal, which suffer from a significant gap between the current supply of finance and their demand for credit. Working capital is necessary for SMEs to finance their daily business operations, source supplies and pay employees. SME growth ultimately facilitates business growth, job creation and income generation, especially in key productive sectors of the Nepalese economy. The financing will also support key industries, as the ultimate recipients of funds would include buyers of raw materials, processors and manufacturers that support growth.

1. Long term funding: The project will be the first of its kind in Nepalese financial sector to enable local banks to access USD resources beyond 12 months. Facing an environment where liquidity shortages are prevalent and frequent, the Bank will be able to secure stable funding that will help them meet the credit demand in the market. 2. Stamp of Approval: IFC's financing will send a market signal to international banks and other financial institutions that may be reluctant to enter Nepal due to reservations about regulatory uncertainty and sovereign risk. As such, IFC's lending may increase the possibility for additional financing to be provided by external third parties.

E&S Category Rationale / Risks and Mitigation

The project consists of a short-term loan (Working Capital Solutions) for up to US$15 million to NMB Bank, an existing IFC client, to support the funding needs of small and medium enterprises (SMEs) in Nepal. The on lending will primarily comprise providing working capital financing through short-term loans to importers/exporters from the SME sector. The project presents medium E&S risks and impacts which are readily manageable. Hence, the project is categorized as Category FI-2. The E&S requirements will include IFC Exclusion List, additional list of restricted commodities and national E&S laws and regulations.

The main E&S risks and impacts of the project relate to occupational health and safety, labour and working conditions, and pollution aspects at the client's SME borrower's premises and supply chain concerns associated with some commodities. The bank is an existing IFC GTFP client and screens projects against IFC Exclusion List. The Client will need to upgrade its ESMS to incorporate screening against restricted commodity list and include due diligence procedures for assessment of compliance with relevant national E&S laws and regulations. The client needs to appoint an officer in-charge of implementing the enhanced E&S risk management system. The client will be required to ensure ongoing compliance with requirements on labor and working conditions under PS2.

Contacts

For Inquiries About the Project, Contact

NMB Bank Limited
+977-01-4246160
Babarmahal, Kathmandu, PoBox - 11543

For Inquiries and Comments About IFC, Contact

General IFC Inquiries
IFC Communications
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Title & Description	Anticipated Completion Date
Nominate officers	05/10/2018
Staff Training	05/24/2018
Enhance ESMS	05/24/2018
Upgrade HR and life and Fire safety Procedures	08/24/2018

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