52346 - SLGP SBL RSF

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Summary of Investment Information

Project Number

52346

Company Name

Siddhartha Bank RSF

Date SPI Disclosed

Nov 11, 2025

Country

Nepal

Region

South Asia

Projected Board Date

Dec 11, 2025

Environmental Category

FI-2 - Limited

Status

Pending Disbursement

Last Updated Date

Jan 17, 2026

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Dec 18, 2025
Signed : Dec 23, 2025

Sector

Commercial Banking - Risk Mgmt Facility

Additional Project Attributes

Blended Finance

Project Description

The proposed project consists of an unfunded risk sharing facility (RSF) on a 50:50 basis between IFC and Siddhartha Bank Limited (Bank) in Nepal to support up to US$40 million Nepalese rupee (NPR) equivalent of eligible MSME loans to be originated by the Bank (the Project). IFC's maximum risk amount will be up to US$20 million NPR equivalent. The Project provides the Bank with a credit risk mitigation instrument to help increase access to finance for MSMEs, including women-owned MSMEs (WMSMEs) and climate MSMEs. It is the first time that IFC is doing an RSF in Nepal.

Subject to eligibility confirmation, the Project would be processed under IFC's Small Loan Guarantee Program (SLGP, the Program), a programmatic approach to derisk and scale up financing for SMEs in Nepal and other eligible countries. SLGP is supported by a pooled first-loss guarantee (PFLG) provided by the IDA-PSW Blended Finance Facility.

Associated Advisory Engagement

Under SLGP, the Project will incorporate advisory services which comprise of operational and/or technical support to help the Bank scale origination in the targeted MSME segments through (i) reporting training to equip the Bank to meet the quarterly and annual reporting requirements, and (ii) operational implementation support to assist the Bank to integrate the risk mitigation product into its systems and procedures.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	20.0
Loan
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
Guarantee	Loans to SME Borrowers

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

Development Impact

Project outcomes Stakeholder effects – Increased access to finance for MSMEs: The MSME finance gap in Nepal is estimated at US$6 billion, which represents approximately 14% of the GDP with roughly 55% of MSMEs being constrained by lack of access to finance. Access to finance for MSMEs is constrained by lack of information, high reliance by banks on collateral, bank business models that are not suited to meeting the needs of MSMEs, with only a few banks having dedicated MSME financing units. IFC anticipates that the Project will contribute to increased access to finance for MSMEs, including women-owned businesses and climate MSMEs in Nepal and help narrow the MSME finance gap in the country. Contribution to market creation - Competitiveness: IFC expects that the Project will promote the competitiveness of the MSME finance market in Nepal. IFC anticipates through systematic interventions focused on provision of a risk mitigation tool in Nepal will demonstrate the effectiveness of RSFs in mitigating the credit risk of MSMEs and build a business case for MSME lending spurring competitiveness in the MSME financing market.

Financial Additionality: Innovative Financing Structure: The Project provides a critical risk mitigation tool that will allow the Banks to mitigate the perceived risk of lending to MSMEs by covering up to 50% of principal losses on all eligible loans. The RSF is also expected to reduce the capital charge on the MSME portfolio covered by IFC's guarantee due to its AAA rating. Thus, the Project would allow the bank to be more capital efficient as it will need less capital to originate the new MSME portfolio. Resource Mobilization: The Project expects that the Banks will retain 50% of the MSME portfolio risk that are not covered by IFC. Thus, the amount of up to US$10 million equivalent will count towards IFC's Core Mobilization. Non-Financial Additionality: - Knowledge, innovation and capacity building: Under the Small Loan Guarantee Program, the Project will incorporate advisory services which comprise of an operational and/or technical support to help the Banks scale origination in the targeted MSME segments through (i) reporting training to equip the Banks to meet the quarterly and annual reporting requirements, and (ii) operational implementation support to assist the Banks to integrate the risk mitigation product into its systems and procedures.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
Number of Outstanding Loans, MSMEs	number		Not Available	Not Available	Not Available
Value of Outstanding Loans, MSMEs	$		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The proposed project will support Siddhartha Bank Limited (SBL) through an unfunded risk-sharing facility (RSF) for its MSME portfolio. The MSME portfolio includes lending to microfinance institutions and to businesses involving retail and wholesale trading, construction, manufacturing and sectors such as cement, brick kilns and agri-based production with both short term and long-term exposure. The portfolio may also include renewable energy sub-projects. The main E&S risk and potential impacts of this investment relate the activities of the MSMEs, their ability to manage these risks and impacts, and the Banks capacity to identify and manage these E&S risks and monitor MSMEs’ E&S performance in line with IFC’s applicable E&S requirements.

The RSF portfolio will include women-led MSMEs, climate MSMEs transitioning to clean boilers, and other MSMEs with low to medium E&S risks. These risks are expected to be limited, site-specific, reversible, and manageable with mitigation measures. E&S risks and potential impacts in the sectors to be supported include among others labor working conditions and accommodation, community impacts, occupational health and safety issues (particularly with contractors), GBVH, supply chain, or pollution and waste management. The project will not support activities on the IFC Exclusion List, coal-related projects, or higher-risk activities, such as those involving a) involuntary resettlement, b) risk of adverse impacts on indigenous peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage, d) retrenchment, and/or e) significant occupational health and safety risks. Additional sectoral restrictions may be considered.

Hence, the E&S risk of the proposed investment is medium, and the Project is categorized as FI-2 according to IFC's Policy on Environmental and Social Sustainability. For this Project, IFC's applicable E&S requirements will be the IFC Exclusion List, the applicable environmental and social national laws and regulations, and screening out non-eligible and higher-risk activities. The Bank will additionally be required to be in line with the life and fire safety requirements of Performance Standard 4, and the relevant requirements of IFC’s Performance Standard 2 on Labor and Working Conditions.

The Bank has an E&S Policy and an E&S risk management system (ESMS) in line with the Nepal Rashtra Bank’s ESRM Guidelines 2022 that are broadly aligned with IFC Performance Standard 1. (https://www.nrb.org.np/contents/uploads/2022/02/Final-ESRM-with-cover.pdf).

The Bank has assigned a dedicated E&S team consisting of the E&S focal point and E&S Managers from the Credit team for the ESMS implementation. The ESMS includes E&S risk categorization procedures, E&S due diligence covering compliance as well as ESRM requirements, identification of corrective actions, and risk-based monitoring of sub-borrower’s performance. For this Project, ESMS will be enhanced through integrating a tool/procedure to the ESDD checklist to duly screen transactions in non-eligible and higher risk activities from the pool of MSME loans to form a part of the RSF. The bank will also strengthen the E&S capacity of their staff to implement the upgraded ESMS through trainings.

Bank has a documented HR policy and a dedicated HR team to manage potential risks emerging out of human resources management. The HR policy and procedures will be upgraded in line with the relevant national laws and PS2 requirements. It follows the fire safety regulations as applicable to its premises.

S.no	Title	Anticipated Completion Date
1	Update ESDD checklist for the IFC’s guaranteed portfolio;	04/01/2026
2	Carry out training for the staff to implement ESMS enhancement.	05/01/2026
3	Update HR Policy in compliance with the national laws and PS2 requirements.	08/01/2026

Contacts

For Inquiries About the Project, Contact

Siddhartha Bank Limited
Shishir Hari Rajbhandari
Head Treasury and Investment Banking
977-1- 5970720
shishir.rajbhandari@sbl.com.np

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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