BoK is an existing IFC client. It was set up in 1995 as a joint venture between SIAM Commercial Bank, Thailand (SIAM) and some local investors. The individual local promoters held a 45% stake in BoK, SIAM 30% and general public 25%. In 1998, SIAM sold off its 30% equity stake as part of its decision to exit its investments in most Asian economies following the Asian crisis in 1997.

Currently, the promoter group holds a 41.8% stake with the balance being held by the general public. Ran Bahadur Shah, Sharda Singh, Nepal Mentha Products and Damber Bahadur Malla are the largest promoter shareholders and own 4.7%, 3.9%, 3.7% and 3.6% stake respectively.

The CEO, Mr. Ajay Shrestha, has been heading the bank since 2010. He is a well-respected banker with a proven track-record and experience in working for a multinational bank.

The total project cost is estimated at US$8 million.
The proposed IFC investment is upto US$8 million loan for IFC’s own account.

8.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	8.0
Equity

* These investment figures are indicative

The Bank is headquartered in Kathmandu, Nepal and has countrywide presence via 43 branches, 7 counters and 53 ATMs.
Investments can be made throughout the country depending on where the need for SME financing is most acute.

Financial Sector Deepening: The Project will enable BoK to access foreign currency funding and compete on a level-playing field with foreign banks that have the benefit of parent funding. The IFC funding will also encourage other international banks / FIs to lend to local banks in Nepal eventually increasing the access to market funding.

Supporting Trade: Support to SMEs (via trade financing) is critical as trade in Nepal contributes 41% to the GDP. The project will have a positive impact on economic activity in Nepal

Catalytic Role: By providing critical foreign exchange liquidity to BoK, IFC will play a catalytic role in meeting the immediate trade finance and working capital needs of local SMEs in the absence of other viable commercial lenders. Following the success of the GTFP program, IFC will enhance its support for SME trade through this loan, thereby providing necessary working capital to SMEs to grow competitively in the global/local market.

Diversification of dollar sources of funding: Sources of dollar deposits in Nepal are limited and seasonal. This creates problems in terms of availability of stable dollar funds and economic cost of capital for the bank thus impacting their trade finance activities negatively. The proposed dollar line would help to diversify funding sources.

Potential Mobilization: IFC can bring in other institutions to increase both short-term and long-term liquidity support to BoK for their financing needs

The Project consists of a short-term loan to BoK to support trade and foreign currency working capital needs of SMEs and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC analyzed the FI’s relevant portfolio and the activities proposed to be supported with IFC financing for types of commodities, countries, SME companies/ traders, transactions, size and tenor. The applicable requirements include (i) the IFC FI Exclusion List; (ii) the applicable National Social and Environmental Laws and regulations; (iii) the IFC Performance Standard -2 and EHS guidelines; and (iv) the eligibility criteria/ country commodity matrix to be developed depending on the portfolio.

IFC also appraised the FI’s labor practices according to the IFC’s Performance Standards 2: Labor and Working Conditions.

The project may be required to: Develop an Social & Environmental Management System (SEMS), prior to commitment to the satisfaction of IFC; Identify responsible, qualified persons to manage and implement the SEMS; and Demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions.