Nepal Second Finance for Growth Development Policy Financing

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The development objectives of the Second Finance for Growth Development Policy Financing in Nepal support the Government of Nepal in its efforts to strengthen financial sector stability, diversify financial solutions, and increase access to financial services. Pillar 1, strengthening financial sector stability, helps to strengthen the Nepal Rastra Bank supervision effectiveness, addressing weaknesses in banking sector risks. Reforms to supervision methodologies, practices, and systems - combined with associated institutional capacity building - enable Nepal to comply with three Basel Core Principles related to bank supervision. Pillar 2, diversifying financial solutions, puts in place the enabling conditions through which financial markets can develop and provide new, diversified sources of sustainable, climate-resilient finance for inclusive and resilient growth. This allows the economy to diversify away from an overwhelming reliance on commercial bank lending. Results deriving from these reforms, including increased institutional investments in securities, growth of venture and private equity, and placement of new private sector-financed disaster products represent a significant change away from the traditional sources of bank and government financing. Pillar 3, increasing access to financial services, are designed to open access to a wider range of more competitively priced financial services - from within Nepal and internationally - and address the FSDS financial inclusion and climate objectives. This is achieved through a combination of policy reforms that change the market behavior of providers (fostering increases in international borrowing, new digital services, and guarantee products) and improve consumer bargaining power (through changes to collateral usage, borrower credit ratings and literacy training). In turn, this will ensure deepening of the financial sector through an increased demand for financial services.

World Bank Group

Project

Power Generation (CCGT), Commercial, Government