Sustainable economic development in rural and semi-urban areas - MSME financing, Phase II

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The aim of the FC module is the sustainable provision and use of a needs-based loan offer by micro, small and medium-sized enterprises (MSMEs) operating primarily in rural and semi-urban areas for business investments (working capital and fixed asset investments). By better tailoring the financing offer to the needs of rural and semi-urban MSMEs, the FC module contributes to the overarching development policy goal of an improved entrepreneurial environment for sustainable and socially balanced economic development in Nepal. In the context of the corona crisis, the FC module is also intended to enable access to short-term bridging loans to maintain the liquidity of MSMEs. The indirect target group are MSMEs operating primarily in rural and semi-urban areas (including cooperatives and sole proprietors), who receive improved access to a needs-based loan offer through the additional refinancing and the MSME-specific products. The immediate target group are two selected banks - the commercial bank Siddhartha Bank Limited (SBL) and the development bank Muktinath Bikas Bank Limited (MNBBL) - which provide financial services to MSMEs and whose capacities and activities in the field of rural and semi-urban MSME financing will be strengthened. The total cost of the FC module is EUR 14.5 million. Of this, a total of EUR 7.0 million will be financed through an FC grant. EUR 6.0 million FC grant will be provided in the form of a long-term loan for the refinancing of the MSME loan portfolio of the two partner financial institutions (PFIs) and EUR 1.0 million FC grant for an accompanying measure. EUR 7.5 million will be contributed as the PFI's own contribution to leverage the FC funds for the refinancing line. The accompanying measure aims to strengthen the capacities and know-how of the PFI (including in terms of crisis management) and MSMEs (especially in the area of basic financial education). In addition, the Nepalese central bank, Nepal Rastra Bank (NRB), is to be supported in setting up and managing a revolving fund for MSME financing.