IFC Partners with Nepal’s Bank of Kathmandu on Trade Finance and SME Development

IFC, the private sector arm of the World Bank Group, is providing a $2 million facility to the Bank of Kathmandu in Nepal, as part of its Global Trade Finance Program. IFC Advisory Services in the region - the IFC SouthAsia Enterprise Development Facility - will also help the bank tailor a program for institutional capacity building that will help enhance the bank’s services to its small and medium enterprise clients.

Radhesh Pant, Bank of Kathmandu’s Managing Director, said, “IFC’s Global Trade Finance Program will help us expand our network of corresponding banks and create new and valuable business opportunities for our clients in Nepal and around the world. This program will enhance visibility of Nepalese Banks in the Global Financial Market. In addition, through the capacity building program being instituted with IFC-SEDF’s advice and support, we hope to adopt better risk management practices and enhance the overall access to finance to small and medium enterprises in Nepal.”

IFC’s support to the Bank of Kathmandu fits well with its strategy to partner with financial institutions and banks that are committed to developing the corporate and small and medium enterprise (SME) sectors. The program will provide risk coverage in a challenging market and a global network that will help grow the bank’s trade finance business.

Per Kjellerhaug, IFC’s Country Manager for Nepal, Bangladesh, and Bhutan added, “Trade finance is a good example of the many products IFC offers to help develop a sector. Through this program, we provide risk coverage in difficult markets and combine global reach and maximum flexibility. We assist trade finance deals by delivering solutions through a global network of participating banks. The program complements the capacity of banks to deliver trade financing, and this partnership with Bank of Kathmandu paves the way for countries like Nepal to increase their share of global trade.”

Earlier, IFC-SEDF conducted an SME Banking Diagnostics that provided a needs-gap analysis for the Bank of Kathmandu. Anil Sinha, General Manager of IFC-SEDF, said, “We will collaborate with Bank of Kathmandu to develop appropriate SME banking products and services, build its institutional capacity in risk management, and help it develop a pro-SME sales and credit culture.” Sinha is also the South Asia Regional Coordinator for IFC Advisory Services, an increasingly large component of IFC’s contribution to private sector growth in developing regions.

BOK acknowledges the needs of marginalised groups and the poorer sections of the Nepalese society and has been extending small and micro credits. IFC-SEDF will equip BOK in extending small and micro credits in a more structured way.

The Global Trade Finance Program supports trade with emerging markets worldwide and promotes the flow of goods and services between developing countries. IFC provides partial or full guarantees against underlying trade instruments and covers the payment risk of participating issuing banks. The program allows issuing banks to increase the volume and value of trade transactions, with enhanced tenors and access to competitive pricing terms. The letter of credit, bank guarantee, and other trade related instruments issued by Bank of Kathmandu (BOK) will now be confirmed by a large number of confirming banks (through IFC guarantee) listed by IFC under this program across the globe.

Trade development and advisory services for issuing banks represent an integral part of IFC’s Global Trade Finance Program. Advisory services modules include basic and intermediate courses on trade finance. In some cases, IFC places experienced trade finance bankers with issuing banks to help them develop their trade finance and other banking skills.

About IFC

IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives. Through FY06, IFC Financial Products have committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit www.ifc.org.

About IFC SouthAsia Enterprise Development Facility

IFC-SEDF is a multidonor funded facility, managed and operated by IFC. One of 11 such regional programs managed by IFC worldwide, the facility is funded by IFC, the governments of the Netherlands and Norway, the European Commission, DFID (U.K.), CIDA (Canada) and the Asian Development Bank. Set up to promote the growth of SMEs in the region, it facilitates increased access to finance and provides quality business development services to projects in Bangladesh, Bhutan, northeast India, Maldives, Nepal, and Sri Lanka.

IFC-SEDF also works to create a business-enabling environment that is supportive of SMEs and assists in value addition to firms through sector development, organization-specific advisory services, capacity-building programs, training, and research. IFC-SEDF’s ultimate goal is to assist in private sector development to create market opportunities for SMEs and promote pro-poor economic growth in the region.

About the Bank of Kathmandu
Established in 1993, the Bank of Kathmandu is involved in all types of commercial banking activities of Nepal. The bank provides its services through 14 branches and four service centers located in all five development regions of Nepal. The bank had a total asset base of $165.70 million as per the latest audited balance sheet and has a current market capitalization of $91.5 million. In its drive to contribute towards economic growth through access to finance, the bank focuses on developing and strengthening the SME sector in Nepal.