Nordic development finance institutions (DFIs) Finnfund and Swedfund have completed their first direct investment in Nepal’s banking sector by providing a loan of US$10 million each to Siddhartha Bank.

The proceeds of the investment will be used to support the growth of micro, small and medium enterprises (MSMEs), agriculture and agribusiness, and the development of the hydropower sector in Nepal.

The investment will also support gender equality and women’s empowerment, with at least 30% of the loan proceeds being allocated to women. The bank has developed tailor-made products for women entrepreneurs and currently 41% of its clients are women.

The two DFIs are also supporting Siddhartha Bank in developing its internal processes to address environmental and social issues and to assess and mitigate climate risks and impacts related to its activities.

“There is limited access to long-term funding in Nepal and as a DFI, we can also further enhance Siddhartha Bank’s environmental and social governance, as well as impact work, which makes this investment important. The investment is in line with Swedfund’s strategy to strengthen financial inclusion in countries with the lowest income”, says Jane Niedra, investment director for financial inclusion at Swedfund.

MSMEs account for nearly all registered firms in Nepal. By supporting improved access to financing for these enterprises, the investment can help Siddhartha Bank contribute to Nepal’s national goals of becoming a mid-income country by 2030 and a developed country by 2043.

Nepal exports surplus hydropower to India. Beyond reducing greenhouse gas emissions, strengthening Siddhartha Bank’s capacity to increase lending to the hydropower sector can bolster Nepal’s financial and climate resilience.

“MSMEs are the key pillar of Nepal’s economy, while their access to bank credit has been limited. Another challenge for Nepal’s development is that hydropower potential needs financing. Thanks to our investment, Siddhartha Bank can now grow their loan portfolio in those sectors,” says Ulla-Maija Rantapuska, senior investment manager at Finnfund.

One of the largest banks in Nepal, Siddhartha Bank has a network of 196 branches across the country. The bank has been positioning itself as a digital first bank for sustainable growth. It is also reaching out to the many unbanked people in remote areas to support financial inclusion.

Finnfund is a Finnish development financier and impact investor. It invests €200-250 million (US$ 217.12-217.39 million) in 20–30 companies in developing countries each year.

Swedfund is Sweden’s development finance institution with the mission to contribute to poverty reduction through sustainable investments in developing countries. At the end of 2023, Swedfund had 73 portfolio companies.