World Bank approves $95m operation to expand finance access for SMEs in Nepal

WASHINGTON: The World Bank’s Board of Executive Directors has approved a $95 million operation to expand access to finance for more than 100,000 small and medium enterprises (SMEs) in Nepal and to promote job-led private sector growth.

The Sustainable and Inclusive Finance Project (SIF) will strengthen Nepal’s Deposit and Credit Guarantee Fund (DCGF) to expand risk-sharing, improve financial sustainability and introduce new guarantee products targeted at underserved groups, including women-led businesses. The project is designed to ease access to finance, reduce transaction barriers and help integrate micro, small and medium enterprises (MSMEs) into regional and global value chains.

“This operation will strengthen Nepal’s Deposit and Credit Guarantee Fund (DCGF) to expand risk-sharing, enhance financial sustainability, and introduce new guarantee products for underserved segments such as women-led businesses,” said David Sislen, World Bank Country Division Director for Maldives, Nepal, and Sri Lanka. “By easing access to finance and reducing transaction barriers, the operation will broaden financial inclusion, support the integration of MSMEs into regional and global value chains, and foster job creation and private sector–led growth.”

The SIF builds on reforms supported under the World Bank-financed Financial Sector Stability and Finance for Growth Development Policy Credit (DPC) series, which concluded in 2024 and prioritised access to finance for underserved segments. Complementing those reforms, the project will invest in the technology and institutional capacity of the Credit Information Bureau of Nepal (CIBN) to expand data coverage, integrate alternative data sources, and strengthen data security and privacy. The International Finance Corporation has been supporting CIBN’s modernisation efforts.

“Inadequate collateral and limited credit histories have long constrained SMEs’ access to affordable finance while limiting lenders’ ability to accurately assess credit risk,” said Sabin Raj Shrestha, Senior Financial Sector Specialist for the South Asia Region and Task Team Leader for the operation. “The DCGF will be strengthened by upgrading its management information system, improving claims-settlement efficiency, and transitioning to risk-based pricing and first-loss coverage.”

The project also aligns with the Government of Nepal’s recently approved second Financial Sector Development Strategy and is expected to support broader financial inclusion and private sector development across the country.