Growing Nepali Financial Service Sector -“Accelerating DFIs Investment in Nepal’s Financial Sector Industry”

Nepal is going into a middle income status’ nation. This is a great challenge for us. We have a lot of issues and constraints for sustainable economic growth and development. Despite this, we also have opportunity and space for sustainable financial sector growth by investing and expanding existing and new businesses and entrepreneurial ventures of Nepal in the support of DFIs. Hence, with an intend to exploring and sharing experiences of international best practices of sustainable financial sector growth, learning, lesson learnt from that A Panel Discussion on “Growing Nepali Financial Service Sector” with the theme of “Exploring Strategies for Growing Nepal’s Financial Service Industry and the role of DFIs” has been organized. It is a part of the Second DFIs Mission 2024.

though this time we have to spread a positive message in the country that will make people strong, feel secure and will start to do creative and innovative business. 

The major aim of the panel discussion is exploring the evolution of Nepal’s financial service industry and emphasizing the crucial role of DFIs. A comprehensive presentation by the International Finance Corporation (IFC) addressed growth prospects within Nepal’s financial sector.

This was followed by a thought-provoking panel discussion featuring distinguished panelists Mr. Samir Abhyankar, Managing Director and Head of Financial Service Group British International Investment (BII), Mr. Preter Gorgels, Manager, FIS Asia, FMO, Mr. Ashok Sherchan, Chief Executive Officer (CEO), Prabhu Bank Limited, Mr. Santosh Koirala, Vice-president, Nepal Bankers Association (NAB) and Mr. Babacar S. Faye, Country Representative, International Finance Corporation (IFC) and the panel discussion was moderated by Mr. Buddhika Samarasinghe, Program Director, Invest for Impact Nepal (IIN). The panelists have shared their experiences, international best practices, lessons learnt, and try to grapple with what Nepal needs to do to ensure the growth of the financial sectors industry adopting a more equitable path to economic growth and the prospective role of DFIs Investment in Nepal’s Financial Sector Industry.

Mr. Samir Abhyankar, Managing Director and Head of Financial Service Group British International Investment (BII), has firstly introduced BII, what and how it has been working emphasizing in Africa and Asia including Nepal. He also gave insights regarding the crucial role of BII on expanding Nepal’s financial service industry. He was very happy to be invited and obtained platforms for sharing.

Nepal Rastra Bank (NRB) is enforcing it but sufficient knowledge and skilled, adequate manpower to enforce is really required in order to international investor to be credible.

Mr. Pieter Gorgels, Manager FIS Asia, FMO has shared regarding how they have been supported to the Srilanka and Ehiopiain a large level as a commercial investor. The Ethiopia is a challenging country from the regulatory perspective. There market has been closed for foreign direct investment into the financial sector. The USD loans were not permitted. But, they did positively with the regulator to ultimately provide the First USD loan very recently to a bank in the sector.  He also expressed the possibility of Nepal too. He also explained the significance of sector initiatives to ensure and everyone needs to participate for all the partners. He clarified the reason for having sector initiatives is to set minimum standards based on international best practices to entice foreign lenders to become active also become very comfortable to adhere international standards. He also mentioned the prospective markets in Nepal especially renewable energy. He appreciates this scope as a great but also signified big risk too. He expressed this ambition of the Nation of very challenging because of required 20 billion investments. He seems possibility to be successful of this ambition only if foreign investment comes into the market. The foreign investors need to be very comfortable on ens standards. He appreciated Nepal is way forward than Ethiopia regarding foreign investment regulation at the same time its needs to be predictable, its needs to be enforced especially on ens standards. He also point out Nepal Rastra Bank (NRB) is enforcing it but sufficient knowledge and skilled, adequate manpower to enforce is really required in order to international investor to be credible. He also appreciates the Bankers Associations and FIS for working on technical assistance in the field of ens, collaborated with the local university to prepare a curriculum at university. He takes it as very excellent ideas.  

Mr. Ashok Shrestha, Chief Executive Officer (CEO) of Pabhu Bank Limited has given his reflection regarding where Nepal is going in the discussion. At first, he expressed his immense gratitude for obtaining an opportunity to be a part of the discussion. He expressed his opinion regarding DFIs as a very new and young concept for us. He highlighted the involvement and contributions of multilaterals since long times like International Finance Corporation (IFC), World Bank and Asian Development Bank (ADB) but take these new bilateral DFIs as a very young and new concept. He says the maximum financial institution of Nepal is also new and just entered into the sector and very new to understand their terms and condition as other things. So it is necessary to understand the environment and socio-economic context of Nepal. He is optimistic regarding their contribution and said, due to the vision of DFIs and their contribution we can reach very far. He added DFIs support can create miracles in Nepal’s economy but there are risks of fluctuations for this we should be able to change our strategies and plan accordingly. He expressed his hopefulness regarding better times in future, confident to get support and expecting policy changes as per international best practice. He also requested DFIs for investing and supporting our businesses and financial institutions. 

Mr. Santosh Koirala, Vice-president, Nepal Bankers Association (NBA) given his perception from an industry wide perspective, says there should be strong political commitments and stability in the country for sustainable economic growth. He expressed the problems and challenges we have been facing for some time in the banking industry due to timely actions, issuance of directives and the policies from the Central Bank. He showed his optimism regarding doing better in the upcoming days.  He also shared about some systems he informed regarding financial stability and economic growth from the government and central bank. He expressed his gratitude for being invited as a representative of the NBA. He shows the NBA’s great motion of interest to all DFIs for training and development in a collaborative approach for development of the financial sector.

The panel discussion was also followed by the question and answer sessions. The participants have raised their questions to the respective panelists. Addressing the question of the participant, Mr. Ashok Shrestha, Chief Executive Officer (CEO) of Pabhu Bank Limited said, though this time we have to spread a positive message in the country that will make people strong, feel secure and will start to do creative and innovative business.  Mr. Samir Abhyankar, Managing Director and Head of Financial Service Group, British International Investment (BII) said in the discussion, you can expect the banks to slowly dipping into non-collateralized lending. It will probably come over time. We should be more demanding around how the banks use our money. We’re actually requiring a minimum amount of non-collateral lending as part of the total portfolio and we’re ready to provide technical support and handholding so that banks start getting more comfortable with this kind of methodology. It is a very different mindset so that’s how we’re approaching it as well, he added.

Mr. Babacar S. Faye, Country Representative, International Finance Corporation (IFC) has explained the significance of how powerful the availability of reliable credit information can be for individuals as well as for business sharing his own experience. He said many small businesses are struggling to require getting capital; they rely on their personal assets to provide guarantees.  He added, it will be very important for the regulators to push through these amendments and for the market to also be more aware and learn how to use them. That will help in terms of these collateral issues. That’s been really hampering access to capital for small businesses and households, he added.