The Second DFI Mission 2024 has been concluded with the intent of increasing foreign investment in Nepal and to coordinate with foreign investors and Nepal’s private sectors. The Second DFI Mission 2024 was commenced on 23rd April and completed on 25th April 2024. The Second DFI Mission 2024 has been organized by IIN with the support of BII, FMO, and SDC. In the event, more than 150 delegates representing Nepal Government, DFIs, Impact Investors and other stakeholders participated. An in-depth discussion has been made regarding advancing effective DFIs investment in Nepal during this three days long Second DFIs Mission 2024 in various formal and informal sessions. Various presentations have been made on Nepal’s private sector investment partnership with DFIs in various sectors. More than 1000 Million Dollar of DFIs has been invested in Nepal from past to now. This leads to contribution in economic growth of Nepal.
Mr. Maha Prasad Adhikari, Governor, Nepal Rastra Bank (NRB) said, the DFIs investment will be very significant in Nepal. He added, DFIs investment can’t be utilized in the unproductive sector, that investment should be utilized and mobilized in the productive sector according to DFIs focused sectors and DFIs priority’ sector is also our nation’s concern and priority.
Mr. Madhu Kumar Marasaini, Secretary, Ministry of Finance (MoF) Said, at present Nepal needs investment support to generate employment. “We should transform our system and bring more investment, especially from the private sector and DFIs. “Bringing investment from DFIs helps to bring in technology, knowledge and expertise besides money,” he said.
Highlighting the objective behind organizing the 3 days long DFI Mission 2024 in Nepal, Ms. Danielle Meuwly, the ambassador of Switzerland to Nepal, speaking during the inaugural session, said that during the 60 years of partnership between Nepal and Switzerland, both countries have made several important milestones and the second DFI mission is one of them, building on the outcomes of first DFI mission organized in the spring of 2023. “During the first mission of the DFI, we had the opportunity to meet the Ministry of Finance, Nepal Rastra Bank and the Security Exchange Board of Nepal,” Meuwly said. “We had the opportunity to discuss the concerns jointly and suggested some ideas to the government,” she added. “Now, a year later, many of these recommendations have been acknowledged and steps were taken to address issues like locking investment, payment before disbursement and decomposing interest rate.
This shows that the government has a strong commitment to facilitating DFI investment in Nepal”. To achieve sustainable and inclusive growth, it will be important that the government and private sector work together to jointly increase investment and strengthen the partnership with DFIs, she said. “And this is why Switzerland supports Invest in Nepal Impact.” Switzerland joined hands with British International Investment and the Dutch Entrepreneurial Development Bank FMO with a vision to unlock DFI investment and nurture Nepal’s investment ecosystem, Meuwly said.
Kucharski added, the good news is that the impact investment market industry focuses on delivering impact is growing at a rate of 18% per year. Over the last few years DFIs are a significant share of 27% and South Asia is getting 8% of the assets under management.
The presentation has been given on DFI’ Investment in various countries of the World and the status of Nepal. Mr. Alex Kucharski, Manager, British International Investment (BII) said, in terms of achieving Sustainable Development Goals (SDGs) there is a huge gap in financing. It is almost the gap of 4 trillion dollars. The need to fulfill this gap and financial support is higher. On the other hand there are certain challenges and crises like; war in Ukraine, debt pressures, high inflation and slowdown on global growth making available capital getting smaller. Kucharski added, the good news is that the impact investment market industry focuses on delivering impact is growing at a rate of 18% per year. Over the last few years DFIs are a significant share of 27% and South Asia is getting 8% of the assets under management. A variety of sectors financial services is a big focus of impact investors including energy, healthcare, food and agriculture. The impact investors invest in a variety of assets classes i.e. equity, private debt, public debt. We’ll have long-term horizons so we’re able to invest patient returnable capital. We’re all government owned as well. We provide loans, equity or guarantees and also provide technical assistance to support our investees Kucharski said.
Mr. Rabi Rayamajhi, the country representative of the BII Nepal, said that in the last 15 years, investment commitment from DFIs has been growing in Nepal. The DFI investment commitment in 2023 was $300.75 million. “The number of DFI investment commitments has spiked after 2018 as that year the government opened up the external commercial borrowing window, which allowed the foreign lender [BII] to come and engage with Nepali banks.” According to Rayamajhi, about 59 percent of DFI commitments have come into financial services, 28 percent in energy, 10 percent in the funds and the rest in other sectors, Rayamajhi said. In terms of product, 84 percent has been invested as debt in hydropower projects or banks, 15 percent in equity, and some DFIs are bringing guarantee instruments as well, he added.
“DFI commitment in Nepal stands for two reasons, one, and it is sizable. Compared to the last 15 years of commitment from the Department of Industry that is looking at small-scale investments, DFI investment to date is one-third of it,” Rayamajhi said. “Second, the conversion rate of commitments in Nepal is roughly around 30-40 percent from the general investment but the commitment from the DFI is almost 100 percent materialized. That’s the difference in quality investments,” Rayamajhi said.
The top five investors in Nepal by commitment in the last 15 years are the International Finance Corporation (IFC), the Development Finance Corporation (DFC), BII, the Dutch Entrepreneurial Development Bank, FMO and the Asian Development Bank.
Mr. Jorim Schraven, Director of Impact, Dutch Entrepreneurial Bank (FMO), introducing the FMO said, they have three core focuses sectors are agri-business, energy and financial institutions and their strategy is aptly named pioneer develop scale precisely what we have in mind for Nepal and we created lasting change by nurturing business and transforming them into investment ready projects we do this through ecosystem building and direct engagement with businesses and that way we try to make opportunities bankable so this commitment to market creation is pivotal to driving sustainable investment. It’s essentially a catalyst that bridges the gap between potential tangible impact by nurturing emerging segments and businesses. We create an environment that’s ripe for investment. Our focus extends beyond financial returns; we actually seek positive environmental and social impact, increased productivity, higher income job creation, lots of impact. In essence we’re trying to be architects of changes constructing pathways for sustainable growth. Let’s pivot to invest for Impact Nepal, our collaborative platform which we established on February 21 which brings together FMO with Swiss Agency for Development Corporation and BII. Together we’ve embarked on a journey to understand Nepal’s investment landscape to identify constraints and translate our findings into actionable strategies. Since August 22 we’ve actually been implementing initiatives to help shape the market of tomorrow here In Nepal. It’s a multifaceted approach. We are close with financial institutions, private equity and venture capital funds and we equip them with tools needed to attract foreign investment. Our investment readiness support ensures that businesses are well prepared to engage with investors but our vision extends beyond individual transactions. We aim to develop entire ecosystem that thrives on collaboration, he added.
Mr. Jörg Frieden, Chairman of the Board of the Swiss Investment Fund for Emerging Markets (SIFEM). Said in the mission, the objective of the DFIs isn’t only generating returns but DFIs should be able to create a trustworthy environment among governments and people. “The issues related to easing investments by Development Finance Institutions are gradually being addressed by the government, which is a positive sign for mobilizing local savings and attracting foreign investments. The government’s recognition of DFIs as partners in development and economic growth is very encouraging for our investments, he added.
This is a significant time for Nepal to economic growth and for this purpose DFIs and Nepal’s private sector can do partnership in many sectors, Mr. Rob Fenn, British Ambassador to Nepal mentioned in the Second DFI 2024. “There are deep-rooted structural issues, legal and regulatory ambiguities and political uncertainty in Nepal, which has been preventing the flow of large amounts of investments into Nepal,” said Rob Fenn. “Removing those hurdles requires a policy change.” “There are attractive investment opportunities across several sectors in this country. Together DFIs and development partners can unlock the access to finance for those strategic sectors.” “Our task is to create a pipeline of investment deals to DFIs in Nepal and development partners can help bridge the massive gap between supply and demand for investment here,” Fenn said.
In the Second DFI Mission 2024, on behalf of Government of Nepal Mr. Madhu Kumar Marasaini, Secretary, Ministry of Finance (MoF) Said, at present Nepal needs investment support to generate employment. “We should transform our system and bring more investment, especially from the private sector and DFIs. “Bringing investment from DFIs helps to bring in technology, knowledge and expertise besides money,” he said. He said that the private sector’s contribution to the country’s GDP is 80 percent and more than 86 percent of employment is generated by the private sector. “So investment needs to be facilitated by creating a conducive environment,” Marasini said. The government has decided to amend nine acts/ laws related to investment through an ordinance to create a conducive environment; he shared this as good news.
Talking in the National Weekly Television and Radio Program “Talk of the Town” Mr. Maha Prasad Adhikari, Governor, Nepal Rastra Bank (NRB) said, the DFIs investment will be very significant in Nepal. He added, DFIs investment can’t be utilized in the unproductive sector, that investment should be utilized and mobilized in the productive sector according to DFIs focused sectors and DFIs priority’ sector is also our nation’s concern and priority. On behalf of NRB, we’re very open. We’ve prepared similar and clear rules and regulations for all. The DFIs roles will not be limited to financial support. It will be in blended financing, mitigating hurdles on banking systems, oversees on green financing and assessment on the project in upcoming days, he added. To increase investment in Nepal and scaling economic prosperity of the country we should take strategic steps and broaden/open our mindset for internal and external investment, he added. Minister Pun highlighted recent legal amendments aimed at simplifying investment processes, indicating a positive shift in Nepal’s investment climate.
