Nepal - Project FinancingNepal - Financing
Major projects are usually financed through foreign consortium financing. Infrastructure projects developed by the public sector are funded by forming a consortium of multilateral funding agencies, such as the World Bank and the Asian Development Bank, and bilateral funding agencies. Similarly, projects developed by the private sector are usually funded by forming a consortium of a number of foreign commercial lenders. The newly formed Nepal Infrastructure Bank will likely play an increasingly noticeable role in financing instrastructure projects in the coming years.
Both the World Bank and the Asian Development Bank are active in lending for development activities, including roads, telecommunications, hydroelectric power and other infrastructure. Both provide loan and grant financing for public sector projects and loan financing for local companies.
The U.S. Export-Import Bank (Ex-Im Bank) can lend to both the private and public sectors in Nepal, but only against a public sector guarantee. Availability of credit varies from year to year depending on Nepal's risk rating. The newly created U.S. International Development Finance Corporation (USIDFC), will bring together the capabilities of the Overseas Private Investment Corporation (OPIC), which was made limited financing available to projects with U.S. investment interest and USAID’s Development Credit Authority. Agreements with Ex-Im Bank, USIDFC, and the International Finance Corporation (IFC) are in place. There are also numerous bilateral financing and insurance arrangements. The U.S. Trade and Development Agency (TDA) funds feasibility studies for projects with significant commercial implications for exports of U.S. goods and services.
The Nepali banking system is small, fragmented with some institutions plagued by bad loans. Banking system assets totaled approximately $28.4 billion as of mid-July 2018, and was backed-up by $3.6 billion in total capital funds implying a total capital-to-assets ratio of 12.5%. The total amount of loans and advances of commercial banks to the private sector was $19.9 billion. Non-performing loans as a percent of total loans declined to 1.49% in July 2018 compared to 1.67% a year earlier. As of January 2019, the gross foreign exchange reserve of the country stood at $8.18 billion, which is sufficient to finance merchandise imports for 8 months. Banks are only willing to consider loans with terms of up to five years. It is difficult to borrow in excess of $20 million from any combination of banks in Nepal. Similarly, liquidity constraints restrict the capital that can practically be raised on the Nepal Stock Exchange through any one public issue to less than $5 million. There is no regulatory system to encourage and facilitate portfolio investment in the industrial sector. Local commercial banks occasionally form a consortium to finance major projects in the hydropower and other infrastructure sector, depending upon the future prospects of the projects.
Foreign commercial lending is scarce and expensive. Currently, there are no resident or non-resident foreign commercial banks that have standing credit limits for loans of a maturity of more than one year. The government permits foreign institutional investors to own up to twenty-five percent of the shares of listed Nepali firms in certain sectors, such as hydropower and tourism. Promoters can sell their shares and repatriate capital. Nepal Rastra Bank, the central bank of Nepal allows up to eighty-five percent foreign equity participation in domestic financial institutions.
U.S. Commercial Service Liaison Offices at the Multilateral Development Banks (Asian Development Bank, World Bank)
The Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the Asian Development Bank and the World Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects, and advocate on behalf of American bidders. Learn more by contacting the Commercial Liaison Offices to the Asian Development Bank (http://www.export.gov/adb/) and the World Bank (http://export.gov/worldbank).
Web Resources
Commercial Liaison Office to the Asian Development Bank http://www.export.gov/adb/
Commercial Liaison Office to the World Bank http://export.gov/worldbank
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Both the World Bank and the Asian Development Bank are active in lending for development activities, including roads, telecommunications, hydroelectric power and other infrastructure. Both provide loan and grant financing for public sector projects and loan financing for local companies.
The U.S. Export-Import Bank (Ex-Im Bank) can lend to both the private and public sectors in Nepal, but only against a public sector guarantee. Availability of credit varies from year to year depending on Nepal's risk rating. The newly created U.S. International Development Finance Corporation (USIDFC), will bring together the capabilities of the Overseas Private Investment Corporation (OPIC), which was made limited financing available to projects with U.S. investment interest and USAID’s Development Credit Authority. Agreements with Ex-Im Bank, USIDFC, and the International Finance Corporation (IFC) are in place. There are also numerous bilateral financing and insurance arrangements. The U.S. Trade and Development Agency (TDA) funds feasibility studies for projects with significant commercial implications for exports of U.S. goods and services.
The Nepali banking system is small, fragmented with some institutions plagued by bad loans. Banking system assets totaled approximately $28.4 billion as of mid-July 2018, and was backed-up by $3.6 billion in total capital funds implying a total capital-to-assets ratio of 12.5%. The total amount of loans and advances of commercial banks to the private sector was $19.9 billion. Non-performing loans as a percent of total loans declined to 1.49% in July 2018 compared to 1.67% a year earlier. As of January 2019, the gross foreign exchange reserve of the country stood at $8.18 billion, which is sufficient to finance merchandise imports for 8 months. Banks are only willing to consider loans with terms of up to five years. It is difficult to borrow in excess of $20 million from any combination of banks in Nepal. Similarly, liquidity constraints restrict the capital that can practically be raised on the Nepal Stock Exchange through any one public issue to less than $5 million. There is no regulatory system to encourage and facilitate portfolio investment in the industrial sector. Local commercial banks occasionally form a consortium to finance major projects in the hydropower and other infrastructure sector, depending upon the future prospects of the projects.
Foreign commercial lending is scarce and expensive. Currently, there are no resident or non-resident foreign commercial banks that have standing credit limits for loans of a maturity of more than one year. The government permits foreign institutional investors to own up to twenty-five percent of the shares of listed Nepali firms in certain sectors, such as hydropower and tourism. Promoters can sell their shares and repatriate capital. Nepal Rastra Bank, the central bank of Nepal allows up to eighty-five percent foreign equity participation in domestic financial institutions.
U.S. Commercial Service Liaison Offices at the Multilateral Development Banks (Asian Development Bank, World Bank)
The Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the Asian Development Bank and the World Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects, and advocate on behalf of American bidders. Learn more by contacting the Commercial Liaison Offices to the Asian Development Bank (http://www.export.gov/adb/) and the World Bank (http://export.gov/worldbank).
Web Resources
Commercial Liaison Office to the Asian Development Bank http://www.export.gov/adb/
Commercial Liaison Office to the World Bank http://export.gov/worldbank
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.