Nepal - Sustainable and Inclusive Finance Project

Overview & Synopsis

Sustainable and Inclusive Finance Project for Nepal has the development objectives to improve access to finance for micro, small and medium enterprises through credit risk mitigation and improved credit infrastructure. Component 1: Strengthening Risk Sharing Mechanisms will broaden safe lending to underserved firms by supporting the Deposit and Credit Guarantee Fund (DCGF) to share credit risk with participating lenders, strengthen institutional and information technology capabilities, and introduce market-responsive guarantee products, including tailored solutions for individual enterprises, women-led businesses in the care economy, and green finance initiatives; it will also embed monitoring and impact evaluation aligned with good practice, enhanced governance and disclosures, and environmental and social risk management. Sub-component 1.1: Capitalization of the DCGF will reinforce a ring-fenced credit guarantee risk reserve to increase risk-bearing capacity, transparency and operational resilience, with staged disbursements linked to performance-based conditions and the establishment of an Environmental and Social Management System. Sub-component 1.2: Management Information System of the DCGF will modernize the management information system and associated hardware and software to improve risk analytics, reporting, portfolio monitoring and efficient claim settlement. Component 2: Enhancing Credit Information Reporting Systems will strengthen the Credit Information Center Limited (CICL) by upgrading infrastructure and institutional capacity to move from limited reporting to comprehensive coverage of positive and negative data, integrate non-traditional sources, develop advanced and gender-sensitive credit scoring, and install a centralized Know Your Customer repository to streamline customer verification, enhance compliance with anti-money laundering and combating the financing of terrorism standards, improve data protection, and facilitate inclusion; implementation will be coordinated with Nepal Rastra Bank (NRB) and banks and financial institutions (BFIs) to increase the reliability, accessibility and use of credit information across the financial system.