Kathmandu, May 15

To cater to the credit demand of small and medium enterprises (SMEs), the government is preparing to announce separate lending institutions through the next fiscal budget.

Even as Nepal Rastra Bank (NRB) has barred licensing new financial institutions, Ministry of Finance (MoF) is going to announce a provision of separate lending institutions for SMEs.

Reportedly, Finance Minister Yubaraj Khatiwada has envisioned upgrading a few microfinance institutions (MFIs) to SME lending institutions, as the number of microcredit institutions has grown exponentially in the country.

Earlier, the government had announced the formation of a separate lending institution for infrastructure financing and the process to establish this institution is under way after fulfilling the regulatory processes of NRB.

Dedicated institutions to provide credit to SMEs can play an effective role in creating opportunities for SMEs to flourish and expand their businesses.

“Till date, the country had viewed microcredit institutions as an intermediary to provide access to finance to the poor,” a high-level source of the MoF privy to the development said. “However, there is a need for institutions that provide loans to SMEs to scale up their businesses for the benefit of the MFIs.”

Microfinance institutions can lend up to Rs one million to a single borrower.

“The finance minister believes that the upper limit of borrowing facility from the MFIs is insufficient for SMEs wanting to scale up their businesses,” said the MoF source.

Minister Khatiwada has often mentioned that most of the loans provided by banks are floated to only a handful of businesspeople and a large number of potential entrepreneurs are excluded from the lending facility.

However, operators of MFIs have criticised the idea of opening up licence for SME lending institutions. Finance Minister Khatiwada has been advised to look into the past of Agricultural Development Bank (ADBL) and NIDC, which were specialised financial institutions, before opening up licence for SME lending institutions.

“There is no doubt that the SME sector should be promoted to generate employment and for the stable growth of the economy. However, just increasing the number of financial institutions is neither logical nor the right solution,” said Janardan Dev Pant, CEO of Nirdhan Utthan Bank.

“It will be better if the government assigns the responsibility of SME lending to ADBL and Nepal Bank by changing the articles of association of these two government banks,” added Pant.

Pant further said that converting ADBL and Nepal Bank into SME lending banks will provide the needed momentum from the onset instead of opening up licence to new players, which could take years to meet the objective.

Analysts have mentioned that Khatiwada might be eyeing political mileage through SME lending institutions to gain the confidence of a large section of enterprises in the country. According to them, this is why he will likely either provide facility of upgradation or merger of MFIs to form SME lending institutions or open up licence for new players.

Meanwhile, Ram Sharan Kharel, advisor to the finance minister, informed that discussions are under way regarding the modality of the proposed lending institutions.

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Kathmandu, May 15

Kathmandu Monorail Company (KMC) and Investment Board Nepal (IBN) are scheduled to sign the memorandum of understanding (MoU) of detailed project report (DPR) of Kathmandu Monorail Project on Wednesday.

The MoU signing had been delayed because the signatories were at odds regarding some of the provisions included in the draft agreement, one of which stated that KMC should deposit Rs 100 million as performance guarantee before carrying out DPR of the project.

While KMC had said it will deposit performance guarantee after signing the agreement, IBN had demanded that the money be deposited before MoU was signed.

“Like with the other contentious issues, we will resolve this disagreement and sign the MoU tomorrow itself,” said DN Thapa, chairman of KMC.

IBN Spokesperson Uttam Bhakta Wagle also confirmed that the MoU signing has been slated for Wednesday afternoon.

As per Thapa, DPR will be completed in a year. “It will take another six months to prepare the necessary paperwork, following which, we plan to initiate the construction of the monorail project. This means that if everything works out as planned, the construction will begin in the next 18 months.”

Issuing a media release today evening, Thapa further said, “What we can tell you now is that the development of the monorail will be undertaken in a holistic manner. Should the government of Nepal approve our proposal, we will progressively contribute to the transformation of Nepal, creating various opportunities and value-added lifestyle.”

In December 2016, KMC had inked a joint venture agreement with Powertek Sdn Bhd of Malaysia to construct a monorail along Kathmandu Valley’s Ring Road. KMC will have 70 per cent stake, while the Malaysian company will have the remaining stake in the project, which will span over 28.55 kilometres. The monorail will be developed utilising 90 per cent of foreign investment. Powertek will make consortium investment along with Savan Development Co of Laos and The Angel CoFund UK.

KMC has planned to construct Kathmandu Monorail Project under build, own, operate, transfer (BOOT) model.

The feasibility study of the project has shown that construction of the monorail will cost almost Rs two to three billion per kilometre. The project, which envisions constructing the monorail at a height of above 14 feet from the ground level, will be able to transport up to 150,000 passengers on a single day, Thapa informed.

“Construction of a monorail in Kathmandu is urgently required to manage the traffic congestion. As monorail will run on electricity, this means of transportation is pollution-free as well,” mentioned Thapa, adding that the concerned government authorities should facilitate in executing this project effectively.

According to the MoU that is to be signed tomorrow, the project is to be handed over to the government 35 years after commercial operations commence. Also, international investors will be provided their principal and interest on investment within 12 years of commercial operation of the project.

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