A new financing approach, the first of its kind in Nepal, aims to bridge the gap in access to finance so that farmers and agribusinesses can grow.
ITC GreenToCompete Hub Nepal has launched a new partnership with the NMB Bank Limited to scale up access to green finance for small agricultural businesses. This new financing approach, the first of its kind in Nepal, will support sustainable agriculture. The partnership aims to bridge the gap in access to finance so that farmers and agribusinesses can grow.
A vital sector that’s underfinanced
About 60% of Nepalis work in agriculture, which contributes 26% to the national GDP. High-value crops like cardamom, tea and coffee are exported to South Asia, the United States and Europe.
But small agroprocessing businesses face challenges in securing financing. Commercial banks usually require real estate collateral. Hilly areas used to grow coffee and tea grow are often deemed unsuitable for financing.
The Central Bank of Nepal has mandated commercial banks to lend 15% of their total loan portfolio to the commercial farms by the end of 2023. As a result, agriculture lending jumped 168% from 2018 to 2021.
But agricultural output has increased at only 3% for the last seven years. This suggests that loans have not reached the intended recipients. Additionally, potential borrowers often don’t know what documents lenders require, and need training in basic accounting and business planning.