Project detail - NMB BANK LTD NEPAL

Who is our customer

NMB Bank Limited (NMB) is one of the leading commercial banks in Nepal, operating for over 20 years in the Nepalese financial market. The Bank has added focus in renewable energy, hydro power and project financing, that form the crux of economic development of the country. In 2015, CEDB (FMO investee company) and three smaller banks, Pathibara, Bhrikutee and Prudential, were merged into NMB. Pursuant to which, FMO received shares of NMB.

What is our funding objective?

FMO will contribute and strengthen the financial sector (rural and urban) and indirectly continue to support the renewable energy in Nepal. FMO (is already) and will continue to create value to NMB by providing guidance in the challenging integration progress and with refining its new strategy. Also FMO will assist NMB to become market leader in managing E&S risks and having a proper and strengthened corporate governance structure in place with TA support. NMB is very open to learn from FMO’s network and understands the potential cross-pollination. Further to this, being part of on-the-ground energy focused bank in this promising hydro energy country will enhance FMO’s ambition to have a positive environmental impact. All in FMO’s role is substantial, but there is also an element of reputational and expectations risk that should be carefully managed.

Why do we fund this investment?

In October 2015 NMB merged via a share swap with FMO/Triodos’ investee CEDB and three smaller banks Pathibara, Bhrikutee and Prudential. After the merger FMO/Triodos’s stake diluted from 14% to 3.19%. We hereby increase our stake to 20%, i.e. the minimum requirement for all new foreign shareholders into Nepali commercial banks. The merger was strongly driven and supported (more than 4 years) by FMO and Triodos through intensive and persuasive guidance by its nominee board directors and shareholders’ representatives. FMO is the only DFI active in the Nepalese banking sector and has been building on its reputation, network and relation with the Nepalese Central Bank (NRB) since it invested in CEDB in 2008. With a TA program on strategy support (ongoing), improved CG and E&S management FMO is and will continue to add value to NMB with the intension to make NMB attractive for to foreign and local investors. NMB recently became member of the Global Alliance for Banking on Values and is very open to learn from FMO’s network. This transaction thus entails the take-over of the existing 3.19% stake (to be approved by FMO AEF & Triodos) and an additional equity investment (16.81%) increasing FMO’s stake to 20%, both with FMO-A. Total transaction size is be between USD 24.5 million and USD 29.5 million depending on the future issuance of additional public shares. FMO intends to partner with SBI-FMO Fund to co-invest, but so far FMO has underwritten the whole transaction.

What is the Environmental and Social categorization rationale?

With the merger and FMO’s further equity investment, NMB’s capital base will enable NMB to provide finance for larger (but still medium sized run of the river hydro project and corporates. The environmental and social related issues will be handled properly by a tailor made ESMS (with TA from FMO). With this, NMB can become a leader and will be setting the example for Nepal with regards to sustainable finance. FMO is already organized a master class on sustainable finance & project finance in September 2016 for the NMB energy team, which included training on the IFC performance standards.

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8/14/2019	EUR 0.14 MLN