Kathmandu, February 17

The Expanding Financial Frontiers Challenge Fund — a challenge fund for the financial sector targeted at boosting agriculture/agriculture value chain finance in Nepal — was officially launched today.

Central bank Governor Chiranjibi Nepal, Danish Ambassador Kirsten Geelan and Renaud Meyer, country director of United Nations Development Programme (UNDP), Nepal jointly inaugurated the launching ceremony, as per the media release.

The challenge fund, under UNCDF’s UNNATI - Access to Finance (A2F) project, was publicly announced on January 24.

The UNNATI - A2F project aims to support financial service providers to more effectively serve the agriculture value chain actors with appropriate financial products and enable smallholder farmers and micro, small and medium enterprises to invest in their value chain activities, leading to the sustained improvement in the competitiveness of the selected value chains.

The total amount of the challenge fund is $1.7 million, which seeks to provide matching grants through a competitive bidding process to two windows.

The first window is expanding and/or scaling up products and services, where expansion of financial service are promoted to a maximum number of clients through upscaling existing products and services.

The second funding window focuses on supporting financial institutions to roll out innovative products for agriculture/agriculture value chain financing (that is, leasing, insurance and warehouse receipts), as well as branchless banking expansions (including through agent networks, e-wallet and mobile financial transactions).

Each project, to be funded under this challenge fund, will range between $50,000 to $400,000 (depending on the project proposal received) in which applicants also need to share costs ranging from 30 to 80 per cent, the release adds.

The challenge fund will target projects with a potential to be replicated throughout Nepal, which also adds value, meets market demands and fulfils market gaps. The challenge fund will pay special attention to reducing discrimination towards women and traditionally marginalised groups.

During the ceremony, Governor Nepal highlighted the need for financial inclusion in Nepal and Nepal Rastra Bank’s commitment for the same. He acknowledged the challenge fund mechanism to be an opportunity for the financial sector to try out innovative projects with high risk, but cautioned against the use of the challenge fund as simple top up grants to do business as usual, the release says.

Danish Ambassador said she hoped that the fund would help bring forward new and innovative products that will benefit poor households, women, marginalised groups and micro and small enterprises in rural areas. She announced that UNNATI will soon open a similar funding window directed at agriculture based private entrepreneurs, where they can seek assistance for various innovative initiatives with ‘Bankable Projects’.

UNDP Country Director Meyer highlighted the mechanism’s clear link and contribution to Sustainable Development Goals (SDGs). He further emphasised that this fund should be maximised and leveraged by Nepali banks and financial institutions as it offsets the cost/risk of investment associated with new, more inclusive business models that are both profit-making and at the same time help market systems contribute in reducing poverty.

The deadline for receiving the expression of interests (EoI) from financial and non-financial institutions in Nepal for the first round is until March 31, 2016, as per the release.