Nine local governments have partnered with the Deposit and Credit Guarantee Fund to launch a dedicated agricultural credit guarantee scheme aimed at expanding access to loans for smallholder farmers, cooperatives and agri-entrepreneurs in some of Nepal's most underserved regions.
KATHMANDU, JULY 6
Nine local governments from Karnali, Sudurpashchim and Bagmati provinces have signed an agreement with the Deposit and Credit Guarantee Fund (DCGF) to establish a ring-fenced Agriculture Credit Guarantee Fund, a new financing mechanism designed to improve access to formal credit for farmers and agricultural enterprises.
The agreement, signed in Birendranagar on Saturday, formally launched the Ring-fenced Agriculture Credit Guarantee Scheme (Agri-CGS), developed by the DCGF with technical support from the United Nations Development Programme (UNDP). The initiative is being implemented under the UN Joint Programme on Innovative Financial Solutions for Local Food Systems Transformation in Nepal, in collaboration with the Food and Agriculture Organization (FAO), the World Food Programme (WFP) and the United Nations Capital Development Fund (UNCDF).
The scheme seeks to address one of the biggest constraints facing Nepal's agriculture sector-limited access to affordable financing-particularly in Karnali and Sudurpashchim provinces, where food insecurity, climate-related shocks, low agricultural commercialisation and outmigration remain major challenges.
The dedicated guarantee fund will mobilise USD 2 million in its initial phase. The UN Joint Programme will contribute USD 1 million, the DCGF USD 700,000, while the nine participating local governments will collectively provide USD 300,000, with each local government contributing Rs 5 million.
According to the organisers, the new guarantee mechanism introduces several reforms to encourage banks to lend to borrowers who lack conventional collateral. Unlike the existing system, banks will be able to seek guarantees for individual loans, submit claims after 90 days of payment default and receive approved claims within one month.
The fund will guarantee loans worth up to five times its capital, reducing lending risks for financial institutions while improving access to finance for women entrepreneurs, smallholder farmers, cooperatives and micro, small and medium-sized enterprises (MSMEs) in remote communities.
Chief Executive Officer of the DCGF, Dila Ram Giri, said the initiative would make Nepal's credit guarantee system more efficient and inclusive by reducing lending risks and expanding financing opportunities for underserved borrowers.
UNDP Nepal's Deputy Resident Representative and Officer-in-Charge, Julien Chevillard, said inclusive finance is critical to transforming Nepal's food systems and strengthening resilient local economies. He said the partnership would help unlock investment for smallholder farmers, women-led enterprises and rural entrepreneurs while advancing the Sustainable Development Goals.
Representatives of the participating local governments welcomed the initiative, expressing confidence that the scheme would improve access to agricultural credit, particularly for women and disadvantaged communities. They also said their respective local governments had allocated additional resources to address other challenges facing the agriculture sector.
Officials said the initiative is expected to strengthen financial inclusion, promote resilient livelihoods and support inclusive local economic development in some of Nepal's least-served regions.