Nepal—Udaya: Investment and Innovation for Economic Development

Working with the Government of Nepal, Udaya seeks to pilot an approach that leverages innovative financing mechanisms to improve access by small and medium-sized enterprises (SMEs) to growth capital and business development services in Koshi Province. The expected outcomes are:

1. SMEs grow and can innovative as they have access to business development services, capital, and information on public initiatives and incentives.
2. Banking and financial institutions increase lending to SMEs, including SMEs that use business development services.
3. The Government of Koshi Province enhances the framework conditions for the growth of SMEs.

DAI works directly with SMEs to access business development services (BDS), providing support to both the supply (BDS providers) and demand (SMEs) side. Services offered by BDS providers can include business and financial management, accounting, marketing, staff training, certifications, etc. DAI’s Technical Assistance Facility will enable both BDS providers and banks to access a grant challenge fund to improve SME lending and the service offering and quality of BDS services. The project also works closely with the Government of Koshi Province to support the establishment of a Risk Reduction Mechanism that will include a final-loss guarantee cover for SME lending.

Sample Activities

• Establish a technical assistance facility for improving BDS offers and strengthening SME lending.
• Creating a redeemable voucher system for SMEs to pay for/subsidize BDS.
• Establish a risk-reduction mechanism for selected banks and financial institutions in the form of a final loss guarantee fund.
• Establish an easy-to-use and interactive digital information portal, which will act as a repository of all business-relevant information for SMEs.