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Capital for Nepalese development

03/10/2014

Dolma Impact Fund I was recently etablished to provide growth capital for SMEs in Nepal. The founder hopes that it will also stimulate the growth of a local capital market.

The economy of Nepal, in South Asia, began to grow after the end of the civil war in 2006. Nepal2.jpgDemand for products and services has been increasing but the development of local businesses and production has been held back by a shortage of capital, technology and skills.

The aim of the new Dolma Impact Fund I is to give small and medium-sized companies better access to capital to develop their operations.

Dolma is the first commercial impact fund in Nepal. Impact funds invest in projects that use the market mechanism to find solutions to the problems of developing countries.

More local production and jobs

The founder of Dolma Impact Fund I is Tim Gocher from the United Kingdom, who has long experience in venture capital and investment banking. He knows Nepal well and, in 2003, established the Dolma Development Fund to alleviate poverty, principally by sponsoring education for children in poor rural areas.

The main aim of Dolma Impact Fund I is to promote the growth of a private sector in Nepal that will create jobs and extra income for the poor. It will also seek solutions to environmental problems.

“We will concentrate on sectors where growing consumer purchasing power is boosting the demand for products and services,” Gocher explains.

Good examples of such sectors are electricity, agricultural produce, health services and education, water supply and sanitation.

"In many sectors, the rise in demand has been met by increasing imports from India. Our aim is to invest in companies that will increase Nepalese production, thereby creating many new local jobs.”

Great hydropower potential

The fund is preparing several investments related to renewable energy. Solar power and small-scale hydropower have great potential in Nepal, and Dolma is looking closely at developing small hydropower stations.

“The rivers flowing down the slopes of the Himalayas have enormous untapped potential. At the same time the country has a chronic shortage of electricity. The capital Kathmandu, for examples, suffers from daily power outages that can last as long as 16 hours.”

New generating capacity would improve business conditions and bring more of the population within reach of the power grid. By using renewable energy, Nepal will also reduce its dependence on imported fossil fuels.

Companies stunted by finance

Nepal1.jpgGocher hopes that the new fund will serve as a paradigm and stimulate the feeble Nepalese capital market. Companies can take bank loans but equity capital is almost unobtainable.

“The biggest problem faced by growing companies is how to finance investments. They also need management skills to run operations and plan strategy. These are skills that international funds generally bring with them.”

Foreign venture capitalists are deterred from entering Nepal by a long and complex permit procedure but Gocher believes that the situation is gradually changing.

“We are engaging actively with the officials responsible and looking at ways of improving the regulations.”

Finnfund invests in Dolma

The target size of Dolma Impact Fund I is USD 40 million and it was launched in September 2014.

Finnfund’s Associate director Mikko Kuuskoski points out that Nepal has been a long-term partner in Finnish bilateral development cooperation. After the long civil war the country’s economy is now taking off. Companies and the new jobs they create are vital for Nepalese economic development.

“They can obtain long-term loans from banks but there is little equity-rated finance available. Dolma Impact Fund will fill this gap,” he predicts.

“One focus of Dolma will be small-scale hydropower, in which Finnfund has made numerous investments in recent years and where Nepal has great potential.”


For more information in Finnfund, please contact Mr Mikko Kuuskoski, Associate Director, mikko.kuuskoski(at)finnfund.fi, tel. +358 40 588 1917.