Friday, December 23, 2011

Collaborators or competitors for the Nepali Commercial Banks

Marred by the fiscal austerity and debt deflating initiatives western countries are pivoting their "foreign aid" distributing mechanism. According to a recent article published in the Financial Times , UK will try Sovereign Wealth Fund model to distribute aid in India. Which basically means the United Kingdom's Government will start investing rather then giving "grants" and other kind of free/subsided money to resolve pressing social and environmental challenges in the developing countries.These investments are expected to make financial returns to the UK taxpayers. If this model is successful in India UK government has plans to replicate this investment,rather then aid model to other foreign aid recipient country ......

USAID has also started a similar kind of "impact investing"model.....one of the many initiatives of USAID is its recent partnership with -JPMorgan Chase & Co., the Rockefeller Foundation, Bill & Melinda Gates Foundation and the Gatsby Charitable Foundation to invest $25 million worth of commercial capital in agriculture-related small and medium-sized enterprises in sub-Saharan Africa.

Nepal in the future might see a similar investment policy from USAID & DFID....... SO what does that mean to the Nepali Private sector, Development Agencies ,NGO and commercial banks ?

My questions :
  1. Less Anti-Aid sentiments,since investments will fall under FDI not foreign AID ?
  2. Investments from USAID and DFID in private sector also means contribution for the entrepreneurial culture and venture capital eco-system in the country ? If these organization are providing equity capital,that means, the entrepreneurial will have more guidance and flexibility to take more risk ?
  3. Entrepreneurs will be more willing to take equity investments /debt from these organizations , does that that means increasing competition for the commercial banks ? Cost of capital for these organization will be cheaper then that for the commercial banks.....
  4. How will these organizations investment there risk capital ? existing channels like " NGOs" are incompetent to do investment due diligence and support operation of the ventures ....


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