Social Venture Fund in Nepal

In recent years board range of organisations has shown interest in adopting impact investing model to  investing in the low income countries . List includes but not limited to investment banks, sovereign wealth funds, and endowments, philanthropic foundations and, international development organization. Traditionally, inflow of foreign capital (not including remittances) in developing countries like Nepal  has taken   place in the form of investment designed to maximize financial returns, while no intentional consideration of social impacts or foreign aid structured to maximize social return, while no expectations for monetary returns. Impact investing provides a platform to blend capital from both foreign aid and foreign investments to support entrepreneurship culture in the developing world. Impact investor operates in the missing middle and fills the capital gap above micro-financing and below institutional financing. They structure there their investment vehicle like a venture capital/private equity fund and investment in businesses in the firm of equity, quasi equity or debt. Some of the investors are also willing to accept below the market financial returns in order to maximize social and environmental returns

To my knowledge their no impact investing funds currently operating exclusively in Nepal, however; there are few initiatives in the pipeline. One of them is Ventures Nepal, which is one of the funds in the International Financial Corporation’s (IFC) SME Ventures program, which will provide risk capital financing and complementary advisory services to small businesses in Nepal. The target size of the Fund is $10 million. Venture Nepal will make risk capital investments of up to $500,000 in small and medium enterprises (SMEs). Another is Dolma Development Fund (DDF), structured as a non-profit domiciled in United Kingdom is currently raising $10 million to investment in SMEs in Nepal.DDF plan to deployed $ 10 million over a period of 3-5 years with a focus on the target sectors like rural connectivity (internet/mobile), health care, affordable private education, clean drinking water, eco-tourism and off grid renewable.

Small businesses are the backbone of any developing economy, not only do small businesses/Startup plays critical role of job creation and poverty reduction across Nepal they also bring wealth of replicable innovations to market. Attracting more impact investors in the Nepal means more startups will have access to capital to scale and impact. Impact investing will extends beyond just a lack of capital; and includes the lack of support, infrastructure and overlaying networks of intermediaries, institutions, and investors. One of the top priorities of the Nepal Investment Board should be to ensure to put in place regulatory incentives and safeguards to attract impact investors that helps build entrepreneurial culture and providing growth capital for achieving sustainable growth and quality jobs in the country. In the short run it is the small size foreign investments that will build appropriate FDI friendly eco-system in Nepal to attract large scale commercial capital.