The FINANCIAL — IFC, a member of the World Bank Group, has appointed White Lotus Centre Pvt. Ltd. as fund manager for Business Oxygen, its SME ventures fund in Nepal. White Lotus will make equity investments in Nepal’s high-growth SMEs, helping them achieve their potential and create more jobs.
Business Oxygen Private Limited is Nepal’s first private-equity fund. IFC has committed $7 million to this $14 million sector-agnostic fund. The fund combines risk capital financing with advisory support to help investee small and medium enterprises develop fundamental financial systems, quality-assurance standards, and corporate governance frameworks.
Siddhant Raj Pandey, Chairman of White Lotus, said, “Despite the challenges posed by this year’s earthquake, there is significant potential for SMEs in Nepal. White Lotus will develop a robust portfolio of investee firms that will become a strong contributor to Nepal’s commercial growth.”
Small and medium enterprises are a vital component of Nepal’s economy. They employ 1.75 million people and account for 22 percent of the country’s GDP. There are an estimated 111,442 operational SMEs, out of which 63 percent were registered over the last decade. For these SMEs, improved access to finance is essential for growth. Only 39 percent of firms in the micro, small, and medium enterprise segment have adequate access to finance, compared to 78 percent of large enterprises. Business Oxygen is designed to address this challenge, according to IFC.
“Business Oxygen Fund’s ability to provide risk capital to SMEs in Nepal provides a vital solution for firms too small or too new for traditional commercial bank financing,” said Wendy Jo Werner, IFC’s Country Manager for Bangladesh, Nepal, and Bhutan. “The fund is unique because it provides equity and also advisory to catalyze the growth of small businesses.”
Tracy Washington, SME Ventures’ program manager, said, “White Lotus will play an important role in developing the private equity sector in Nepal. We look forward to supporting the team as it demonstrates that new funds, even in challenging markets, can achieve promising results.”
Business Oxygen is part of IFC’s SME Ventures program, which supports the creation of risk capital funds in fragile, frontier, and post-conflict markets. With four funds covering six countries, SME Ventures is expanding to new markets where the need for risk capital remains high and potential for growth makes private equity an effective market solution.