IMAGE: ARTHASAROKAR
START WITH with a simple fact. In October 2022 the United States government lent $100m to a commercial bank in Kathmandu. The US Development Finance Corporation, Washington’s vehicle for deploying capital in frontier markets, wired the money to NMB Bank—one of Nepal’s mid-sized private lenders with a balance sheet a fraction of the size of an American regional bank. That was the largest direct DFI loan ever extended to a Nepali bank. It was not the only one that year.
The British development bank BII had extended a $25m climate finance facilityy to the same institution that August. By the time the DFC transfer cleared, NMB had assembled nine development finance institutions on its books for a combined borrowing of $301.50m, directed at hydropower, renewable energy, agriculture and small businesses. Then, in April 2025, NMB issued Nepal’s first-ever local currency green bond: a $60m instrument anchored by the IFC, the World Bank’s private-sector arm, alongside BII and MetLife, the American insurer. It was also the first private placement of a locally issued Nepali bond ever bought by international investors.
That is a remarkable accumulation of foreign development capital for a bank of NMB’s size, in a country that most international investors struggle to find on a map. The question worth asking is how it happened, and why the same cluster of deals has not, so far, coalesced around any of NMB’s competitors.
The answer starts in 2008, though not with NMB itself. That year, FMO, the Dutch government’s development bank, made an equity investment in the Community and Enterprise Development Bank (CEDB), a smaller Nepali lender focused on agricultural and SME lending. It was a small bet on a difficult market, made on the reasonable theory that Nepal’s banking system was too small and too shallow, and that a patient institutional shareholder could help fix both problems.
Seven years later, when Nepal’s central bank pushed smaller financial institutions to merge in order to consolidate a cluttered sector, CEDB merged with NMB Bank via a share swap. FMO’s stake, diluted by the merger, fell to 3.19%. In September 2016 FMO chose not to exit but to double down, raising its holding to 20%, and became NMB’s single largest shareholder. Subsequent capital increases by the bank (bonus shares and rights issues) have since diluted FMO’s proportional stake to 13.69%, where it stands today. FMO remains the single largest shareholder.
That relationship, formalised in 2016, changed the institution in ways that took years to become seen. FMO placed a director on the board (currently Ms Sharmila Sanjiv Hardi Prakash, who replaced the previous FMO nominee in 2024) and, alongside the Dutch bank’s technical assistance programme, pushed NMB to build the environmental, social and governance infrastructure that international capital markets require before they will touch a frontier-market bank. That meant proper environmental risk assessments on loans. It meant governance frameworks that could survive external scrutiny. It meant the kind of audited, internationally legible financial reporting that lets a DFI in London or Washington sign off on a deal without commissioning months of bespoke due diligence. Most Nepali banks have never built these systems because their funders (local depositors and the central bank) have never demanded them. NMB was pressed into doing so, and the rewards have compounded ever since.
The DFI relationships arrived in sequence, each making the next easier. IFC first extended trade finance facilities to NMB in 2015, then a working capital loan in 2018. In June 2020 it provided a $25m climate loan: its first climate-focused investment in any Nepali bank.
BII, then operating under its former name CDC, made an initial $15m infrastructure and agriculture loan in 2018, which NMB repaid in full on maturity. In August 2022 BII returned with a larger $25m facility specifically for climate-finance assets, a recognition of the bank’s deepening hydropower portfolio.
That same October, the DFC’s $100m loan arrived. Each institution had, by then, done its due diligence not just on the numbers but on the governance architecture and found the work already done.
The numbers make the advantage plain. NMB’s non-performing loan ratio in the third was below the sector average, and well below the ratios at some of its most prominent peers. NIC Asia Bank reported 8.85%. Prabhu Bank 8.84%. Himalayan Bank 7.68%. NMB is not the cleanest book in the sector (Siddhartha Bank, Everest Bank and Standard Chartered Nepal all hold lower NPL ratios) but it sits comfortably in the second tier, clear of the institutions now under regulatory scrutiny for evergreening. The bank posted a net profit of Rs3.28bn, up 46% year on year, in the fiscal year ending mid-July 2025.
None of that makes NMB the most profitable bank in Nepal, or the largest. Global IME Bank, with 440 branches, holds that distinction by assets. But NMB is the bank that international development institutions trust enough to write large cheques for, and that distinction has a compounding quality.
When IFC came in 2020 with a green loan, it was partly because FMO was already on the board. When BII and the DFC arrived in 2022, it was partly because IFC had already been there. When MetLife agreed to co-invest in the green bond in 2025, it was because three well-known development institutions were anchoring the deal and had done the reputational groundwork. Each new investor made the next one easier.
The green bond itself deserves attention beyond its headline number. At $60m it is not big by global standards. In Nepal it was unprecedented. The bond is denominated in Nepali rupees (meaning the currency risk sits with the international investors, not the bank) and its proceeds are earmarked for electric vehicles, solar installations and small businesses working on sustainability. The IFC, BII and the Nepalese government had, in the months before the deal, reformed the regulatory framework that made such a bond legally possible, including SEBON rule changes that had previously made private placements by local issuers to international buyers awkward.
New CEO Govind Ghimire, who took office in April 2025 after Sunil KC completed the maximum two consecutive terms permitted under Nepal’s banking law, has pledged to deepen the bank’s sustainable-finance identity. Ghimire joined NMB in 2009 and served as deputy chief executive before his elevation; he represents the kind of internal succession that DFI investors value, because the relationships and institutional memory that attracted capital in the first place are not disrupted when the chief executive changes.
What NMB’s competitors might draw from its trajectory is less about any particular deal and more about a decision made in 2016. When FMO signed the joint venture agreement and joined the board, NMB accepted governance constraints and transparency demands that most Nepali banks would have found nauseating. It let an outsider onto its board, accepted external scrutiny of its loan book and spent years building systems that local regulation did not require.
A hundred million dollars from Washington, sixty million from a green bond consortium, and the title of Nepal’s most internationally connected bank: that is what a governance decision made nine years ago eventually buys. ■
