BoK, beed establish BO2 venture fund

KATHMANDU, Jan 16: 

To finance small and medium enterprises (SMEs), Bank of Kathmandu (BoK) and beed have established a venture fund — Business Oxygen (BO2). 

The venture fund will finance businesses that are unable to obtain bank finance due to the absence of collateral. It is a $14 million SME venture fund, initiated by International Finance Corporation (IFC) and managed by a joint venture between BoK and beed. 

The fund will invest in SMEs in Nepal and open up, for the first time, access to finance outside the traditional realm of providing collateralised loans.

“Venture financing will shift the capital source from debt to equity which is rare in Nepal and hopefully we will be able to create a market for equities in Nepal,” said CEO of BoK Ajay Shrestha during the formal launch of the fund. “Moreover, this kind of financing arm can provide options for developing balanced financial structure of small and medium sized business ventures in particular, which in return can be comforting for the entire banking sector,” he added. 

The fund will invest up to $500,000 in equities in companies that are already six months in operation and comply with all the investment guidelines. It will not finance any start ups. 

“BO2 is not for just about any venture that is only looking for capital, we offer advisory services along with equity investment in the companies,” pointed out CEO of BO2 Suman Rayamajhi. “Most SMEs lack the expertise in terms of accounting, system control, marketing, and legal services among others, and that is where we can provide them consultancy and advisory services,” he added. 

“Providing risk finance to small businesses in countries with limited access to sophisticated capital markets has been the key focus of our programme,” said chief investment officer of International Finance Corporation Peter Tropper, adding that the fund will help Nepali entrepreneurs tap new opportunities and create employment. The Nepali economy is dominated by SMEs as more than 90 per cent of existing companies are listed as SMEs. 

“It is difficult for small enterprises to obtain finance in the absence of collaterals and the capital market is also not vibrant enough, so a venture fund is the best possible source of financing for them,” said CEO of beed Sujeev Shakya.

Source: THT