Where we work

UNCDF in Nepal

Nepal
    Region

    Asia and the Pacific region

    Investment types

    Loans

    Guarantees

    Investment grants

    Our work

    The United Nations Capital Development Fund works closely with national and sub-national governments, as well as development partners and the private sector, to catalyse economic growth, unlock investment, and improve access to finance in Nepal. Through innovative financing models, UNCDF's investments are focused on promoting inclusive and sustainable development by strengthening financial systems, fostering financial inclusion and digital innovation, and building climate resilience at the local level, while empowering small businesses and entrepreneurs.

    Innovative financial solutions for local food systems transformation in Nepal

    UNCDF, along with UNDP, FAO and WFP is implementing a Joint Programme funded by the UN SDG Joint Fund which aims to deploy, test and refine innovative, scalable financing solutions to transform local food systems. It will work in selected municipalities where Partner UN Organizations (PUNOs) have established a wide range of partnerships with local stakeholders, to ensure a conducive environment for the deployment of proposed financing mechanisms. These include i) supporting the government in developing costed and sustainable food systems transformation plans, as part of the annual planning process; ii) local PPP model to support agro-processing women entrepreneurs, and iii) agri-credit guarantee scheme to increase access to finance for small holders, cooperatives and SMEs.

    UNCDF and UNDP are partnering with Deposit and Credit Guarantee Fund (DCGF), Nepal's public credit guarantee institution with a national mandate to enhance access to finance for underserved segments, including SMEs and the agriculture sector. Under this partnership, a new Agri Credit Guarantee Scheme (ACGS) is being developed which will strengthen DCGF's ability to de-risk lending to smallholder farmers and agri-MSMEs. The programme will unlock at least USD 16.6 million in agricultural loans during the pilot phase. This will directly benefit over 3,000 rural borrowers, with an emphasis on women, cooperatives, and first-time borrowers, and enable partner financial institutions (PFIs) to extend credit under improved terms.

    The Joint Programme aims to reach over 9,000 farmers and MSMEs that will benefit from better access to finance, livelihood opportunities and enhanced capacity for food systems transformation. Moreover, 9 municipalities will develop and implement food systems transformation action plans leading to better economic opportunities for local people.

    Leveraging climate finance for resilient local economies and communities

    Local governments are well placed to understand the challenges their communities face as they adapt to a changing climate, but often lack the finance and capacities needed to deliver results. In partnership with the Government of Nepal UNCDF is building resilience to the impacts from climate change from the ground up. The Local Climate Adaptive Living (LoCAL) Facility, which provides the basis for international standard ISO 14093, integrates locally led climate adaptation into local governments’ planning and budgeting as they respond to climate change. Five local governments in Lumbini Province will receive performance-based grants worth a total of $ 1.97 million for investing in locally conceived projects that strengthen communities’ ability to adapt to the impacts of climate change in the first phase, with plans to scale activities to 10 local governments.

    Terraces maximize land available for agriculture in Nepal. Photo: UNCDF.

    UNCDF also provides training and capacity building, including helping to finalize operational and practical manuals for local government staff working on adaptation to climate change. A new UNCDF-backed Climate Vulnerability Risk Assessment provides detailed information on how climate change could impact Nepal at the subnational level to aid local governments plan and prepare. Nepal is also part UNCDF-supported south-south cooperation with all 25 countries where LoCAL is engaged. Adaptation investments in Nepal are possible with the financial support of the Australian Department of Foreign Affairs and Sweden.

    Smallholder farming community in Nepal. Photo: UNCDF.

    Unlocking finance for smallholder farmers with Kheti digital loans

    Agriculture makes up 30 per cent of Nepal’s Gross Domestic Product, with around 66 per cent of the population depending on agriculture for their livelihood. Yet, smallholder farmers, especially those without land titles or credit histories, face challenges in accessing affordable, formal finance. Addressing this gap, agri-fintech company Kheti, working with UNCDF, launched a digital, collateral-free loan product that uses alternative data such as agri-input purchases and digital identification to plug the information gap and enable smallholder farmers to apply for credit. This initiative is supported by UNCDF, through user research, credit scoring tools based on farm production and payment data, electronic identification solutions, and digital disbursement infrastructure. UNCDF also provided Kheti with a grant to improve its platform, which helped onboard farmers and enabled Kheti to connect with financial service providers. The Food and Agriculture Organization of the United Nations (FAO), further enhanced the initiative by providing technical assistance and analysis that helped build the investment case for Kheti, resulting in a private equity investment in the platform. In parallel, financial service providers such as NMB Bank and Laxmi Sunrise Bank integrated their loan products with Kheti, enabling rapid scale-up. As a result, thousands of previously unbanked smallholder farmers, especially women and marginalized groups, now have access to fast, inclusive loans without the need for land collateral. Kheti has emerged as a scalable, public–private model for inclusive agri-finance, improving financial inclusion and demonstrating potential for replication across Nepal and beyond.

    Digitizing finance for women entrepreneurs

    Women entrepreneurs in Nepal face barriers to accessing formal finance due to low financial literacy, complex loan procedures, and limited trust in digital banking. In 2024, Prabhu Bank, with support from UNCDF, took steps to address these issues by improving its digital services to better meet the needs of women-led businesses. Through targeted training for 1,664 women-led microenterprises, the use of data-driven tools, and strengthened internal capacity, Prabhu Bank has gained a deeper understanding of the specific challenges women entrepreneurs face in accessing and using financial services. This shift has not only improved access to finance for women-led microenterprises but also fostered a culture of innovation within the bank. Cross-departmental teams now use sex-disaggregated data and insights to design more inclusive products, with plans to integrate these solutions into future updates of its mobile applications. The initiative has positioned Prabhu Bank as a frontrunner in gender-smart digital banking.

    Latest news and stories

    Our partners

    UNCDF’s work in Nepal is made possible thanks to collaboration with the Government of Nepal, the Australian Department of Foreign Affairs and Trade (DFAT), the Swedish International Development Cooperation Agency (SIDA), FMO, the Swiss Agency for Development and Cooperation, the Joint SDG Fund, the United Nations Development Programme (UNDP), and the Food and Agriculture Organization of the United Nations (FAO).

    Contact us

    For inquiries about UNCDF’s work in Nepal, including partnerships, investment opportunities, or ongoing initiatives, please contact our team on asiapacific.region@uncdf.org.