The government has initiated the process of drafting legislation to regulate and facilitate alternative finance mobilization, aiming to identify and utilize non-traditional investment sources.
Ministry spokesperson Mahesh Bhattarai told state-owned news agency RSS that the draft bill is still under discussion within the ministry and has not yet been finalized for submission to the Cabinet. “Consultations with stakeholders are ongoing,” Bhattarai stated.
Over the years, there has been a growing demand for alternative financial mechanisms to complement traditional methods such as government funding, public-private partnerships, and foreign direct investment.
The budget for the current fiscal year highlighted the need to explore alternative investment sources, proposing a blended finance model that integrates commercial, private, NGO, and concessional loans or grants to support developmental projects.
Read: Govt Plans to Table Bill to Explore Alternative Financial Resources: FM Paudel
The government aims to enable alternative financing through instruments such as bonds, guarantees, and equity funds. The proposed legislation will also facilitate fundraising for specific projects via methods like crowdfunding, securitized loans, and long-term capital investment funds sourced from both domestic and foreign investors.
Additionally, the bill includes provisions to establish a “remittance fund” by pooling contributions from Nepali citizens abroad and non-resident Nepalis. The current fiscal year’s budget states, “A Sovereign Wealth Fund will be established to mobilize remittance in productive sectors. This fund will be used as a special-purpose vehicle to supplement investment in public infrastructure.”
The draft legislation also proposes the creation of a guarantee fund, enabling the issuance of loans or bonds with partial or full backing from international financial institutions. It further allows for the monetization of institutional or project revenue streams to establish project-specific funds, alongside other innovative funding mechanisms.
Funds raised through alternative financing will target projects that boost employment, generate significant economic returns, or contribute to GDP growth. Key areas of investment will include power generation, transmission, and distribution; roadways, railways, airports, tunnels; and industrial development infrastructure such as special economic zones, industrial parks, dry ports, and IT parks.
Other eligible projects include urban development infrastructure, cable cars, ropeways, and similar facilities. The draft also allows investment in nationally prioritized public-private partnership (PPP) projects implemented by the private sector.
However, the proposed legislation imposes certain restrictions. The fund will not invest in projects estimated to cost less than Rs 1 billion, nor in projects that lack immediate returns, fail to provide collateral, or do not meet financial standards for borrowing against bonds or debentures issued by the fund.
Natural persons are excluded from the fund’s investments, as are projects executed by entities linked to the fund’s executives or those who held significant shares or roles within three years prior to assuming office.
The draft specifies that the fund will have an authorized capital of Rs 50 billion and a paid-up capital of Rs 10 billion. Contributions to the fund will come from the Government of Nepal, international financial institutions, foreign banks or financial institutions, the Employees Provident Fund, the Citizen Investment Trust, the Social Security Fund, and insurance companies.
RSS
