British International Investment (BII), the UK’s development bank, has extended a trade finance loan agreement to develop renewable energy and manufacturing in Nepal.

The US$15mn credit line goes to Nepal’s Sanima Bank, a commercial bank with a focus on socio-economic development, with 19% of its loan portfolio allocated to the sustainability sector.

The funds will be used to support the construction of renewable energy plants and import of hydromechanical, electro-mechanical and solar energy equipment. It will also finance the procurement of raw materials for manufacturing processes and agricultural goods, among others, BII says in a release.

“BII is thrilled to partner with Sanima Bank to enhance its climate finance lending,” says Habib Yousuf, BII’s regional director for South Asia. “This facility will help to improve access to affordable, reliable and clean energy for businesses and households in Nepal. The positive impact of this will be far-reaching, contributing to sustainable development and improving the quality of life for countless individuals.”

Nepal’s mountainous terrain makes it especially suited to hydropower, which already accounts for 90% of the country’s total electricity generation capacity. A 2021 research paper places its maximum economically feasible hydropower generation at 43GW, but the country currently only produces around 8.3GW.

Projects funded by BII’s credit will contribute to expanding generation in line with the government’s aim of developing 15GW of hydropower by 2035, according to a release from the bank. This will also allow Nepal to increase its export of surplus energy to neighbouring South Asian countries including India and Bangladesh.

“This partnership marks a significant step towards accelerating Nepal’s transition to sustainable energy sources while addressing the country’s growing energy needs,” says Pawan Kumar Acharya, deputy chief executive officer at Sanima Bank.

“This endeavour also aligns with global efforts to reduce reliance on fossil fuels and combat climate change. Sanima Bank envisions to promote low-carbon energy projects that foster economic growth and create long- term positive impacts for local communities.”

In January 2024, BII signed a US$100mn risk sharing agreement with the Asian Development Bank aiming to increase financing for renewables in South and Southeast Asia.

Efforts to use trade finance to support a green transition have intensified in recent years, with notable successes including the International Chamber of Commerce’s definition of sustainable trade finance published last year.