International Finance Corporation (IFC), a member of the World Bank Group, has appointed White Lotus Centre as the fund manager for Business Oxygen, its small and medium enterprise (SME) venture fund in Nepal. White Lotus will make equity investments in Nepal’s high-growth SMEs, helping them achieve their potential and create jobs.

Business Oxygen is Nepal’s first private equity fund. IFC has committed $7 million to this $14 million sector-agnostic fund. The fund combines risk capital financing with advisory support to help investee small and medium enterprises develop fundamental financial systems, quality-assurance standards and corporate governance frameworks.

“Despite the challenges posed by this year’s earthquake, there is significant potential for SMEs in Nepal. White Lotus will develop a robust portfolio of investee firms that will become a strong contributor to Nepal’s commercial growth,” said Siddhant Raj Pandey, chairman of White Lotus.

SMEs in Nepal employ 1.75 million people and account for 22 percent of the country’s GDP. There are an estimated 111,442 operational SMEs, out of which 63 percent were registered over the last decade.

Only 39 percent of the firms in the micro, small and medium enterprise segment have adequate access to finance, compared to 78 percent of large enterprises, and Business Oxygen is designed to address this challenge.

“Business Oxygen Fund’s ability to provide risk capital to SMEs in Nepal provides a vital solution for firms too small or too new for traditional commercial bank financing,” said Wendy Jo Werner, IFC’s country manager for Bangladesh, Nepal and Bhutan.

Tracy Washington, SME Ventures’ programme manager, said, “White Lotus will play an important role in developing the private equity sector in Nepal. We look forward to supporting the team as it demonstrates that new funds, even in challenging markets, can achieve promising results.”

Business Oxygen is part of IFC’s SME Ventures programme which supports the creation of risk capital funds in fragile, frontier and post-conflict markets. With four funds covering six countries, SME Ventures is expanding to new markets where the need for risk capital remains high and potential for growth makes private equity an effective market solution.