ADBL Signs Agreement to Provide Low-Interest Loans for Forest Entrepreneurs
23rd November 2025, Kathmandu
Agricultural Development Bank Limited (ADBL) has formally executed a Subsidiary Loan Agreement with the Public Debt Management Office (PDMO) under the framework of the Forests for Prosperity Project, which is funded by the World Bank (WB).
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This agreement initiates a critical financial lifeline aimed at supporting enterprises within Nepal’s forest sector, reinforcing the bank’s long-standing commitment to development financing.
Details of the Financial Initiative
The newly signed agreement establishes a dedicated credit line to facilitate lending for forest-based businesses across the country, providing them with access to capital at significantly subsidized rates.
Loan Interest Rate: The most compelling feature of the loan is the fixed and highly competitive annual interest rate of 7 percent. This is a major reduction compared to prevailing commercial lending rates, making capital more accessible and profitable for forest entrepreneurs.
Borrowing Limit: The facility allows entrepreneurs to access borrowing limits of up to NPR 150 million. This substantial ceiling ensures that the credit line can support not only small and medium enterprises (SMEs) but also larger, integrated forest-based industries seeking to expand or modernize their operations.
Agreement Execution: The signing was formalized by ADBL’s Chief Executive Officer, Govinda Gurung, in the presence of senior officials from both the bank and the government’s Public Debt Management Office. This procedural step finalizes ADBL’s role as the implementing financial institution for Component 3 of the World Bank-supported project.
Overarching Goal: The primary objective of the initiative is to strengthen the viability and competitiveness of forest-sector enterprises and support sustainable economic development nationwide. This aligns with national strategies to promote environmentally responsible industry and job creation in rural areas.
Context of the Forests for Prosperity Project
This low-interest loan facility is a key component of the larger Forests for Prosperity Project, a joint initiative between the Government of Nepal and the World Bank. The project is designed to transform Nepal’s forestry sector by coupling sustainable forest management with economic development.
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Project Objective: The project’s central aim is to improve sustainable forest management, increase benefits derived from forests, and contribute to the reduction of net Greenhouse Gas emissions in selected municipalities, primarily in the Madhesh and Lumbini Provinces.
World Bank Financing: The project is financed through a combination of a concessional loan and a grant, highlighting its importance to the nation’s green, resilient, and inclusive development framework.
ADBL’s Role (Component 3): ADBL, a pivotal implementation entity for the Government of Nepal, is responsible for managing the credit line for Component 3: Forest enterprise improvement and development. The Ministry of Finance facilitates the disbursement of funds from the credit line to ADBL, which then on-lends the money to eligible private forest-based enterprises and individuals, often through selected financial intermediaries (FIs) at a marginally commercial interest rate, which is currently fixed at 7 percent.
Benefits for Forest Entrepreneurs
The provision of accessible, low-cost capital is expected to have a transformative effect on forest-based industries, which include processing units for timber, non-wood forest products, herbs, and other related goods.
Encouraging Investment: The fixed 7 percent interest rate provides entrepreneurs with certainty regarding their cost of capital, making investments in machinery, technology, and facility expansion far more attractive and feasible.
Job Creation: By stimulating the growth of forest-based micro, small, and medium enterprises (MSMEs), the loan facility directly contributes to job creation and diversification of income sources for forest-dependent communities.
Value Addition: The funds will support entrepreneurs in improving and developing their enterprises, moving beyond raw material extraction to value-added processing, which generates higher revenue and promotes economic development.
The operationalization of this loan agreement is a significant step towards leveraging Nepal’s vast forest resources for economic growth while simultaneously promoting environmental stewardship and sustainable practices.
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