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Kathmandu, Nepal, March 25, 2019 - IFC, a member of the World Bank Group, has partnered with Nepal’s securities market regulator SEBON to educate investors from rural communities about the risks and benefits of purchasing local shares in hydropower projects.
The education sessions in Rasuwa and Solukhumbu this week are targeted at local officials and civil society leaders, women groups, and community members. They follow similar successful events held in Lamjung and Dolakha in December 2018.
The joint session includes a presentation by IFC on the findings of its study Local Shares: An In-depth Examination of the Opportunities and Risks for Local Communities Seeking to Invest in Nepal’s Hydropower Projects that was published in September 2018, and followed by a session by SEBON on the securities market including buying, selling and trading of shares, and the risks and rewards of investing.
Despite an ongoing demand for equity participation in hydropower projects in Nepal, the risk associated with purchasing local shares is not well understood by the majority of investors, whose decision making is often driven by hearsay and the advice of family and friends. This is reflected in the IFC study as well as in the education sessions in Lamjung and Dolakha, where the majority of participants had the expectation that local shares are guaranteed to generate a profit.
“There was a lot of rumor flying around that investing in shares will be lucrative. So I put in Rs. 40,000 ($350) of my savings without much thought,” says Man Maya Gurung of Lamjung. “I only wish I had gotten to attend such a program before I invested my savings. We need more of such programs.”
To help address these gaps in investor knowledge, SEBON conducts dozens of education sessions every year aimed at potential shareholders, especially those in poor and vulnerable communities.
“Many investors take loans or use their savings to purchase local shares. It’s important they have realistic expectations for returns and we’re pleased to partner with IFC to reach more investors with that message,” said Niraj Giri, Executive Director and Spokesperson of SEBON. “Through education, and securities market reform, we can improve their access, and increase their chances to share in the benefits that hydropower can bring to their communities.”
Among the reforms initiated by SEBON to make the securities market more transparent and investor-friendly are an online trading platform where shareholders can buy and sell with minimal transaction costs. Companies will also have the option to raise capital from the general public ahead of a local shares offering, giving poor investors more time to arrange for financing. Both were identified as key recommendations in the IFC study, which was produced by IFC's Environmental and Social Advisory which is supported by the governments of Australia, Norway, and Japan.
Mohammad Rehan Rashid, IFC’s Country Head in Nepal, said, “we’re pleased to be working with SEBON to bring the findings of the Local Shares study back to the communities who contributed to the report. In addition to this investor education, the report recommends tightening up the eligibility criteria for local shares, putting in additional safeguards for vulnerable investors, especially women, improving the transparency of information to potential shareholders, and the consideration of alternate delivery models for private companies.”
To download a copy of the Local Shares report in English or Nepali, visit www.ifc.org/hydroadvisory
To read a Nepali language version of this press release visit here.
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org