Education Brings Benefits to Local Shares Investors in Nepal

Man Maya Gurung, 34, of Lamjung, Nepal, has an infectious laugh and a sunny disposition, reminiscent of the magical mountains surrounding the district famous for oranges, honey, and hydropower.

Like thousands of others in her community Man Maya has invested in hydropower projects through “local share” offerings by hydropower companies. This innovative form of equity participation is written into the Nepal Constitution to ensure project-affected communities share in the benefits of development.  

“There were rumors that investing in shares will be lucrative. So I put in Rs 40,000 ($350) of my savings without much thought,” says Man Maya during the local shares education session jointly organized by IFC’s Hydro Advisory and the Nepal securities regulator SEBON in Lamjung, in December 2018.

Located in western Nepal, Lamjung is touted as a model district for hydropower development; its current installed capacity exceeds 140MW and there are plans for 800MW more in the future. Local share offerings here have received an overwhelming response and interest from community members, but countless investors like Man Maya do not really understand their investments. They rely mainly on hearsay for information, and on friends and extended family to make decisions.

“I don’t even know if I was allotted any shares. I don’t know where to begin in order to follow up,” says the former English teacher who has been working as a member of the Besisahar Municipality for the past two years. According to her, her sisters and her friends are in the same boat.

Lack of access to timely and comprehensible information is highlighted as one of the key concerns in the IFC study, Local Shares: An In-depth Examination of the Opportunities and Risks for Local Communities Seeking to Invest in Nepal’s Hydropower Projects.

The study is part of IFC’s support for improved environmental and social standards in Nepal’s hydropower sector, which is supported by the governments of Australia and Japan. Among its recommendations is more public education. These joint community education sessions with SEBON are one of the ways in which IFC aims to share the findings of the report, and support greater understanding about the risks and rewards of investing.

SEBON has plans to organize more than two dozen sessions across the country in the coming months. “We have seen firsthand the huge demand that exists in local communities for education programs focusing on local shares investments. We hope to continue to work with agencies like IFC to educate communities on the pros and cons of the securities market with the aim to empower more people with the right information,” says Niraj Giri, SEBON Executive Director and spokesperson.

For Man Maya, it has been an eye-opening experience. “I picked up two important lessons," she says. "Shares don’t always guarantee profit, and that one needs to think hard and assess options before making any investment. Now I'm going straight to the bank to find out the status of my shares."