Government to Establish Rs. 100 Billion Alternative Development Finance Fund with Insurance Sector Participation

Kathmandu – The Government of Nepal is preparing to establish a massive Alternative Development Finance Fund worth Rs. 100 billion, with significant investment participation from insurance companies and other major institutional investors.

According to a bill proposed by the Ministry of Finance, the fund will mobilize resources from multiple institutional investors, including insurance and reinsurance companies, the Citizens’ Investment Trust, the Employees’ Provident Fund, and the Social Security Fund. The bill outlines that the fund’s authorized capital will be Rs. 100 billion, divided into one billion ordinary shares, each valued at Rs. 100.

The initial paid-up capital of the fund has been set at Rs. 25 billion, distributed as 250 million ordinary shares. These shares will be allocated among various participating government agencies and financial institutions, with the shareholding structure already outlined in the proposed legislation.

Under the proposed framework, the Government of Nepal will hold a 51 percent stake in the fund. The remaining shares will be divided among the Employees’ Provident Fund, Citizens’ Investment Trust, and Social Security Fund (25 percent collectively) and life insurance, non-life insurance, and reinsurance companies (24 percent). The government and participating institutions are required to pay the amount for their subscribed shares in a maximum of two installments within two fiscal years.

The bill also provides clear provisions regarding the determination and sale of shares. The number of shares for each shareholder will be decided based on mutual agreement among the stakeholders. If such agreement is not reached, shares will be distributed equally. In case any shares remain unsubscribed, the government will proceed with selling them in a manner prescribed by the bill.

Furthermore, if any shareholder intends to sell their shares, preference will be given to other members of the same category or structure. Also if the existing group decline to purchase them, the government will facilitate the sale as per the legal provisions. The legislation also opens the door for international governmental or intergovernmental financial institutions to invest in the fund. Any such sale will require a recommendation from the designated committee, approval from the Council of Ministers, and publication of a notice in the Nepal Gazette.