(A partnership between UKaid Sakchyam and Siddhartha Bank Limited)


In developing countries like Nepal, Small and Medium Enterprises (SMEs) contribute significantly to economic development. They create sustainable employment and are more adaptable to innovations. However, the segment has not been able to fully exploit their potential due to lack of formal financial services.

There are a limited number of Financial Institutions (FIs) catering to the SME sector. The focus of FIs especially commercial banks have been mostly on urban areas and their operational expansion in rural areas targeting the small enterprises have been minimum.


Micro, Small and Medium Enterprises (MSMEs) have been seen as high-risk borrowers by FIs and they lack both reliable financial statements and adequate and/or acceptable collateral. Further, MSMEs’ financial requirements are considered too big to be fulfilled by Microfinance Institutions (MFIs) but too small to be served by the corporate banking model, falling in the ‘missing middle’ category.

At present, Siddhartha Bank’s definition of SME business is based on the loan ticket size which limits the understanding of the SME sector. The bank also has an SME hub which caters only to the enterprises in Kathmandu while the branches outside the valley have fragmented approach towards SME segment. Existing business processes can be improved further to cater to the needs of MSME clients with more structure and focus.

Sakchyam Intervention

In order to meet the financing need of the MSMEs — ‘missing middle’ – UKaid Sakchyam Access to Finance Programme has partnered with Siddhartha Bank Limited to support the bank restructure its SME business model. The restructuring will focus on changing the bank’s approach to cater to the MSME segment, design customized products/services and adapt delivery mechanism that is best suited for small enterprises.

To make the credit and other financial services easily accessible to people from low-income group establish or expand their business, the project will:

  • follow innovative approaches towards reengineering products/process,
  • allocate dedicated resources,
  • define clear parameters for the segment
  • use technology to enhance the operation of the SME banking.


By establishing a dedicated SME vertical reaching throughout the country, this partnership is expected to create a foundation on which Siddhartha Bank Limited intends to increase the segment’s contribution to 50% of the total loan portfolio in the next 5 years. The bank is likely to disburse loans in excess of NPR 5 billion to more than 2,000 micro and small enterprises across the country.

Other impacts:

  • Better and customized service to meet the unique financial requirement of the SME customers through the usage of technological solutions such as ‘loan process management’
  • Improved Turn Around Time (TAT) for quick and easy lending decisions; usage of ‘credit scoring models’
  • Simplified credit process through easy-to-fill forms and nominal document requirement
  • A customer-specific approach through digitized process and services
  • Advisory services through dedicated SME relationship officers


As of March 2021, Siddhartha Bank has:

  • Simplified the credit process with technical assistance from Sakchyam and improved TAT for lending
  • Disbursed loans to more than 3,588 SMEs
  • Disbursed loans of more than NPR 9.2 billion