Frequently Asked Questions (FAQs)

What is private equity investment?

Private equity investment is the provision of capital to enterprises in a financing arrangement according to which the investor (LBSC) becomes an active shareholder in the enterprise (investee) with representation on the Board of Directors and key input in the management and strategic direction of the investee. The investor (LBSC) will be entitled to dividend payments and profit realization upon exit from the investment.

How is the model relevant to SMEs in rural Nepal?

This particular model which combines equity financing with technical assistance has been implemented successfully in several developing regions, including countries that face similar political, geographical, and economic constraints as Nepal. The “hands-on” nature of the model specifically targets small and medium enterprises, which are the engine of economic growth in rural Nepal. Private sector development is the catalyst for socio-economic improvement to supplement public service delivery.

What other services does the LBSC provide?

In addition to financing and technical assistance, LBSC also actively promotes public-private partnerships that will enable participation of local public bodies and private entities. Furthermore, LBSC is developing the operating framework for the potential establishment of a local stock exchange which will enable individual investments and benefits to be realized.

What is LBSC’s strategy to increase its market support?

LBSC leverages the reputation of GARDP II to encourage market acceptance and support. With multi-disciplinary teams composed in large part of former GARDP II staff, local communities are more comfortable in establishing a relationship of mutual trust with LBSC. Pilot investments are already underway to rapidly prove success and inspire confidence among local entrepreneurs. LBSC also employs a skilled Marketing Specialist to convey its messages to parties outside of the immediate rural areas.

How will LBSC be affected by potential political / insurgency risks?

During the worst of the insurgency movement, GARDP II was affected but not to the point where it was unable to achieve its objectives. The project has had interaction with the Maoists during which they expressed support for LBSC and its mission, especially since the Centre will focus on improving the welfare of rural communities and reduce their reliance on international support. From the government’s side, LBSC has support from the District Development Committees and local Chambers of Commerce and Industry.

How will LBSC address investment risk?

We understand that the perceived risks of rural equity investment are high. To counter this, LBSC has established a detailed format according to which each investment evaluation is meticulously carried out. Special care is applied to financial due diligence and proper reporting from the enterprise both before and after the investment. LBSC’s Investment Review Committee requires fact-based analysis for every financial assumption used in order to make their decision. Multiple parties are involved in the decision process to reduce the impact of subjective opinions of any one party. After the investment is made, the enterprise is monitored closely to ensure that management conforms to reporting and administrative standards. Furthermore, LBSC maintains a diversified investment portfolio to avoid excessive exposure to any one investment or industry. The integration of trading networks and having alternative sources of raw inputs greatly mitigate the risk of natural disasters. Encouraging enterprises to offer diversified products decreases the impact of industry recessions.

What are the benefits to investors in LBSC?

LBSC operates on a for-profit basis and only targets enterprises which have high expected rates of return (greater than 20%) in addition to their positive social impact. LBSC senior management maintains an active presence in Kathmandu to conduct investor information presentations. Investors share in the profitability of the company in the form of dividend payments. In addition, investors have the opportunity to participate in formulating the strategic direction of LBSC by having a seat on the Board of Directors based on the size of their investment. They are also recognized as the pioneers of an innovative, high-impact model, which can be replicated in other parts of Nepal. LBSC is currently actively seeking investors. Financial projections are available for serious interested parties.



		Frequently Asked Questions (FAQs) What is private equity investment? Private equity investment is the provision of capital to enterprises in a financing arrangement according to which the investor (LBSC) becomes an active shareholder in the enterprise (investee) with representation on the Board of Directors and key input in the management and strategic direction of the investee. The investor (LBSC) will be entitled to dividend payments and profit realization upon exit from the investment. How is the model relevant to SMEs in rural Nepal? This particular model which combines equity financing with technical assistance has been implemented successfully in several developing regions, including countries that face similar political, geographical, and economic constraints as Nepal. The “hands-on” nature of the model specifically targets small and medium enterprises, which are the engine of economic growth in rural Nepal. Private sector development is the catalyst for socio-economic improvement to supplement public service delivery. What other services does the LBSC provide? In addition to financing and technical assistance, LBSC also actively promotes public-private partnerships that will enable participation of local public bodies and private entities. Furthermore, LBSC is developing the operating framework for the potential establishment of a local stock exchange which will enable individual investments and benefits to be realized. What is LBSC’s strategy to increase its market support? LBSC leverages the reputation of GARDP II to encourage market acceptance and support. With multi-disciplinary teams composed in large part of former GARDP II staff, local communities are more comfortable in establishing a relationship of mutual trust with LBSC. Pilot investments are already underway to rapidly prove success and inspire confidence among local entrepreneurs. LBSC also employs a skilled Marketing Specialist to convey its messages to parties outside of the immediate rural areas. How will LBSC be affected by potential political / insurgency risks? During the worst of the insurgency movement, GARDP II was affected but not to the point where it was unable to achieve its objectives. The project has had interaction with the Maoists during which they expressed support for LBSC and its mission, especially since the Centre will focus on improving the welfare of rural communities and reduce their reliance on international support. From the government’s side, LBSC has support from the District Development Committees and local Chambers of Commerce and Industry. How will LBSC address investment risk? We understand that the perceived risks of rural equity investment are high. To counter this, LBSC has established a detailed format according to which each investment evaluation is meticulously carried out. Special care is applied to financial due diligence and proper reporting from the enterprise both before and after the investment. LBSC’s Investment Review Committee requires fact-based analysis for every financial assumption used in order to make their decision. Multiple parties are involved in the decision process to reduce the impact of subjective opinions of any one party. After the investment is made, the enterprise is monitored closely to ensure that management conforms to reporting and administrative standards. Furthermore, LBSC maintains a diversified investment portfolio to avoid excessive exposure to any one investment or industry. The integration of trading networks and having alternative sources of raw inputs greatly mitigate the risk of natural disasters. Encouraging enterprises to offer diversified products decreases the impact of industry recessions. What are the benefits to investors in LBSC? LBSC operates on a for-profit basis and only targets enterprises which have high expected rates of return (greater than 20%) in addition to their positive social impact. LBSC senior management maintains an active presence in Kathmandu to conduct investor information presentations. Investors share in the profitability of the company in the form of dividend payments. In addition, investors have the opportunity to participate in formulating the strategic direction of LBSC by having a seat on the Board of Directors based on the size of their investment. They are also recognized as the pioneers of an innovative, high-impact model, which can be replicated in other parts of Nepal. LBSC is currently actively seeking investors. Financial projections are available for serious interested parties.