The funding will help bolster the country’s public finances, which are still recovering from the shocking experience of the earthquakes that hit Nepal in April and May.

ADB said the money, which comes under its Rural Finance Sector Development Program, will support policy actions to improve the delivery of finance to rural communities.

This latest loan will help Nepal develop new regulatory frameworks for the sector and reform key rural institutions, such as its Agricultural Development Bank Ltd, Small Farmers Development Bank and Grameen Bikash Bank.

It will also strengthen government plans to take further steps to enhance the rural finance sector.  

“This loan will bolster the government’s finances at a time its revenues have been badly affected by the economic losses caused by the earthquakes,” said Mayumi Ozaki, rural and microfinance specialist, in ADB’s South Asia department.

Nepal’s economic growth projection for 2015 is now 3%, significantly lower than pre-earthquake projection of 4.6%.

The quakes caused an estimated $7bn in damages and losses, equivalent to nearly a third of Nepal’s gross domestic product. This has also set back the country’s efforts to meet its Millennium Development Goals (MDG) for poverty reduction.

Around 8 million people living in rural areas were affected by the natural disaster.

Along with the budgetary support loan, ADB has provided Nepal with $200m in emergency assistance, and a $3m disaster relief grant. A further $15m grant from the Japan Fund for Poverty Reduction is also in the pipeline.