London — The Asian Infrastructure Investment Bank’s (AIIB) has approved a USD112.3-million loan to Nepal to increase access and improve the quality and efficiency of electricity supply across the country’s western regions.

The Distribution System Upgrade and Expansion Project is AIIB’s first sovereign-backed financing project in Nepal. This is also the first project approved, of which AIIB’s technical assistance under the Special Fund has supported compressive project preparation from the very early stage, said a statement issued by the Bank.

In 2018, Nepal received a USD1-million grant under AIIB’s Special Fund to assist the government to prepare the electrification program in western Nepal, in terms of feasibility study, technical design, and environmental and social management.

The project covers 13 districts in Provinces 5 and 6 (Karnali Pradesh) and will include the construction of 21 primary substations and over 2,000 kilometers of supply lines. A key component focuses on strengthening the capacity of Nepal’s Electricity Authority to plan, analyze and modernize the network performance of the project.

“AIIB’s investment gives much-needed financing to provide affordable, reliable and modern energy, especially in rural areas where people lack basic infrastructure,” said AIIB Vice President and Chief Investment Officer D.J. Pandian. “This project will help provide more than half a million people with new or improved access to electricity. By investing in Nepal’s energy sector, we hope to encourage further infrastructure investment in the country, which will support Nepal’s efforts to achieve the Sustainable Development Goals and drive economic growth, employment opportunities and poverty alleviation.”

While 78 percent of Nepal’s population have access to grid electricity, there is a large regional disparity. The rural and hilly areas of western Nepal are the least connected, requiring substantial investments in distribution networks.

Similarly, the AIIB’s Board of Directors has approved a USD145-million loan to India to improve irrigation service delivery and strengthen flood risk management in West Bengal. Earlier this month, the AIIB President Jin Liqun had approved a USD65-million 250-megawatt (MW) solar power project in Jodhpur in India, the Bank said.