Nepal is one of the countries with a population of 2.5 Crore and still half of its population has no access to financial services. The government of Nepal promoted microfinance companies by providing subsidized loans, not much legal hindrance for registration, and no paid-up capital requirement. The main reason behind this initiative is to enable the poor and deprived community to access banking services. The below table displays the list of microfinance in Nepal till April 2020.
Concept of Microfinance in Nepal;
After learning from Bangladesh, the country where the microfinance initiative was born and succeeded, the government of Nepal also allowed the company to register without any paid-up capital to provides similar services in Nepal.
SARC (South Asian Regional Cooperation) countries share a similar challenge where most of the country’s population lives under the poverty line and they are out of the financial services.
The concept of microfinance in Nepal is to provide financial services, including micro-credit, micro-savings to poor and disadvantaged communities. Allow them to carry out micro-business activities from where they can lift their financial condition.
While corporate banks A, B, C-class financial institutions have not reached the rulers and poor communities. Microfinance companies in Nepal have emerged to fill these gaps, with the result that now there are 90 microfinance banks in Nepal.
Who oprates microfiance in nepal?
Although there are 90 microfinance companies in Nepal they have different areas of the operation. Some microfinance companies are limited in one district, some are few districts and some have a national level of operation.
Other financial institutions such as cooperative also can work in the microfinance sector, Mostly microfinance institutions fave focused on the women, because, culturally they have deprived of the financial decision in a family.
Now the A-class commercial banks also operate the microfinance services, because, central bank requires that some portion of their capital should go to the deprived communities. If any commercial bank which has not operated a microfinance program it should provide the fund to the microfinance institution through wholesales landing.
Microfinance function in Nepal
- To Disburse micro-credit, with or without any movable or immovable property as the collateral or security, for operating any micro-enterprise prescribed by the Rastra Bank to any project, any group or a member thereof which/who have regularly saved for the period and maintained the prescribed saving,
- To accept loans or grants from any bank or financial institution or native or foreign organization or institution, and use such loans or grants for the supply of micro-credit or for making the same effect.
- Obtain a loan from the Nepal central bank or from any foreign organization.
- Prior to disbursing micro-credits, evaluating the schemes for which micro-credits have been requested and determining whether or not they are feasible,
- To provide necessary services and consultation to groups with regard to the mobilization of microfinance,
- carry out necessary actions for recovery of the microcredits on time,
- To accept deposits and refund such deposits subject to the limit prescribed by the Rastra Bank by getting approval of the Rastra Bank,
- To issue shares, debentures, bonds, etc. for the purpose of meeting the capital fund requirements,
- exchange information or notices on debtors or customers who have obtained credit or any kind of facility from it and other banks or financial institutions with the Rastra Bank or any other bank or financial institutions.
- carry out such other functions as prescription of the Rastra