Role Of Microfinance In Nepal

INTRODUCTION

BRIEF PROFILE OF STUDENT

Name: Upama Shrestha

BOD: 04/09/1992

Graduation: BBM (Jyoti Nivas College Autonomous, Bangalore University)

Current course: MBA

Specialisation: Banking and Finance

BRIEF PROFILE OF PROJECT MENTOR AT THE BANK

Name: Mr. Pritha Bahadur Thapa

Designation: Manager of Microfinance service department.

Joined RMDC: June 2000

Academic qualification: MBA from Tribhuvan University, Nepal.

Experience:

Worked with CSD as Chief of Rural Finance Sector of CBED project, Jumla, Nepal for 30 months. Worked as a program Supervisor of Self-help Banking Program for 6 months. Major trainings: Grameen generalized system, organized at Grameen Trust, Bangladesh Financial Analysis and Delinquency Management,

Microfinance is a financial provision provided to poor and deprived population to help them improve their socio-economic condition

Being a poor country, the need for microfinance in Nepal is of utmost importance. More than23.8% of population lies below poverty line in Nepal. To reduce this percentage microfinance was indeed the solution. Providing financial motivation and bridging the gap between money and work can help the poor stand on their own feet. A bit of a financial push and they are willing to work hard. Microfinance follows Income- saving = expenses rather than Income-expense = saving. They encourage poor to earn and save then spend.

The term “poor” is a relative term. It differs from economy to economy. In Nepal poor people can be categorized as follows: Those families who live below the poverty line stated by the government of Nepal. A person earning less than the average national income. The rural areas where women engaged in agriculture have either part time job or no job. Women of dalit category or Muslim community, having skill and willingness to work but no source of

Strengthen confidence of deprived sector and make them independent. To encourage women to participate in the economy and in turn improve their status in the society. Helping create jobs by investing in clients business.

LEGAL FRAMEWORK OF MICROFINANCE IN NEPAL

There are three different legislatives under which microfinance activities are carried on in Nepal. The microfinance institutions were licensed under “Development Banks Act” which is now registered under “Bank and Financial Institution Act, 2006”. The Financial Intermediaries Act (1998) is clearly targeted at Microfinance NGOs. The cooperative Act (1972) caters for Cooperative organization. The Nepal Rastra Bank (central bank) has classifies banks and financial institution into 4 different categories.

AS per guidelines of NRB, the banks under A, B and C category need to invest some % of their total loan portfolio in Microfinance sector i.e. in banks under category D. The following table will clarify the type and % allotted to each category of banks.

Category A B C D

Type Commercial banks Development banks Financial institutions Micro Credit development banks

Number 32 89 66