Added At: 2010-06-13 11:09 PM
Last Updated At: 2010-06-14 11:09 PM
KATHMANDU: Despite, rapid expansion of banking facilities in Nepal, most of the population living in the far-western Nepal has very nominal access to the financial institutions.
In the areas of Bajhang and Doti only the district headquarters Chainpur and Dipayal have branches of Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL). Same is the case of other districts except Dadeldhura which has branches Bank of Kathmandu (BoK) and Global Bank Ltd (GBL). Despite, the efforts of Nepal Rastra Bank (NRB), commercial banks are not going to the rural hinterlands to provide the banking facilities. NRB has made it mandatory for the licensed banks and financial institutions (BFIs) to invest about 3 per cent of their loan portfolio in the rural sector.
“Commercial banks’ main agenda being profit generation, they only operate in the economically viable areas and where prospects of profit is high. So they are not willing to open branches in far-west as their expectation of profit is low,” said NRB’s spokesperson Gopal Kafle.
“To increase the access of banking facilities, NRB is partnering with UNDP that will use microfinance institutions and development banks as agents to reach the deprived population,” he informed.
“We are focusing on the microfinance institutions to fill this gap as microfinance will be highly beneficial and suitable for providing banking services to the poverty-stricken people than big-wig profit-centric commercial banks,” he said.
There are 27 full-fledged commercial banks in Nepal at present with about 800 branches. Commercial banks have been ignoring the Far-Western Nepal’s northern part dubbing it economically unprofitable. In the capital and other urban regions of the country, bank branches can be found on every nook and corner. Likewise, most of the partially developed semi-rural areas also house the branches of regional development banks and some local cooperatives. However, in the Far-Western region of Nepal, financial institutions are limited to the branches of government banks located at the district headquarters.
It is ironical that the bigger commercial banks’ CEOs have been saying that Nepal has more than enough of banks while the statistics show that of the total population, only 30 per cent is having access to the banking and finance.
Difficult geographical features, frequent natural disasters and lack of proper infrastructures has made Far-Western region the most deprived of Nepal, especially the hilly and mountainous areas of the Far-West has been living a very hard life. The households have to depend on foreign employment and aid from non-government organisations for food as due to climatic conditions and lack of irrigation facility, their crops production can support them for not more than 3 months.
Thus, the commercial banks are not interested in operating in the region with the view that there will not be any deposit collection with the poor rural people as customers. Likewise, the BFIs are also afraid that the loans floated will also go bad due to borrowers’ inability to pay back.
It is quite obvious that in view of lack of formal financial institutions, the people are resorting to approach local money lenders who give loans at higher interest rates, pushing them further into poverty. This absence of proper banking channels in the region is fuelling the use of Indian currency.