Kathmandu, February 14:

Finance Minister Dr Ram Sharan Mahat while inaugurating Microfinance Summit Nepal 2008 here today assured government’s support in promoting micro-credit as an effective tool in the fight against poverty.

Urging micro-finance institutions (MFIs) to discourage unhealthy competition and bring uniformity in services with a higher-level of commitment to reach grassroots levels, he assured that the government would help spread micro-credit to every nook and corner of the country for sustainable socio-economic development.

“These MFIs are turning the poors into micro-entrepreneurs,” he said adding that micro-credit is playing a vital role in sustainable socio-economic development in poor countries.

He laid stress on the need of MFIs and concerned development partners to expand their reach and activities to remote villages. “The government is ready to review its tax policy and tax rate, if the MFIs and micro-credit service providers firmly come up with program-mes to expand activities solely to the rural parts,” he said.

Acting governor of Nepal Rastra Bank (NRB) Krishna Bahadur Manandhar said that the central bank does not have any plan to phase out deprived sector lending. “Instead, NRB is planning to make it mandatory for finance companies to lend in deprived sector from next fiscal year,” he informed.

Presenting examples from developing countries across the world, Manandhar said that micro-credit has been proved one of the most effective tools for poverty reduction as well as economic development. “The beauty of micro-credit is its rate of repayment, which is almost 100 per cent apart from participation of poor and women.”

Dr Harihar Dev Pant, chairperson of the summit organising committee and vice-chairperson of Centre for Microfinance Nepal, on the occasion, said micro-finance has been one of the few effective tools for poverty reduction. “However, in Nepal, its reach and activities have been limited mostly within some semi urban areas and Tarai districts,” he said.

Micro-credit helps poor people to cultivate saving culture and accumulate funds for future investments or emergencies as well as access loans for productive purposes leading to higher incomes. “It has also helped in good governance, participation in political processes, women empowerment, social inclusion and conflict transformation,” Dr Pant said. “The challenge ahead of MFIs is to expand micro-credit services to rural populace, particularly in hills and mountains,” he said adding that micro-finance should accompany programmes on basic education and business literacy for its best utilisation.

Dr Pant underscored need of more MFIs to cater micro-credit to hilly and mountainous areas due to highly dispersed population and topographical difficulties. He said that the MFIs require more funds to expand their wings in these areas. He also urged the government to set up seed fund for loans.

Bhim Kumari Subba, a client of micro-credit and Tory Clawson, country director of Save the Children US Nepal, also shared their views on the occasion. The first of its kind of the three-day event with participation including policymakers, officials, diverse stakeholders of micro-credit, NGOs, INGOs and development partners will last till February 16. More than 800 participants with more than 50 per cent women are taking part. On the occasion, Dr Mahat also unveiled a book ‘Microfinance in Nepal’ written by Bijayram Bhakta Mathema.