‘MFIs need to avoid duplication of credit’

Kathmandu, September 6

Microfinance institutions (MFIs) have been urged to be careful while floating loans as multiple borrowing is rampant, which may have an adverse impact on credit recovery.

Citing the overcrowding of MFIs in semi-urban areas, Nepal Rastra Bank Governor Chiranjibi Nepal has said that MFIs will face serious challenges if they do not avoid the trend of multiple borrowing.

Speaking on the second memorial day function of Harihar Dev Pant organised by Harihar Dev Pant Foundation, NRB Governor Nepal said that the central bank is mulling over introducing merger and acquisition provision for MFIs as the number of MFIs is relatively high.

Currently, 52 MFIs are in operation and the central bank has also directed 25 financial intermediaries to scale up as MFIs. Mergers and acquisitions, as per the governor, will promote healthy competition and help fulfil the credit demand of the rural population as the capacity of MFIs to extend credit will improve through mergers and acquisitions.

NRB has stopped issuing licences to MFIs since this fiscal.

Governor Nepal also alleged that the MFIs are not serving the people in need and are concentrated only in semi-urban areas. “NRB has set up a fund to help MFIs to work in highly remote areas. Such MFIs will receive Rs four million at zero per cent interest rate from NRB for a year and this could help create entrepreneurs in remote areas by fulfilling the credit demand of the rural poor,” according to the governor.

On the occasion, the Harihar Dev Pant Foundation also awarded borrowers who have been successfully operating their micro enterprises with support from the foundation. The foundation was established to recognise the efforts made by late Harihar Dev Pant, who had initiated the concept of micro credit in Nepal by setting up Nirdhan Uthan Bikas Bank.

Kaushilamaya Sunuwar from Siraha, Gita Pariyar from Parsa and Chandra Lamichhane received the micro entrepreneurship award. Likewise, the foundation awarded Academic Excellence Award to Dharmendra Timalsina, who topped Tribhuvan University in Monetary Economics in 2013 and Milan Bagale, gold medallist of Rural Development from Tribhuvan University in 2013.

Likewise, the Society of Economic Journalists-Nepal was honoured for its outstanding contribution to promote economic journalism in the country. NRB Governor Nepal handed over the accolades to those awarded.