EDITORIAL: Give it credit

To bridge the gap between the policy and practical action, the government must identify some pocket areas where an entire community can be involved in collective production

A number of financial institutions came into operation after the restoration of democracy in 1990 providing services to the people. But most of them have remained confined to urban areas, neglecting the rural areas where the largest chunk of population lives. Even the microfinance institutions have not been able to serve the rural population, and their lending rate is so high that small income people find it very difficult to take their services. Addressing a three-day National Microfinance Summit, Finance Minister Krishna Bahadur Mahara urged the MFIs to lower their operation cost by using innovative methods, applying modern technology and utilizing the best practices available so that the lending rate can be lowered to a level at which the rural people can also reap benefit from the micro-financing. The MFIs have played a significant role to uplift the living conditions in rural areas. But they need to simplify the lending process and make more investment in the agriculture sector so that farmers can use modern technology to increase their produce and productivity. MFIs need to introduce entrepreneurial ideas and develop value chain financing so that lending space for microfinance could be further expanded.

At the same time Nepal Rastra Bank also needs to arrange more funds for MFIs which have so far mobilized Rs. 77.22 billion till the last fiscal. But the credit demand is rising by almost 50 percent. But the MFIs cannot lend money more than Rs. 77 billion without policy level support from NRB. The shortfall in funds is due to the central bank’s provision of two percent direct lending to deprived sectors from commercial banks. To fulfill the credit demand in the rural areas the NRB has a provision under which Class A, B and C financial institutions are required to lend five, 4.5 and four percent, respectively, to the deprived sector identified by the NRB. However, the NRB monetary policy has allowed the commercial banks to lend only two percent directly to the deprived sectors, creating credit crunch in rural areas.

NRB governor Chiranjivi Nepal said NRB has been providing fund to the MFIs without any interest rate so that they can lend in 22 remote districts. But a large amount of money has remained unutilised. It shows that the MFIs have not been able to use the zero percent facility offered by the NRB to them. The government and the NRB have come up with a sound policy to uplift the economic condition of the low-income groups in rural areas. But the micro-financing policy has not been translated into action in the absence of practical programmes which also need skills and technical support. In order to bridge the gap between the policy and practical action the government must identify some pocket areas where an entire community can be involved in collective production. Scattered lending in rural areas does not yield any desired result. Bajura, for example, is a remote mountain district where there is huge potential of olive farming. If the entire community is engaged in this sector along with technical and financial support from the MFIs and the government, the entire community can benefit from collective efforts.

Welcome drive

There are many complaints about taxis cheating passengers and the authorities taking only effete action against the erring cabbies. There are about 10,000 taxis plying on the roads of the Kathmandu Valley. In order to prevent the cheating by the taxis they are now compelled to install computer billing machines. As of now, about 2000 cabs have such machines. The Nepal Bureau of Standards and Metrology has been carrying out this drive since January 1 despite the complaints from the taxi drivers. They would have to pay from Rs. 5000 to Rs. 8000 for such a machine.

The public are asked to demand bills from the cabbies. Taxis would not be allowed to operate without installing the computer billing machines. It is expected that the task of installing such machines in all the capital’s taxis will be completed by August 2017. In the last week more than 150 taxis were equipped with these. Meanwhile, most of the cabbies even now do not charge according to the meter. Passengers have to bargain with them as they are reluctant to use the meter to charge more. There should be no letting up in the drive to have the billing printers installed in all the taxis.