Governor concerned over increasing microfinance share price

Kathmandu, Sept. 22: Governor of the Nepal Rastra Bank (NRB) Dr. Chiranjibi Nepal Thursday expressed serious concerns over the ever-growing stock price of the shares of micro-finance companies.

Addressing the 10^th Annual General Assembly of the Nepal Microfinance Bankers’ Association (NMBA), Dr. Nepal said that the high prices of micro-finance shares had distorted the market.
”This is very unusual. Share price of some commercial banks vying for the paid up capital of Rs. 8 million is hovering around Rs. 300 to Rs. 500 while the share price of microfinance companies with Rs. 10 million to Rs. 100 million is around Rs. 5,000,” he remarked.

He said that the NRB had communicated its concerns to the capital market regulator, Securities Board of Nepal (SEBON).

The Governor urged the micro-credit institutions to go to the mountain and Karnali region and extend their services to poor people.

“Most of the microfinance banks are city-centred. There is an unhealthy competition in this sector. Microfinance was started with a motto to serve the people specially women and help them develop entrepreneurship,” said Dr. Nepal.

Saying that about 60 per cent of the population did not have access to the formal financial institution, he asked the microfinance to help the poor people with financial support in their entrepreneurial venture.

Vice-president of the NMBA Ram Chandra Joshi said that quality of microfinance institutions had been degrading over the years.

“Unhealthy competition and customer duplication has increased the risks,” he said.

He stated that some microfinance institutions had been trying to forge collaboration with the commercial banks in mobilizing 2 per cent lending to the deprived sector.

President of Nepal Bankers’ Association Upendra Poudel said that although it was difficult, commercial banks were ready to collaborate with the microfinance companies in catering services to the entrepreneurs who were graduated from the microfinance and were in search of more loans.

President of Development Bankers’ Association Nepal Krishna Raj Lamichhane appreciated microfinance banks for their efforts in making women self-reliant.

President of NMBA Dharma Raj Pandey said that the sector needed self-regulation in terms of interest rate, service charge  and other business aspects.

There are 46 microfinance companies in Nepal.