Microfinance Summit 2017 concludes

MFIs vow to be more accountable and transparent

Kathmandu, Mar. 17: The fourth National Microfinance Summit concluded on Friday with a 17-point declaration that includes development of entrepreneurship at the local level, financial literacy, contribution to the national economy and innovation through the microfinance.

The summit applauded the contribution of microfinance institutions in poverty alleviation and expressed commitment to make the sector more accountable, transparent and fair.

Issues like challenges of microfinance, role of government and microfinance institutions (MFIs) in addressing the challenges threatening the industry and policy reforms have got priority in the declaration.

It said that a code of conduct for microfinance banks would be developed, a request would be made to the central bank for a policy provision to distribute the shares among the customers of MFIs, and make a call for more effective regulation of the microfinance banks, cooperatives and financial intermediary non-government organisations (FINGOs).

"A call will be made to the government, central bank and development partners for support to enhance the efficiency of MFIs, reduce the cost, expand services and adopt newer technologies," reads the declaration.

Similarly, the summit declared that collaboration would be forged among all the stakeholders working in the finance sector to expand micro-insurance.

Chairman of the Summit Coordination Committee Pitambar Prasad Acharya issued the declaration at the closing ceremony of the summit.

Chairman of Centre for Microfinance (CMF) and former governor of the Nepal Rastra Bank Ganesh Bahadur Thapa urged the microfinance banks to self-regulate themselves.

No scarcity of resources

The central bank has said that there was no scarcity of resources for the microfinance institutions (MFIs).

Responding to the whining by the microfinance bankers, deputy-governor of Nepal Rastra Bank Shiva Raj Shrestha said that although there was a provision that allowed the MFIs to mobilise resources 30 times more than their total capital, they were able to mobilise only 7.87 per cent of the total resources.

"Currently the MFIs have been mobilising about Rs. 110 billion while they have a capacity for Rs. 350 billion," he said while addressing a session of the Summit.

In order not to let the resources dry up for the MFIs, the central bank has implemented a mandatory provision whereby the commercial banks, development banks and finance companies need to invest in the deprived sector.

Commercial banks must mandatorily lend 5 per cent of their business to the deprived sector, development banks 4.5 per cent and the finance companies 4 per cent. Recently, the NRB has asked the banks to lend 2 per cent of their money directly to the deprived communities.

That money reaches the poor populace in the rural areas through the MFIs.

"According to those provisions, Rs. 130 billion should have been mobilized, but only Rs. 95 billion has been realised," said Shrestha.

However, citing the liquidity crisis that has sent a panic through the banking industry in recent times, microfinance bankers said that the MFIs have had to mobilise the savings to cope with the problem.

Chief Executive Officer of Rural Microfinance Development Centre (RMDC) Jyoti Chandra Ojha said that the MFIs were unable to avail the concessional loan facility of the development partners and urged the government to facilitate in creating an enabling environment for the microfinance in that regard.

Economic uplifting

Meanwhile, stakeholders say that microfinance had contributed to social and economic uplifting of the people and in entrepreneurship development.

Presenting a paper on 'Balancing financial, social and human values' at the summit, microfinance expert Dr. Harihar Acharya said that a study conducted from August 2014 to July 2015 in five districts of the country had shown that the microfinance had contributed in an economic revolution in the society.

Indian expert Abhimanyu Kaul said that microfinance contributed to change in the mindset of the communities.

Likewise, participants of a session on 'Missing middle: graduation from micro to small entrepreneurs' said that it was sad that no agencies, including the government, had statistics about microenterprises.

"Small financial institutions do have enough money to support cottage and small enterprises while the large banks hesitate to mobilise money in that sector, therefore the cottage and small enterprises are the 'missing middle'. They are short of resources to upgrade their enterprises," said Prahlad Man Mali, advisor to Sakchyam – Access to Finance.