Kathmandu, Oct. 3
Finance Minister Janardan Sharma has urged the
microfinance institutions (MFIs) to reduce the current interest rate on their credit
flow. According to MFIs, they have been extending loans at 10 to 15 per cent
interest.
Accepting the demand letter of Microfinance
Association of Nepal on Sunday, Minister Sharma stated that the living
standards of the poor people will not change unless the MFIs reduced interest
rates. Their role will be important in reducing poverty as they have higher
penetration in the rural areas and deprived communities.
Stating that he was ready for the support needed to reduce
the interest rate fixed by the MFIs, Minister Sharma urged the representatives
of the MFIs to come up with an action plan for the same.
The delegation said that it would not be possible to
reduce the interest rate of micro loans unless the commercial banks took the
interest rates down. Commercial banks’ loan is the main financial resource for
the MFIs.
They informed that the microfinance institutions
have been providing loans by adding only 2 per cent on top of the interest rate
charged by the commercial banks. The state should set up microfinance funds in
the areas of infrastructure, energy and agriculture, they said.
Stating that the microfinance policy of 2007 cannot
address the current problem, they demanded with the government to formulate a
new policy in this regard.
The delegation led by chairman of the association
Jagat Bahadur Pokhrel demanded that the fund should be established as per the
provision of National Microfinance Policy and said that institutional tax on
microfinance should be reduced by half, interest income of group members should
not be taxed and life and livelihood of the members should be insured, and insurance
companies should provide reinsurance services for the same.
As of last July, there are 70 microfinance
institutions in Nepal. Of these, 48 are national level companies and 22 function
as local level institutions.
About Rs. 39.92 billion is invested in MFIs. With a
deposit of over Rs 130.42 billion, microfinance institutions have invested Rs.
365 billion in loans.
About 83.4 per cent of it is invested without
collateral. Likewise, 97.8 per cent of microfinance borrowers are women.
Published in The Rising Nepal daily on 4 October 2021.
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