In two years, MFIs come down to 65

Kathmandu, Sept. 29

While the number of microfinance companies has gone down significantly to 65 from 84 in the past two years due to mergers and acquisitions, their branches have increased by 1,116 over the same period. Of the 65 microfinance institutions (MFIs), four are wholesale lenders and 61 mobilise the retail loans.

There were 3,946 branches of MFIs by the end of the fiscal year 2019/20 and it has reached 5,062 by the end of the last fiscal 2021/22, according to a recent ‘Situation of microfinance institutions’ report of the Nepal Rastra Bank (NRB). They have their presence in all 77 districts in the country.

The number of MFI’s branches has gone up by 9.54 per cent (from 4,621 to 5,062) by the end of the last fiscal compared to the previous year. According to the report, there are 429,000 microfinance centres and 1.35 million groups across the country. There were about 311,000 centres and 1.04 million groups two years ago. 

Province-wise, Lumbini has the highest number of branches and Karnali the lowest – 1,160 and 230 respectively. The central bank has noted that the Karnali has the poor access to the financial services extended by the microfinance companies. This means Lumbini has 23 per cent of the branches of the microfinance while Karnali has just 4 per cent.

Likewise, the number of microfinance members has increased by 12.87 per cent – from 5.19 million to 5.86 million – in the last fiscal compared to the previous year 2020/21. Likewise, there are 3.30 million creditors of microfinance companies. These class ‘D’ sector companies licensed by the central bank have created employment for 23,303 so far.

The NRB has found the capital fund of the microfinance satisfactory. By the end of the last fiscal, this sector has 11.87 per cent primary capital and 13 per cent capital fund, up by 21.64 per cent and 20.35 per cent respectively.

Meanwhile, retail lending MFIs have increased their savings and lending amount. They have collected Rs. 159.02 billion in savings and Rs. 186.21 billion from borrowing. The savings and borrowings were Rs. 106.15 billion and 107.75 billion respectively two years ago. 

However, the growth in the collection of financial resources has not gone up significantly due to the shrinking liquidity situation.

The central bank has found that the investment from the microfinance banks has decreased. By mid-July 2022, the total investment from them has reached Rs. 6.10 billion which is 58.57 per cent less than the previous year when the size of investment was Rs. 14.71 billion and by the end of the FY 2019/20, it was Rs. 10.19 billion. 

Their areas of investment are government bonds, shares and debentures, fixed deposits and others. Their investment in shares and fixed deposits have decreased during the review period. 

Published in The Rising Nepal daily on 30 September 2022.