Dhulikhel,
Aug 10: Deputy Governor of Nepal Rastra Bank (NRB) Chinta Mani Siwakoti
Thursday said that the central bank had no intention of issuing licenses to new
microfinance institutions (MFIs) even though it had received 54 new applications
seeking permission to operate them.
"The
NRB will issue licenses to the Financial Intermediaries Non-Government
Organisations (FINGOs), but no license will be awarded to new class 'D'
microfinance banks," Siwakoti said while addressing a symposium on
'Appraising current challenges and issues in microfinance' organised by the Centre
for Self-help Development (CSD) here.
Currently,
53 microfinance institutions, 25 FINGOs and over 150 cooperatives are providing
microfinance services in Nepal.
If the
NRB issued licenses to all applicants, the number of MFIs would reach 107.
According
to Siwakoti, increasing the number of MFIs has created multiple problems, such
as client duplication, unfair competition and difficulties in monitoring and
regulation.
"The
central bank had stopped issuing licenses to 'A', 'B' and 'C' class banks and
financial institutions (BFIs) for the last 5-6 years but had been liberal to
the MFIs as they could assist in reaching out to the remote areas and the
deprived communities," he said.
He said
that some new MFIs were facing problems due to the profit and facility-seeking
nature of the members of the Board of Directors and chief executive officers.
As per
the NRB provisions, MFIs are not allowed to increase the perks and benefits of
its directors and employees until it issues an Initial Public Offering (IPO).
Similarly,
no BFIs are allowed to send their directors and high officials on foreign trips
and trainings without receiving approval from the Board and the NRB.
Siwakoti
also directed the MFIs to invest in capacity building of their staff as enhanced
expertise could contribute to the health and strength of the company.
CSD
chairman Shankar Man Shrestha said that the biggest challenge faced by the
microfinance banks was resource mobilisation.
"We
must develop internal resources and reduce the dependency on banks and other
internal institutions. Especially, international organisations set so many
conditions that they will create more problems in the long run," he said.
He said
that the MFIs had reached all the districts of the country and had their
footprint in many remote areas. However, they need to implement organisational
governance at the earliest for their better future and to contribute to poverty
reduction.
He
stated that the microfinance banks must revive the system of weekly meetings of
the beneficiary groups to increase the rate of repayment. Currently, the MFIs
are holding monthly meetings.
Participants
of the symposium said that though the MFIs have expanded their services to more
than 124,000 centres, they have failed to reach out to the ultra-poor and thus
contribute to poverty reduction and entrepreneurship development.
Chairman
of Nepal Micro-Finance Bankers Association Ram Chandra Joshi said that the
microfinance initiative was begun as a social institution but later, personal
interest had superseded the social cause.
The
symposium includes discussions on problems, challenges, learning, opportunities
and the future of microfinance from the perspectives of FINGOs, cooperatives,
well established MFIs and newly established MFIs, identifying major problems
and challenges of microfinance and will formulate common strategies to be
followed by the MFIs.
The symposium will conclude Friday.
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