Govt mulls to set up an apex body for microfinance

KUVERA CHALISE

KATHMANDU: The government is planning to set up Microfinance Development Centre. “We are discussing modality of the Microfinance Development Centre that will provide wholesale lending to the microfinance institutions,” said a central bank official.

“However, there is a confusion over possible duplication as the Rural Microfinance Development Centre (RMDC) is also providing similar services,” he said, adding that the central bank is holding discussions with stakeholders to avoid duplications.

There are around 93 microfinance institutions under RMDC, which helps and supports them to grow and do better business.

According to the statistics, around 16,00,000 households are enrolled with different microfinance institutions and benefitting from the financial access.

However, cut-throat competition among microfinance institutions has led to overlapping and over-indebtedness.

Excluding the overlapping, around 12,50,000 poor households are enrolled with microfinance institutions. “It is almost half of the total target,” the source said, adding that there are around 25,00,000 poor households that need the help of microfinance institutions.

Microfinance institutions have been slowly deviating from its goal of serving the poor to becoming profit-oriented. They are quantity-driven rather than quality-driven. They have a high lending concentration in the Tarai and accessible hilly districts.

“To regulate and monitor malpractices in these institutions, the central bank has brought the second-tier institution that will supervise them,” the source said, adding that last week the cabinet approved to set up an apex body for microfinance.

The country has a bitter experience of failure of Grammen Bank earlier that has made the central bank more serious over the Microfinance Development Centre’s modality and functions that could help expand microfinance services to the remote hilly districts where there are not a single microfinance institution.

“Most of the microfinance institutions have been overcrowding in the Tarai and accessible hilly districts instead of serving the remote hilly poor people,” he added.