Banks investment in Pokhara tourism negligible

POKHARA, March 28: 

Even though Pokhara stand as the second largest city after Kathmandu in terms of presence of banks and financial institutions (BFIs), their investments in the tourism industry is negligible despite the fact that the city is the most popular tourism destination in the country.

Figures on loans and investments by the BFIs suggests they are largely concentrated in housing, real estate, retail businesses and hire purchase, instead of tourism that holds huge business potential. 

Contrary to this prospect and credit demand existing in the industry, chiefs of BFIs flushed with liquidity here say they are finding no investment avenues following central bank´s cap on realty lending. 

“This has been the irony of this industry. I believe such a situation exists probably because bankers lack proper knowledge of the tourism industry,” said Biplav Paudel, president of Western Hotel Association.

Nepal Rastra Bank (NRB) records show the city has 154 branches and head offices of various BFIs operating at national, regional and local level. “Such a large number of BFIs are competing fiercely for deposits in the city, but they have not even invested 2 percent of their total local lending in tourism industry,” said a senior official at NRB.

Data shows, BFIs in Pokhara invested Rs 39.61 billion in in 2010/11, but their investments in tourism industry totaled a mere Rs 607.50 million. 

“Clearly, the BFIs are interested in short term and immediate profits and in the process are ignoring highly potential investment avenues like tourism,” said the official. He also agreed with the tourism entrepreneurs like Paudel that bankers probably were not aware of the potentials of the industry.

Interestingly, Chairman of Garima Development Bank Jaleshowr Pandey said that his institution has not invested in tourism because the sector has no capacity to absorb loans. “There is simply no credit demand, and the sector is still too small to attract BFIs,” he stated.

The development bank has invested merely 2 percent of the total loans it has flown in the city in the industry. “As of mid-January 2012, we have invested Rs 1.50 billion in the city and of that some 2 percent has gone to tourism sector,” said Govinda Prasad Dhakal, its CEO.

Paudel attributed poor flow of credit in the sector to myopic vision and policy constraints of the BFIs. “Large BFIs are guided by investment policies formulated in Kathmandu and because bankers in Kathmandu are not aware of our industry´s potential in Pokhara, it is obvious they see no credit demand here,” said Paudel.

He even viewed that the bankers might not be investing in the sector because the leading banks that issued loans in the sector in the past failed to recoup their loans.

 Paudel also stressed that the industry develop new products in order to attract BFIs attention.

Source: Republica