Body mulled to provide credit info to co-ops

KATHMANDU, JUN 02 -

The Ministry of Cooperatives and Poverty Alleviation is planning to establish a Credit Information Unit (CIU) from where cooperatives can obtain the credit history of their potential borrowers to help them decide whether to lend them money or not.  

The ministry said the unit could help prevent borrowers from taking loans from several cooperatives and increasing the risk to them.

The Credit Information Bureau is the only organization that currently maintains documentation of the credit history of borrowers from commercial banks, development banks and finance companies. It is also planning to keep records of the credit history of borrowers from micro finance institutions. The bureau maintains a black list of loan defaulters based on the recommendation of banks and financial institutions.

Despite the huge number of loans being issued by cooperatives, there is no institutional mechanism to check the credit worthiness of borrowers.

A ministry official said they had sent a draft of the working guideline for establishing a CIU to the Cabinet last week for its okay.

As per the proposed working guideline, the CIU, which will operate under the ministry, will collect the credit history of borrowers who take loans of more than Rs 50,000.

The ministry has planned to establish a pooling unit in coordination with Rastriya Sahakari Bank.

“The ministry will maintain a pooling unit to provide the necessary information to cooperatives who request to see the credit history of a particular borrower,” said the official. “Rastriya Sahakari Bank will assist with the technical part.”

The National Cooperative Policy, 2013 has also aimed to set up an effective credit information system to make investments secure. The ministry’s plan to set up a CIU has been prompted by recent revelations of embezzlement of deposits by a number of cooperatives, particularly savings and credit cooperatives.

Study teams formed at different points in time have also shown that a single borrower banking with a number of cooperatives is one of the root causes of the irregularities seen in the sector. The high-level probe commission has also urged the government to form regulations on cooperative credit guarantee and credit information system.

Source: The Kathmandu Post