Financial intermediaries told to convert into MFIs

KATHMANDU, JUL 25

Nepal Rastra Bank (NRB) has asked non-government organisations (NGOs) and cooperatives working as financial intermediaries to convert themselves into microfinance institutions (MFIs) by the first half of 2015-16.

Previously, these institutions were told to do so by the end of 2014-15. But the Monetary Policy 2015-16 unveiled on Thursday extended the deadline. The central bank said the deadline was revised considering the imp-act of the April 25 earthquake, according to NRB Spokesp-erson Min Bahadur Shrestha.

Under its plan to gradually phase out such financial intermediaries, the central bank had six months ago put in place stern licensing policy for such financial intermediaries. The NRB has so far issued licences to around 35 NGOs and 20 cooperatives to offer limited financial services to micro and small enterprises. They have been allowed to offer small loans, mainly in rural areas.

“As a notable number of financial institutions are already present in the microfinance sector, these financial intermediaries hold no significance,” said Shrestha, adding the NRB previously issued licences to these institutions to promote micro and small enterprises’ financial access. “As the cooperatives are guided by the Cooperatives Act, we have asked our licencees to limit their lending to their members.”

The NRB also plans to hike the promoters’ share threshold for NGOs that intend convert into MFIs. Under the new plan, the NGOs promoters can maintain up to 51 percent stake. Shrestha said the move is aimed at encouraging the promoters to convert their NGOs into MFIs.

Earlier, the NRB had maintained the threshold of promoters’ shares at 25 percent.

The NRB has come up with a number of plans to facilitate the MFIs. The monetary policy has announced coordinating with the government to set up a start-up fund for the MFIs that do not have enough capital to fund their businesses. The monetary policy also plans to raise the paid-up capital requirement for the MFIs. “For the purpose, the process of e-mapping has been initiated,” read the policy.

But the capital hike will not be applicable for the MFIs that provide services to areas with low financial access.

The NRB also aims at bringing the MFIs under the purview of the Credit Information Centre to maintain transparency. It also talks about introducing effective measures to strengthen the Nepal Grameen Bank post-merger.

Source: The Kathmandu Post