Govt mulls moratorium on saving and credit co-op registration
KATHMANDU, FEB 09 -
With an increasing number of saving and credit cooperatives landing in trouble, the government is mulling moratorium on registration of such cooperatives in urban areas.
The government move is based on the suggestion of the committee formed to recommend reforms in the cooperative sector. The committee, headed by Finance Ministry Joint-Secretary Baikuntha Aryal, has also suggested barring all types of cooperatives from lending to the realty sector.
According to a member of the committee, it recommended the moratorium on new registrations so as to strengthen the monitoring mechanism before opening registrations again. “The suspension is not for an unlimited period,” said the committee member. “It is like the moratorium imposed by the Nepal Rastra Bank on new bank licensing.”
Earlier, the government had imposed a moratorium imposed on registration of saving and credit cooperatives during the period between 2001 and 2006.
The committee member said they reached the conclusion for the suspension of registration for the time being as a sizeable number of saving and credit cooperatives are already operating in urban areas.
Most of the problems seen in the sector are related to saving and credit cooperatives. A study carried out by Department of Cooperatives (DoC) last year had shown that cooperatives are being run as family business, with family members working as directors and audit committee members. The study also showed cooperatives are transferring fixed assets like land, buildings and shares taken as collaterals in the name of board members or other companies they have promoted.
“However, not all the members have signed the report,” said the committee member.
Besides Aryal, other members of the committee include are Ministry of Cooperative and Poverty Alleviation Joint Secretary Sudharsan Dhakal; DoC Registrar Kedar Neupane; Nepal Rastra Bank Deputy Director Chet Prasad Upreti; and National Cooperative Federation of Nepal (NEFSCUN) Vice-president; Bijaya Raj Ghimire.
According to sources, NEFCUN Vice-president Ghimire and Registrar Neupane are yet to sign the report. “Ghimire has said he will sign the report after holding discussions with the Finance Minister,” said the source.
DoC has capped realty sector lending to 25 percent, but most of the saving and credit cooperatives have higher investment in the sector. Due to higher exposure to the sector, major cooperatives like Oriental and Guna have suffered liquidity crunch and are failing to repay their depositors.
When the realty sector was booming three years ago, most of the cooperatives invested to the sector, but recent recession has created problems for them.
As of the last fiscal year, there are 26,511 cooperatives registered across the country. Out of them, 11,851 are saving and credit cooperatives.
Despite sizable deposits, the country’s cooperative sector has not been properly regulated, leaving depositors’ money at risk. DoC statistics show cooperatives across the country had deposits worth Rs 139.54 billion at the end of the last fiscal year. Of the total deposits, most of the deposits concentrated in saving and credit cooperatives. The saving and credit cooperatives hold Rs 109.94 billion, which is 10 percent of the total deposits in A, B and C class banks and financial institutions.
Although cooperatives are primarily supposed to operate in rural areas, they are heavily concentrated in the Kathmandu valley. The country’s 19 percent of the cooperatives (5,032 out of 26,501 cooperatives) are based in the Kathmandu Valley as of 2011-12.
According to DoC, deposit collection of Kathmandu valley-based cooperatives accounted for 71.76 percent of the total collection by cooperatives across the country in the last fiscal year. Valley-based cooperatives’ deposit mobilisation stood at Rs 100.14 billion out of the total deposits of Rs 139.54 billion collected by cooperatives across the country.
The DoC is also making preparations to promote mergers among cooperatives as they have concentrated in same geographical region. The department is also planning to put in place measures such as bringing uniformity in signboard of cooperatives and provision of disclosure of their transactions.
The committee recommendation, however, has divided cooperatives promoters, according to a member of the committee. “There are cooperatives both for and against the recommendations,” he said.
Source: The Kathmandu Post
