NRB mulls cap on MFIs’ cash dividend, but not on bonus shares

ShareSansar , June 30:

Nepal Rastra Bank is mulling over a plan to cap the cash dividend for the microfinance institutions (MFIs), but not their bonus shares in a bid to stem unhealthy competition among them as well as to consolidate their capital base, according to highly placed and reliable sources privy of the development.

Though the central bank officials are themselves divided whether to set the ceiling for MFIs and are also under pressure from various quarters, including MFIs as well as BFIs, there is a growing consensus among the officials that placing a cap on only cash dividend would serve the purpose.

“As bonus share will not affect the capital base of the microfinances, placing the ceiling on the cash dividend alone is also a creative problem solution,” said a highly placed government source, adding that the upcoming monetary policy is expected to introduce the provision.

He also cited the case of the insurance sector in this regard. There is a limit on the cash dividend but not on the bonus shares for the insurance companies.

Spokesperson of the central bank, Bhaskar Mani Gywali only said that they were still discussing whether or not to place a ceiling on the dividend of MFIs through the upcoming monetary policy.

It may be noted that the central bank has been concerned over the competition among the MFIs over the recent years to pledge higher dividend, which not only risky their financial health but also defeats the very cause behind the establishment of any MFI.

Though the central bank had tried to place the ceiling on MFIs’ dividend while introducing the monetary policy for this fiscal year as well as the mid-term review of the same, it could not do so owing to differences among the central bank officials themselves as well as pressure from some of the MFIs and big investors, according to the sources.