Only 40pc population have bank accounts

KATHMANDU, MAR 23:

Of the total population, 40 per cent have deposit accounts in formal financial institutions.

There are 10.78 million deposit accounts in financial institutions including those with commercial banks, development banks and finance companies, by mid-February. Although, number signals that more than one-third of the 26.6 million population have access to formal financial channels, financial exclusion still remains a prominent problem in the Nepali financial sector.

“The number of people with bank accounts is actually lower as many people own multiple bank accounts,” pointed out senior economist Dr Madan Kumar Dahal.

According to World Bank’s Global Findex Database that studies the state of financial inclusion among 148 countries, in Nepal only 25.3 per cent of adults save in the formal financial service provider including any kind of bank, microfinance institution or cooperative. The study has found that 50 per cent of the world’s population do not have formal bank accounts.

Deposit account is considered an entry ticket to the formal financial system. A formal account promotes saving habit and opens access to credit. However, the high cost to maintain an account, physical distance and lack of proper documents required to open an account is recognised as barriers to open a deposit account.

“Banks and even microfinance institutions do not find the rural population viable customers so it is but natural that they are lured towards the urban and semi-urban populace,” said Dr Dahal.

The Global Findex has pointed out that by far the most common reason for not having a formal account cited by 65 per cent of adults without an account is lack of enough money to use one, worldwide. Likewise more than 25 per cent of people without a bank account cited that accounts are too expensive, and 20 per cent said branches are too far away to maintain an account.

“The traditional brick and mortar setup of bank branches will not be very useful in increasing outreach but branchless banking

and mobile banking models have to be used extensively to increase the participation of more people in banking,” said Dr Dahal who is also chairman of Mega Bank.

Mega Bank had started branchless banking that uses local business agents and POS machines for transactions almost a year back.

“The bank has expanded its branchless banking services to 27 remote places across Nepal and branchless banking seems to be really useful in increasing the outreach of formal banking services especially in rural regions,” he said.

“In places where banks have not reached, cooperatives and microfinance institutions can provide formal financial services,” he added.

Despite the increase in the number of banking branches, Kathmandu valley dominates more than 60 per cent of total business of financial institutions. There are 2474 branches belonging to commercial banks, development banks and finance companies operating at present.

“Increasing financial access is one the main objectives of Nepal Rastra Bank (NRB) and it has also recognised branchless banking and mobile banking as the means to promote financial inclusion,”said spokesperson of NRB Bhaskar Mani Gyanwali.

“Moreover, recognising the role of microfinance development banks in encouraging financial access, the central bank is still issuing licences to class ‘D’ banks,” he said, adding central bank recently awarded a licence to the 29th class ‘D’ bank.

Source: THT