Report indicates Microfinance Sector hit hard by the pandemic; These are CMF's suggestions to ease the pain

Centre for Microfinance (CMF) Nepal has conducted a study on Covid-19 Impacts on Microfinance with input from various microfinance practitioner institutions.

CMF had shared the preliminary report through a webinar. Dr. Prakash Kumar Shrestha, Executive Director of Microfinance Promotion and Supervision Department of Nepal Rastra Bank participated as the Chief Guest in the meeting chaired by Executive Chairperson of CMF Dr. Rewat Bahadur Karki CMF Nepal.

The study has brought numerous alarming insights into the light. During the study period, 89.36% of the MFIs and branches were partially closed. Meanwhile, 10.64% were completely closed.

Since the clientele network of microfinance institutions is mostly comprised of wage earners, auto-rickshaw drivers, hotel/transport business owners, and people reliant on agriculture, the industry as a whole has been hit harder by the pandemic. Most of these clients lost their jobs while others have had to close their businesses. Furthermore, some even have the difficulty to meet the basic needs for survival.

The study has reported that 68.63% of customers in urban areas have severe difficulty to repay their loans. Meanwhile, 63.82% of customers in rural areas report the same problem.

The study presented various recommendations to ease the difficult situation. Since the sector is severely affected, the study has called for support with the moratorium, loan procedure, provisioning, rescheduling, refinancing, etc. by the regulators. The study has also advocated the delegation of power to MFIs and recommended the concerned entity to authorize them to spend CSR funds and improve the situation.

Also, projecting that the Covid-19 will continue affecting the sector for long, the study has suggested a target subsidy package for at least 2 years. The study has also emphasized the provision for a separate regulatory body for microfinance institutions. Although the sector is very integral and is seriously affected by the pandemic, the study reflects on how sufficient regulatory focus hasn't been seen. Thus, the study has seen the need for a separate regulator like the Microcredit Regulatory Authority in Bangladesh and other countries.