The YSESF was established by the UCPN (Maoists) government three years ago as a vehicle to provide unsecured low-interest loans of up to Rs 200,000 to promote entrepreneurship among jobless youth.[break]
So far, the Fund has distributed Rs 338.9 million among 18 BFIs by signing agreements with them. Of this, only 11 BFIs have utilized the money. And, even among those that have used the money, many have not been active in issuing credit to jobless people.
For instance, financial institutions like Western Rural Development Bank, First Microfinance Development Bank and Madhuban Savings and Credit Cooperative have not used a single penny from a sum of Rs 27 million given by the YSESF while commercial banks like Kist, which received Rs 50 million, has utilized only 5 percent of the total amount.
“We suspect many of the BFIs are only trying to hoodwink us by saying they have not been able to utilize the money. In fact, they may have channeled the money to sectors where yields are higher,” said Punya Prasad Regmi, vice-chairman of the YSESF while being grilled by lawmakers at the Public Accounts Committee on Thursday.
Currently, the YSESF has been giving away funds to BFIs at an annual interest rate of 7 percent. These BFIs, however, are not allowed to slap rates of more than 12 percent on credits they give away to unemployed youth.
“For institutions that are in the habit of giving loans at rates as high as 22 percent, the lending rate fixed by us would be certainly too low,” Regmi said, referring to Mid Western Rural Development Bank, one of the YSESF partners, which had officially sought freedom to fix the rates on its own citing “the institution has a practice of giving away loans at rates of 22 percent and 12 percent fixed by the Fund is too low”.
“Since the rural development bank has said it has not used any of Rs 6 million given by us, we have reasons to suspect it may have diverted the money to other sectors,” Regmi said.
Regmi, however, acknowledged that some of the BFIs, which have not made use of the YSESF amount, have genuine reasons for not being able to use the money. For example, First Microfinance Development Bank, a wholesale lender for microfinance institutions, which had received Rs 9 million, said it failed to distribute the money after the YSESF did not offer training to those seeking the credit amount.
As per the YSESF rule, all people, who apply for loans, must undergo training prior to getting the credit. “Since we have not been able to orient loan seekers for quite some time, mistakes on our part have also affected credit distribution,” Regmi said.
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