One. Then another. And another. Women were entering the pharmacy at intervals of half an hour or even every 15 minutes.[break]
Most of them would then settle on a bench in the store and hand over bank notes of various denominations to the pharmacist.
The pharmacist, a medium-built Rajan Shrestha, would take the money, usually without uttering a word, punch some numbers on a card swipe machine and hand over receipts to the women.
“It´s the time when the monthly installment on loans they have taken has to be paid. That´s why most of the customers are making their payments,” Shrestha said, as he stepped outside for a short break.
Apart from being a pharmacist, Shrestha also works as a mobile teller, or business correspondent, for Mega Bank -- one of the new commercial banks that is rapidly expanding a service called ´branchless banking´ in the country´s suburban and rural areas.
26-year-old Laxmi Lama and Rajan Shrestha, a business correspondent of Mega Bank, share a light moment as they conduct a branchless banking transaction in Sanga Chowk, Sindhupalchowk.
The bank has given Shrestha a wireless swipe machine, also known as point of sales terminal.
This machine contains a card reader and small scanner that reads the fingerprints of clients to facilitate transactions for those who do not know how to read or write. Using this device, Shrestha issues loans, receives loan repayments, collects deposits and processes remittance from Nepalis abroad.
“Since there are no bank branches within a radius of 10 km, this is how people in this small town are gaining access to banking,” Shrestha said.
Sanga Chowk lies about 10 km from Dolalghat. Chautara, Sindhupalchowk district headquarters, is 15 km further away. Since the town does not have much economic activity of its own, no bank has set up a base here. So, until Mega Bank launched its branchless banking, most locals would make the journey to Dolalghat or Chautara to open an account in one of the big banks.
“I hope establishment of a branchless banking center here has opened the locals´ access to real banking services,” Shrestha said.
Since the opening of the center almost two years ago, he has roped in some 200 clients. “They have all opened accounts and have miniscule savings of several hundred rupees,” said Shrestha, who gets paid on a commissions basis. “But we have a huge borrower base, as 70 percent of my customers are loan clients.”
Apart from providing basic banking services, Mega´s branchless banking also provides services similar to microfinance institutions.
“As per the principle of microfinance, we first create a group comprising five women as members,” Shrestha said. The bank then provides an unsecured loan of up to Rs 100,000 for a period of up to one year to each member. Since the loans are issued on group guarantee basis, failure by any member to repay automatically restricts the remaining members from getting loans next time.
“We resorted to this technique (used by microfinance institutions) so that members can exert pressure on each other to ensure timely loan repayments,” Shrestha said.
Mega Bank´s branch office in Chautara, Sindhupalchowk. The bank is the only financial institution to offer branchless banking services in Sindhupalchowk district.
Laxmi Lama is one such loan client of Mega´s branchless banking. Lama, who migrated to Sanga Chowk from Kavre district around three years ago, runs a small restaurant. She also assists her husband, who operates a pool house.
Although the 26-year-old was a member of several microfinance institutions in the past, she shifted to Mega last year after learning the bank offers loans of up to Rs 60,000 even to new members.
“Microfinance institutions provide loans of that size only after several years of membership. And I didn´t want to wait that long as my husband was planning to add one more pool table,” Lama said.
She then borrowed Rs 60,000 from the bank and is now repaying in regular installments.
Women like Lama are now turning to Mega´s branchless banking for loans to open small shops, purchase livestock and expand other businesses. This is helping locals of Sanga Chowk supplement their incomes.
So far, Mega has established branchless banking outlets at five other places in Sindhupalchowk, enrolling over 700 clients.
"Business generated by these outlets contributes almost 25 percent to the Chautara branch´s micro credit portfolio (comprising loans of under Rs 500,000). And apart from one or two cases, we haven´t come across problems of default," Dharanidhar Sapkota, Mega Bank´s Chautara branch manager, told Republica.
The bank has so far set up 25 branchless banking outlets in different parts of the country and is planning to take this to 47 by mid-July.
Although the concept of branchless banking was introduced in the country by Everest Bank around four years ago, it was not able to expand the service rapidly because of its focus on deposit mobilization.
Other banks such as Citizens Bank, Siddhartha Bank and Nepal Bangladesh Bank, among others, have also jumped onto the bandwagon, but they are focusing on both deposit collection and lending.
As Everest Bank CEO Mohapatra said, banks may be heading into branchless banking to boost the penetration of formal banking services in the country and inculcate a savings habit so that people do not face problems during lean times.
But this is not the only reason for the expansion. For one, the banking sector regulator has made it mandatory for commercial banks to extend at least 3.5 percent of their total loan to the deprived sector.
There is a business purpose to it as well.
Currently, competition is rife in the urban centers and newer banks are facing difficulty roping in customers. So, many are seeking a foothold in the strategic rural and suburban areas with their growth potential. And they are meeting with success as agents are lining up clients, many of whom feel that affiliation with big banks will help them in future.“
"I became a member of the group operated by Mega Bank in the hope of getting bigger loans if I maintain a good credit hist”ry," said Bishnu Maya Giri, who has already repaid a loan of Rs 60,000 acquired last year to expand her home-based poultry farm.
Her only concern was annual the interest rate slapped on micro loans, which stands at 20 percent. Said Gi“i: "More people would have been encouraged to obtain loans to set up small businesses had the lending rates been lo”er."
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