Expanding cooperative businesses call for integration with core financial system

Published On: August 23, 2020 09:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 23: The government has identified cooperatives as one of the three pillars of the Nepali economy, which have been handling a large chunk of financial resources of the country. However the sector has been left less integrated to banks and financial institutions that has led to high exposure of risks, said stakeholders of the cooperatives sector.

There are more than 35,000 cooperative institutions in the country mobilizing deposits of Rs 700 billion of their members. These cooperatives incorporate more than 6.5 million members, out of which more than half are estimated to be women. Despite being a vital organ economy, the sector has been sidelined when it comes to using modern technology or policy synchronization, said the participants speaking at a webinar organized by the Nepal Cooperative Journalists Society on Saturday.

Badri Kumar Guragain, chief executive officer of the National Cooperative Bank, said the entire entire area was looked down upon just on the pretext of the misappropriation of money caused by a handful of cooperatives. “Rather than bringing these cooperatives under strict regulatory framework, the entire state mechanism is after ignoring the sector just because of the single reason,” said Guragain.

According to him, many cooperatives are now looking to introduce the advanced technologies such as digital transaction mode to enhance their service deliveries. “However, due to lack of clear government policies, it cannot be materialized until now.”

The government has enacted the Cooperative Act 2017. Recently, the new savings and credit cooperatives monitoring directive has been on board. Likewise, introduction of the credit information system, debt recovery tribunal and inter cooperatives transactions, among others, are underway. However, these structural set up has created a risk that the cooperative sector might develop itself into a parallel financial system inside the country. This has called for an integration in the policies and structural set up of cooperatives to those of the core financial system.

Min Raj Kadel, chairman of National Cooperative Federation, sought the government's permission allowing cooperatives to conduct cashless transactions, soft loan distribution and channelizing various types of state’s funds. According to him, cooperatives hold only a certain amount of cash in their vault while the majority of the money they have are mobilized through banks and financial institutions. “Due to the reason, the contradictions in Cooperative Act and other acts related to banks and financial institutions have to be resolved to interrelate the two distinct sectors,” Kadel said. 

Of the total number of cooperatives, around 14,000 are savings and credit cooperatives while another 4,000 are multipurpose cooperatives. These cooperatives mainly focus on providing banking services rather than boosting the production sectors. In addition, most of them have been operating their businesses in cities rather than the rural areas, where there is a much need for cooperatives.

Gunakar Bhatta, spokesperson of Nepal Rastra Bank, also stressed on the need for removing duplication in the institutional arrangements in cooperatives and financial institutions. “Although both are the financial intermediaries, there should be clear demarcation in orientation and scope of cooperatives,” Bhatta said. 


Leave A Comment