KATHMANDU, Jan 2 : Due to the lack of proper laws and regulations related to cooperatives, it is uncertain whether the approximately Rs 275 billion that cooperative victims have lost will be returned. Although the government has announced the introduction of an ‘Ordinance to Amend Certain Nepal Acts Related to Cooperatives, 2081’ to resolve issues in cooperatives and return the money to the victims, the problem remains unresolved.
The government has made efforts to systematize the cooperative sector through the ordinance, but the victims and stakeholders are worried, stating that it is uncertain whether the approximately Rs 275 billion that depositors have invested in cooperatives in the past will be returned.
Gopinath Mainali, former secretary of the Ministry of Land Management, Cooperatives and Poverty Alleviation, said that although the government has attempted to reform the cooperative sector through the ordinance, it has not immediately addressed the problems of the victims. "The ordinance seeks to address some issues in cooperatives," Mainali said, "but even small amounts (up to Rs 500,000) should have been returned, but that was not the case."
Although the government mentioned in the current fiscal year’s budget that it would return up to Rs 500,000, the ordinance does not guarantee the return of depositors' funds, he said. "There is no basis for the immediate return of deposits made by cooperative victims," he said, "However, provisions, including the formation of an authority, are positive."
According to the National Campaign for the Protection of Cooperative Depositors, more than 357 cooperatives across the country have approximately Rs 275 billion at risk.
According to a report by a parliamentary inquiry committee formed by the government to investigate the embezzlement of funds by cooperatives, only 40 cooperatives, including 22 problematic ones and 18 that have been publicly questioned, have a liability of Rs 87.89 billion with savings of Rs 71.3 billion. Since only 40 cooperatives account for a quarter of a billion rupees, it seems that around Rs 300 billion in deposits are at risk in cooperatives across the country.
Kushluv KC, campaign chair, said that the problem remains unresolved despite expectations that the money would be returned from the cooperatives through policy arrangements in the ordinance.
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"We expected the government to prepare a legal basis in the ordinance and return the money as per the prior agreement," KC said, "There was no sure basis for the return of the money."
He said that victims who had deposited their entire life’s earnings in the cooperatives were left homeless. "Although the ordinance has tried to strengthen regulation for the future, it has not been able to provide relief to those currently in trouble," he said.
The ordinance states that savings of up to Rs 500,000 deposited by members of cooperatives that have been declared problematic must be paid as a first priority. However, nothing has been mentioned about depositors in other troubled cooperatives.
In the case of savings over Rs 500,000, the ordinance states that if the concerned organization is unable to pay the amount at once, it should make arrangements to pay the member's savings proportionally, setting standards. Stakeholders understand that this does not seem to provide a basis for the immediate refund of the amount.
The ordinance has introduced strict provisions for managing cooperatives, which have always been committee-run businesses. It has been stipulated that no person can be elected and remain as the director of a cooperative organization that primarily deals with savings and loans for more than two terms.
This will help improve financial governance to some extent. At a time when there is growing unrest due to the lack of regulation in cooperative organizations, the ordinance mentions the establishment of a National Cooperative Regulatory Authority to regulate cooperative organizations.
Since the authority will be an autonomous body, it is expected to help regulate and organize cooperatives. The authority will regulate, monitor, and supervise cooperatives that deal with savings and loans.
The ordinance also sets limits on personal savings and loans in cases where large amounts of money have been deposited in a cooperative without being returned.
Members of a cooperative can deposit personal savings of up to Rs 5 million in a cooperative organization that primarily deals with savings and loans with an operation scope of more than one province, up to Rs 2.5 million in a cooperative organization with an operation scope of more than one district, and up to Rs 1 million in a cooperative organization with an operation scope of a single district.
Additionally, if a member needs to deposit more than Rs 1 million in a cooperative, it is mandatory to disclose the source of such funds.
Similarly, the ordinance mandates that cooperatives report the names of borrowers who do not repay their loans on time to the Credit Information Bureau every three months. It also stipulates that cooperatives cannot disburse loans exceeding 15 percent of the primary capital fund of the initial organization.
Cooperatives that deal with savings and loans must subscribe to the Deposit and Loan Protection Fund. When a cooperative transacts loans exceeding Rs 1 million, it must provide its information to the Credit Information Bureau.
Ganesh Prasad Bhatta, spokesperson for the Ministry of Land Management, Cooperatives and Poverty Alleviation, said that the Cooperatives Ordinance will make the cooperative sector more systematic. "The ordinance has prepared a policy basis," he said, “It is expected that many problems in cooperatives will be resolved."
The government had previously formed a committee to resolve the issues of problematic cooperatives. Although it has been more than a decade since the Oriental Cooperative was declared problematic and began its work, victims have not been able to recover all their money.
According to the Central Investigation Bureau (CIB) of Nepal Police, 1,487 victims in Civil Cooperative have filed complaints alleging fraud of Rs 5.5933 billion. This is just one example.
The situation of most troubled cooperatives is similar. The government had repeatedly assured the depositors that they would return the money through agreements. The victims, who had hoped that a legal basis would be established through the ordinance to return their deposits, have been disappointed by its provisions.
The problem has arisen due to the lack of effective regulation of cooperatives. Cooperatives operated contrary to their values and norms, forcing depositors to invest in housing, land, shares, hydropower, and other sectors, and thus were unable to return the depositors' money. Currently, there are 31,373 cooperatives across the country, with 7.4 million depositors and 2.3 million borrowers.
