KATHMANDU, Sept 2: The government is in the final stages of setting up a ‘National Microfinance Fund’ with a purse of Rs 500 billion, with the aim of providing soft loans to under-privileged farmers and workers to help them start a business of their own.
According to an official of the Ministry of Finance (MoF), the ministry has prepared a working guideline to mobilize the money in the fund. “People from the targeted groups will be provided credits at single-digit interest rates,” a finance ministry source said.
Announcing the budget for 2022/23, Finance Minister Janardan Sharma stated that a microfinance fund of Rs 500 billion would be established to extend ‘agriculture credits’ at the farmers’ doorsteps. According to the MoF’s working guidelines, banks and financial institutions (BFIs), Citizen Investment Trust (CIT), Employees Provident Fund (EPF) and Nepal Rastra Bank (NRB) have been proposed as the main contributors to the fund.
The government has planned to consider five percent of the deprived sector lending of BFIs and two percent from each of CIT and EPF for the creation of the fund. Similarly, a certain percentage of the net profit of NRB and the Social Security Fund and government grants will be taken to the microfinance fund, according to the MoF.
By utilizing the fund, the government will be providing credits between Rs 500,000 and Rs 700,000 to an individual who meets the prescribed criteria. The government expects to benefit an estimated seven million people from the deprived groups through this new scheme.
“However, there is a serious risk that the fund could be mis-utilized to actually fund ruling party cadres in the name of benefiting the poor and the downtrodden,” said a source at the ministry, adding that there were many instances of misuse of similar government programs in the past.