KATHMANDU, Sept 28: The amount of loans provided by the banks and financial institutions (BFIs) has increased compared to the last fiscal year. Most loans have been flown to wholesalers and retailers.
A study conducted by the Nepal Rastra Bank shows that development banks and financial institutions have flown over Rs 4.219 trillion of loans till August of which, Rs 840.7 billion has been provided to wholesalers and retailers.
The amount of loans provided by the BFIs in the same period last year was Rs 3.2 trillion. A total of Rs 652 billion of loan was provided to the wholesalers and retailers by the BFIs last year. The amount of loans given to wholesalers and retailers has increased by 30 percent compared to last year.
For the past couple of years, the import of daily essential items from India and neighboring countries has increased. The increase of investment in wholesalers and retailers indicates an increase in the consumption of consumer goods in the country. Nepal, which used to be an exporter of paddy as early as the 1980s, has been importing rice, lentils and consumer goods worth millions of rupees for the past couple of years.
Likewise, weapons, vegetables, fruits and goats are imported from abroad. Nepalis are consuming even mustard and flowers imported from countries like Australia and New Zealand.
According to a government study, as many as 500,000 people used to leave the country for foreign employment annually prior to the COVID-19 pandemic. As the country is unable to produce essential and consumer goods by itself, it highly depends on remittances sent by Nepali migrant workers.
According to a study by the Central Bureau of Statistics, as early as a few years ago, only two percent of the remittance was being used for production. A total of Rs 961 billion of remittance was received in the fiscal year 2020/21.
Despite the suggestions to invest the remittance in the productive sector, the government has not made any policies regarding the proper use of remittances. According to the NRB, out of the total loan, Rs 695 billion has flown to sectors related to agriculture, forest and production of beverages.
The amount is 16 percent of the total loan granted by the BFIs. A total of Rs 550 billion of loan was granted to the same sectors last year. Although the amount of loans invested in the agriculture and forest sectors is one of the highest among other sectors, experts say that the sector has not improved.
Similarly, the BFIs have injected a total loan of Rs 200 billion into the hotels and restaurant businesses, while Rs 9 billion has been invested in the mines sector. Also, the loan investments in the construction sector reached Rs 416 billion in August, while loans worth Rs 65 billion were provided to electronic, machinery and metal production sectors.
Likewise, Rs 330 billion of loans were given to financial, insurance and real estate businesses and Rs 215 billion to sectors related to electricity, gas and water. The BFIs lent Rs 235 billion to consumer goods businesses and Rs 175 billion to the service sector.
Furthermore, the BFIs provided loans worth Rs 97 billion to the public transport sector.