KATHMANDU, Sept 7: Nepal Rastra Bank (NRB) Governor Chiranjibi Nepal has cautioned microfinance institutions that the growing unhealthy competition was becoming a challenge for the financial sector of the country.
Speaking at a ceremony to commemorate the Second Harihar Dev Panta Memorial Day in Kathmandu on Wednesday, he said that the rising unhealthy competition among microfinance institutions in the urban areas had become a cause for financial anomaly.
He said that the microfinance institutions that should be working in the rural areas to uplift people from poverty had indulged in unhealthy competition in the urban areas for lending.
He said that such practices would instead make the poverty situation worse. The NRB Governor also warned that the central bank could introduce merger and acquisition measures if microfinance institutions did not curb unhealthy competition and multiple banking practices.
“Instead of uplifting people from poverty, many microfinance institutions are perpetuating multiple banking practices. One person is getting loans from 4 to 5 microfinance institutions,” said NRB Governor Nepal: “Due to lending from more than one microfinance institutions, the financial burden to the borrower increases. This practice (of multiple banking) increases poverty.”
NRB Governor Nepal said that he was also concerned about the growing concentration of microfinance institutions in urban areas.
“If this concentration of many microfinance institutions in the same areas continues to grow, they would be taken to the merger process,” he said.
“We have been providing interest-free loans of up to 4 million to microfinance institutions to open their branches in rural areas. However, they are still reluctant to go to the unbanked areas.” Governor Nepal added.
There are currently 53 microfinance institutions while 25 other non-governmental organizations working as financial intermediaries are operating in the country. However, the concentration in the urban areas despite the high number of microfinance institutions has left the central bank frustrated and compelled it to halt the registration of new license.
Also speaking at the ceremony, Himalaya Shumsher J B Rana, the first NRB Governor, praised the contribution of the microfinance institutions in Nepal providing financial and banking access to the people in the country.
Mohanman Sianju, former vice chairperson of National Planning Commission, also lauded the role of microfinance institutions in reducing poverty.
HARIHAR DEV PANT MEMORIAL AWARDS DISTRIBUTED
Meanwhile, Harihar Dev Pant Foundation has awarded Dharmenda Timilsina and Milan Bagale with Harihar Dev Pant Academic Excellence Awards. The award carries a purse of Rs 50,000 and a certificate. Similarly, the foundation has also felicitated Society of Economic Journalists-Nepal (SEJON) at the event with a cash prize of Rs 25,000 and a certificate of appreciation.
The foundation also provided Harihar Dev Panta Microenterprises Awards to Kaushila Maya, Gita Pariyar and Chandra Lamichhane with the cash prize of Rs 10,000 and certificate to each recipient.