Transforming Unsustainable Projects into Sustainable Rural Financial Institutions in Nepal: The Case of the Small Farmer Co-operatives Ltd. (SFCLs) in Nepal
This paper, through a comprehensive financial analysis, reviews the financial sustainability of the various microfinance institutions (MFIs) in Nepal such as the savings and credit co-operatives, multi service co-operatives, Grameen Banks, government and privately owned development banks, as well as the MFIs run by the non-government organizations (NGOs).
The paper, in particular, examines the mother of all microfinance initiatives in Nepal, known as the Small Farmer Co-operatives Ltd. (SFCLs) that introduced the concept of joint liability.
The paper highlights some of the key findings of the report as:
- Strong savings drive of SFCLs continues - average total deposits has increased by 50% during the last fiscal year 1999/2000;
- Loan business has picked up during the financial year 1999/2000;
- There has been improvement in the quality of the loan portfolios;
- Equity capital has improved remarkably from very low levels during the last fiscal year;
- For the fiscal year 1999/2000, SFCLs have reached an average financial self-sufficiency ratio of 117.2%;
- Increasing internal resources have helped SFCLs to become less dependent on external funds.
Finally, the report concludes that SFCLs are efficient financial intermediaries with very low operating costs; however, the great challenge would be maintaining consistency in the performance level.
