Nepal Microfinance Country Profile

This paper discusses the microfinance profile of Nepal. It studies the microfinance initiatives that are filling the gap that emerged because of the withdrawal of commercial banks, due to insurgency and as a cost-reduction measure. The paper describes the following salient features of the sector:

• About 17.6 million people lack access to financial services, so the need is high;
• Development of microfinance sector marked by:
  • Cooperative movement,
  • Directed credit programs of the government,
  • Private initiatives led by non governmental organizations (NGOs),
  • Autonomous microfinance banks.
• Microfinance ordinance of 2004 addresses the need for regulatory framework to some extent;
• Grameen Bank methodology is the most popular delivery method;
• Self-help groups, cooperatives and individual lending is mainly used in hilly and remote areas.

The paper also discusses the service providers:

• Private banks are more successful, and public sector banks are in the process of privatization;
• Semi-formal providers like NGOs and cooperatives are also playing a positive role through innovations and partnerships;
• Informal sources continue to enjoy the largest market share;
• Microfinance institutions have access to wholesale funds and other support from the government as well as banks and multilateral agencies.

The paper concludes by discussing the role of national and international organizations involved in building the capacity of the microfinance sector in Nepal.