Access to Financial Services in Nepal

This report examines constraints to increasing financial services access in Nepal. It also offers recommendations for making the financial sector work for Nepal's people, especially the poor.

Over the past 2 decades, Nepal's financial sector has become deeper, and the number and type of financial intermediaries have grown rapidly. Recent reforms have also made banks more stable. Yet, access to financial services remains limited, and in recent years, has been declining. Supply and demand indicators show that formal financial institutions do not serve the needs of most of the Nepalese population.

The report makes recommendations to expand access to financial services in Nepal. It states that the government should:

• Create a technical assistance fund to help banks develop appropriate products and procedures for profitable lending to small businesses;
• Develop an enabling environment that makes small business lending safer, cheaper and faster;
• Promote the microfinance industry;
• Create a legal and regulatory environment that protects microfinance consumers and promotes stability;
• Enhance financial literacy of migrants;
• Tackle legal and regulatory obstacles in the India-Nepal corridor to increase formal remittances.