The Regulation Muddle in Nepal

In this essay, Sanjay Sinha and Swetan Sagar explore the myriad different and sometimes overlapping regulations that regulate the four types of institutions that currently offer microfinance in Nepal: cooperative societies, NGOs, Micro-Credit Development Banks, and Regional Rural Development Banks. After describing each institution and chronicling its development over time, the authors address some of the regulatory issues existing in the current framework. These issues include: overlapping and conflicting laws and regulations, disparate treatment of similar institutional types, and evasion of the spirit of the law. The essay concludes with a number of recommendations for rationalizing the legal framework for providers of microfinance, as well as a review of recent developments.