Benchmarking Nepal's Microfinance Banks 2006

This presentation from Microfinance Information eXchange, Inc. (MIX) examines a sample of 18 MFIs, nine microfinance banks (MFBs), four microfinance development banks (MFDBs) and five regional rural development banks (RRDBs) in Nepal. It examines outreach and performance data for the year 2006. Key findings include:

• Nepal's MFB outreach and growth compare favorably with global norms, but fall behind regional trends;
• MFBs focus mostly on credit provision and serve a broad market segment;
• Microfinance in Nepal relies heavily on borrowed funds and is among the most leveraged in the region;
• MFBs generate weak, but positive returns due to their tight cost structure;
• Service diversification could help boost outreach.

Concluding that institutions will have to strengthen their revenue streams to ensure sector sustainability, the presentation recommends that:

• Nepal's microfinance sector has a low cost structure that can help increase profits;
• Poor portfolio quality weakens revenues and MFBs would benefit from best practice dissemination and technical assistance in portfolio risk management;
• RRDBs should adopt appropriate product pricing policies that cover direct service provision costs as well as provisioning and funding expenses.