Policy and Regulatory Issues in Microfinance

This paper examines the policy and regulations governing microfinance in Nepal. Microfinance in Nepal has been the outcome of policy rather than private initiative in the past. However, since the 1990s, private sector has come in with various models. The sector also has wholesale lenders providing funds to MFIs. As a result of these concerted efforts, an estimated 1 million people are currently being served.There is no formal microfinance policy in Nepal. The Nepal Rastra Bank is guiding microfinance regulation and is expected to announce a formal policy soon. It is expected that the government will retain its role as facilitator while the financial services field will be left to private MFIs and the cooperative sector.The paper suggests that the government and central bank can help in terms of research, capacity building, recognizing and rewarding expertise etc. It concludes by recommending some elements that could be included in the policy.