Challenges and Issues Currently Experienced by Microfinance Institutions (FINGOs) in Nepal

This paper discusses issues that prevent MFIs from expanding their frontiers in Nepal.

MFIs in Nepal work as Non Government Financial Intermediary Organizations (FINGOs). They are active in 38 districts with coverage of 63% hill districts and 36 percent Tarai districts. FINGOs target excluded and low-income people, especially women living in difficult economic conditions.

FINGOs have been playing an important role in reducing social and economic poverty in rural and urban areas. The microfinance sector in Nepal is a joint effort of the government and the private sector. FINGOs in Nepal face challenges of:

• Serving rural and remote households living in hilly districts;
• Restrictive regulations for MFI that are in contrast to the liberal environment provided to commercial banks;
• Unhealthy competition;
• Resource constraints, such as shortage of credit funds;
• Development needs and lack of attention from the government and Nepal Rastra Bank;
• Lack of efficient and trained staff, security risks in the management of local branches and lack of supervising and monitoring institutions.