Issues & Problems on Microfinance in Nepalese Context Facing by Microfinance Banks

This paper discusses problems that microfinance banks in Nepal face.

The Nepalese government opened microfinance banks, institutions and cooperatives in order to alleviate poverty in the country. Microfinance banks have been operating in the rural areas of Nepal, providing microcredit, savings services, informal education, first aid health services, training and skill development. Despite these activities, microfinance banks in Nepal face problems that include:

• Lack of outreach to the ultra poor, and communities in remote and hilly areas;
• Lack of resources;
• High interest on deprived sector policy loans;
• High taxes;
• Problems with capacity building;
• Lack of permission from the central bank to accept public deposits;
• Lack of government attention;
• Lack of sustainability and viability.

Nepalese microfinance banks are looking to the government and the Nepal Rastra Bank to help them address their problems. Suggested steps include:

• Providing microfinance banks with the 3 percent deprived sector loan;
• Reducing deprived sector lending rates to strengthen microfinance banks and help them reach remote areas;
• Exempting microfinance banks from corporate tax;
• Enhancing capacity building vertically and horizontally.