He says that consideration of risk, market and service should be done for the proper establishment of micro finances and service distribution.

Microfinance is seen as an effective strategy for extending financial services to the poor and disadvantaged groups not reached by the formal financial sector. Recognized as an official poverty alleviation tool only in the country’s Sixth Plan, Microfinance Companies  of Nepal is helping in creating self-employment and income opportunities among the poor. ShareSansarrecently  caught up with Mr Dharma Raj Pandey, Chief Executive Officer (CEO) of Nepal GrameenBikas Bank Limited as well Presiedent of Nepal Microfinance Bankers Association, to know more about the situation of Microfinance companies in Nepal. He says that consideration of risk, market and service should be done for the proper establishment of micro finances and service distribution.     What is the role of microfinance in a country like Nepal? Microfinances are established in the needy places; mainly in places where people don’t have access to financial resources to initiate economic activities on their own. Micro finances in Nepal are assisting the financially backward community and people below the poverty line to uplift their social and economic life standard. Micro finances work on supply guideline. Supply guideline is a must to work in coordination with people’s group especially women for providing loan without any collateral. The relevancy and popularity of micro finance institutions is achieving heights as it helps to empower women socially and economically. In Nepal, micro finances are getting hype. Financial literacy is lacking among illiterate Nepali families with minimal financial know how on its accessibility, sources and beneficiaries. They should be well informed about its advantages, sources and economic rewards in return with improvement in their life standard economically and in every aspect. Finance related information should be disseminated among people with duly loan assistance. Micro finance services are catered through agriculture (krishi) finance prioritizing women, Janajati and other minority groups.   Do you think there are already too many micro finance companies? Is regulatory intervention required for this case? There are total 36 micro finance companies out of which 4 to 19 districts category there are 14 companies, 3 districts category there are 3 companies, in regional category there is Diprosc Laghubitta Sansthan, and national level category there are 18 companies. In this context, how can micro finances as a business are viewed? Microfinances are mainly of two types. One is retailer and another is wholesaler. Retailer in one hand provides direct service to the customers whereas 5 micro finances like RMDC and Sana Kishan fall under the wholesaler category. Micro finance services are available in 52 districts. 23 districts are yet to get micro finance service. Few numbers of micro finances cannot meet the need of mass people. A holistic program cannot fulfill creditor’s need. Variation is seen in terms of competition and diversity in places and districts accordingly.Healthy market competition and diversity is a must in case of micro finances. The Nepal Rastra Bank has formulated a policy to pass on information for loan amount above 10-50 thousand. We can further improve in this very policy. We opine that people from remote areas and VDCs should get microfinance services. We are demanding the government to bypass the increment of financial institutions in numbers. Instead we should promote the existing financial institutions at our best. We have urged Rastra Bank not to provide license to new micro finances. If it is for the sake of increasing number, opening micro finance in places like Manang, Mustang is acceptable. Number of micro finances is already tremendous and there seems no clue to stack up more on the existing ones. Microfinances are partly unsafe. Loan is provided without collateral. We are asking for self regulation development with the government. Microfinance association should develop self regulation so that access of income could be done more properly for mobilization in VDCs. A mere fact is that an institution established out of profit sustains for only up to 3-5 years. Likewise in Terai it sustains for maximum 2/3 years. Promotion is required after establishment. Microfinances are in the verge of expanding its working areas. Since it tries to address a gross gross risk, micro finances are bit tough in its initial phase.    The Central Bank has conducted a study about the loan rates and services provided by the micro finances. The study had concluded that only a limited number of people have benefitted from the loans provided by micro finance institutions. The economic conditions of underprivileged people have not improved. What can be done to improve the situation? Microfinances need capital to start its service in different places .In presence of security and infrastructure development provision it can provide service.  Micro finances in Nepal have reached to 17-18oo VDCs in the entire country. The loan service differs in municipality and VDC. Consideration of risk, market and service should be done for establishment of micro finances and service distribution. There are places  like Manang and Mustang in Nepal with  total population comprising of 4000 households A ward in such district  consists of 50/60 households in maximum. And the very places are relatively backward in business. In every place we have our institutional loan limitation. The size of the population too determines the loan amount they receive. The population size is already too small in such places but the people over there demand for loan more than Rs 10 lakh at a time. We serve underprivileged group and prioritize them too. Women too fall under this category.90% of clients in micro finances are women. Women’s standard is being upgraded through women groups’ formation in 8/10 palces.70% of our clients are Janajati and minority group. Microfinances are helping women to develop leadership. We provide upto Rs 20 lakh to our customers without any collateral. The NepalRastra Bank is trying to balance it. Separate collateral should be developed so as to respond 33% single woman, single man by allocating certain amount. Loan can be given considering the project type of the customers. Lately some institutions are working in collaboration with micro finance through networks.   Microfinance companies provides loan without collateral so what do they do to minimize the risk? In Nepal microfinance emerged by assisting the people who seemed poor. Programs were conducted accordingly targeting those groups. This included labors from various backgrounds. Some were laborers from sugar factory. These laborers do not have permanent address. They do not work constantly in a place .To minimize the financial risk created by such groups, micro finances asked them to bring their identity cards. Group should be responsible to those people in any case. We identify their financial risk bearing capacity as well. We order the group to conduct the program and provide them loan as soon as they develop more financial risk bearing capacity.   What type of impact has earthquake brought in the overall micro finance sector? Earthquake has brought more negative impacts than positive impacts in the micro finance sector. Around 70,000 households of our clients were damaged .We are yet to get the exact data.200/250 clients died and around 500 were injured. We are trying to dig out the accurate data. Around 55,000 cattle and birds were destroyed. Many projects were blocked. Agricultural sector was destroyed likewise. Overall the destruction was massive and irrecoverable.   The NRB and Finance Ministry officials were working together to prepare a work procedures on loan waiver for the quake affected borrowers of Micro finances? Where has the process reached? Government has put forth a new plan of providing loan up to Rs 2, 50, 000. Our average loan size is Rs 40,000. Only few customers take more than the fixed amount. If government launches Rs 50,000 loan scheme then we can institutionalize them. We are working on that too. We are approaching to the quake affected grieved and injured customers for repayment. However, we are putting no pressure on them for repayment. Our customers’ willingness in this situation counts the most. Micro finance will revive in a couple of years.