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Eight Point Directives of NRB for Solving the Current Crisis in Microfinance Sector

Experts are of the view that the 8-point directive of the Nepal Rastra Bank (NRB) will help to improve the quality as well as the strength of the microfinance sector in long term and bring them back to follow the principles, values and culture of microfinance. It will also lead the microfinance sector to the right path. In an online webinar organized by the Centre for Self-help Development (CSD) under the 20th web-talk series, they concluded that although the 8-point directives seem to have tightened the operation of microfinance institutions in the short term, it will help to restore the image of microfinance in the long run.

The webinar was organized to clarify the main objectives and spirit of the directives. The key note speaker of the webinar, Executive Director of Microfinance Institutions Supervision Department of the Nepal Rastra Bank Mr. Revati Prasad Nepal highlighted that the directives are very necessary to guide microfinance on the right path and it is expected to help build sustainable development of microfinance in long run. “Recently, there have been many distortions and wrong doings in microfinance. On seeing the weakness, some vested interest groups started an anti MFI movement and the achievements made by the MFIs in the last four decades was ruined instantly. There is an urgency to address the major issues confronting MFIs which have led to this crisis. I hope you all understand and move forward with the values and principle of microfinance and its goal to achieve poverty alleviation. As of now, CEOs are not tired saying that we have worked on poverty alleviating but knowingly they are focusing for their own betterment and not for the client members. If what is said differs from what is done, NRB will not tolerate and will bring tighter regulations to control the misdeeds of MFIs,” Mr. Nepal said.

On the occasion Mr. Shankar Man Shrestha, Chairman of CSD remarked, “There is a need for strengthening, purifying and refining microfinance operations to bring it back to right track and the eight-point directives of the Nepal Rastra Bank will help in this regard. Should this directive have come much earlier, the distortions currently faced by microfinance sector would be avoided. We all know that microfinance has become profit focused and employees and promoters friendly instead of becoming members friendly. The present crisis needs to end.” Mr. Shrestha further added, “NRB seems determined to control wrong practices through this directive such as duplication of clients or multiple and over financing, pushing the clients to loan trap and excessively dividend oriented culture forgetting the objectives and principles of microfinance. It is said that Nepali MFIs have followed the Grameen Model, but in practice we have perverted and distorted this model. NRB must ensure that all the MFIs should go through the principles, values and spirit of microfinance.”

Chairman Shrestha also emphasized that MFIs should work on entrepreneurship development of the target group. He cautioned that MFIs should not be involved in the clients poaching game to earn more profit because it will give them short term benefit only and will weaken the clients and the microfinance sector.

Speaking on the occasion, Chairman of the Chhimek Laghubitta Bittiya Sanstha Ltd., Mr. Ram Chandra Joshi said that the microfinance sector did not require any regulation in the past but now needs to be strictly regulated due to their deviations from the principles of microfinance. He also said that the current 8-point directive is very positive and urgent, and it will help to regain the strength of the microfinance sector.

Another speaker of the webinar, Mr. Sanjay Kumar Mandal, Chief Executive Officer of the Jeevan Bikas Laghubitta Bittiya Sanstha Ltd. opined, “There is no need to regulate many things that are in conformity with the principles and not deviating from the basic fundamentals of microfinance. The main problem now is that we have not practiced the Grameen Model as it was envisaged. We have forgotten the spirit of the model we learnt and practiced on the start of the program. We have not been able to move ahead keeping in mind the poor and the disadvantaged communities and work towards their upliftment. Now MFIs have faced more problems in the urban areas. This means that we have forgotten our target group who live in the villages. So we have to focus on the villages, and the poor and the disadvantaged group.”

Another speaker of the webinar, Ms. Bimala Yogi, Chief Executive Officer of the Jalpa Samudayik Laghubitta Bittiya Sanstha Ltd. said that the directives of NRB are positive for employees who believe in and adhering to the principles and mission of microfinance. She also added that the directive reminds us of complying with the fundamentals of microfinance while discharging our duty.

After the presentation, Mr. Rajan Bhattarai, Dr. Purushottam Shrestha, Mr. Ram Chandra Rupakheti and other participants raised their queries in the open discussion. A total 260 participats from various microfinance and financial Institutions had attended the webinar.

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