CENTRE FOR SELF-HELP DEVELOPMENT

Institute of micro-finance and cooperative development.

Check Mail
  • Home
  • News & Events

Micro-financing by Cooperatives: Prospects, Problems and Way Forward

The Centre for Self-help Development (CSD) organized a webinar talk on April 16, 2021 to sensitize microfinance practitioners and other stakeholders on policy level as well as practical problems and issues related to micro-financingby cooperatives.

Mr. Mahendra Kumar Giri, Chief Executive Officer of Sahara Nepal SACCOS was the key speaker of the programwhich was moderated by General Manager of  Kisan Bahuudeshiya Sahakari Sanstha Ltd, Mr. Dambar Bahadur Shah.

Mr. Giri said, “Cooperatives are one of the three pillars of the economy and the Constitution of Nepal, 2015 has also acknowledged the role of cooperatives in our economy. Currently there are 29,886 cooperatives in the country and the sector has been mobilizing overRs. 70 billion as paid up capital. It has also mobilized a total saving of Rs. 300 billion from its members and has employed64,440 individuals as regular staff and contributed 5% of the total GDP of Nepal.” He also added that there are currently 65 microfinance financial institutions in Nepal and more than 100 cooperative model microfinance institutions are operating in Nepal.

Highlighting on his own cooperative, the Sahara Nepal SACCOS, Mr. Giri said, “Currently, Sahara has 148,978 members under 73 service centers. Its paid-up-capital is Rs. 1430 million and has been mobilizing savings of Rs. 7.69 billion from its members  and has disbursed a total loan of Rs. 9 billion.” He further added, “Sahara has been involved in credit plus programs such as health, education, renewable energy, agriculture, livestock, youth employment program, corona relief program as well as contributed in other social programs like drinking water and housing for deprived families.” He said that Sahara has launched health insurancefor its members and their family members affected by special diseasesand accidents. He said that lately his organization has given priority on value chain for which they established agro business unit, tunnel farming and market linkage to increase yield as well as provide technical support for their businesses. He said among employment for the youth we haveprovided loan for auto rickshaw for those who returned from abroad.In context to corona relief program, he said, “We have run public sensitization  program through brochures and pamphlets highlighting correct procedures of washing hands and also distributed  masks and sanitizers, emergency loans and also goods andfood grains in coordination with local government.”  He said that during the corona pandemic 10% interest had been waivedand loan period of affected members have been extended by 6 months.

Highlighting the special features of the cooperatives, Mr. Giri said, “Anyone can be the owner of a cooperative after investing Rs.100. There are no promoters in a cooperative and there is no pressure for dividend from general shareholders. The dividend is capped at 18%. Similarly the saving of members is used for credit mobilization as well as social causes such as education, health and entrepreneurship promotion. Since all the members of cooperatives are shareholders, they have ownership of their cooperative and think for the long term sustainability of the cooperative they do not put pressure on the CEO for profit maximization.” He also said in comparison to microfinance institutions cooperatives have higher savings and do not have to rely on external funds for credit mobilization.He also added, “Low saving could bring vulnerability to the organization during policy change by the government and NRB as well as when there is liquidity crisis in the banking sector.”

Mr. Shankar Man Shrestha, Chairman of CSD, said, “Cooperatives have more than 60 year history in Nepal. The saving and credit cooperatives are based on Raiffeisen Cooperative Model. Those who are deprived,economically weak and vulnerable are organized for self-help development by mobilizing their own meager resources and capacitate to access external resources. One of the trademarks of cooperatives is also based on the concept of ‘One Man One Vote’. In banks the shareholders have a voting right based on share numbers. The more number of share one has, the more control one will have over the decisions.” He said, “However board members have exercised control over the operation and have taken undue advantages and making organizations insolvent.” He also said that credit plus programs can be enhanced and promoted by cooperatives where in case of microfinance institutions such practices have been curtailed by NRB.”He suggested, “The members should be classified and categorized based on the economic status and should work for developing and upgrading members from lower to upper category and ultimately to make entire members free of poverty trap,havingdecent income andadequate property through entrepreneurship activities.” He also said, “Over-indebtedness  due to policy of microfinance institution to increase profit at any cost has also increased loan delinquency. Over-indebtedness among the members will bring loan default and poverty. The focus should not be overburdening members with heavy loans pushing to loan trap rather should be encouraged therefor onentrepreneurship development and building good client staff relationship and developing good rapport with all relevant stakeholders.” He further added, “CEO should play a dynamic role to enhance discipline, good governance and proper compliance system among its staff.”

Moderator of this webinar, Mr. DambarBahadur Shah, also raised the issue of dormant members where members attend meetings and keep savings but do not undertake economic activities. There are about 40% of such dormant members in the cooperatives.

One of the participants, Mr. BalramPoudel said, “Cooperatives have been guilty of providing larger loans to single member which have increased over-indebtedness.” Mr. Shah said, “If individual has greater influence over the organization then this problem is prevalent. Similarly, as loan size and amount of transactions increase in cooperatives some skilled human resources like chartered accountant and legal compliance experts should also be hired. The cooperatives should be vigilant about anti money laundering issues that has been gaining momentum lately after the massive use of digital transactions.” Mr. MahendraGiri added that this kind of practice is widespread in cooperatives which provide loans to individuals based on coercion and unfeasible business practicesand thereforedo not cater to genuine business plan of subsistence level members.

News

Announcements