microfinance institutions (MFIs) demand direct supervision by NRB

KATHMANDU, JUN 14 -

Currently, the government has been working on a Microfinance Authority Act that talks about forming a separate second-tier institution to supervise microfinance institutions


Stakeholders associated with microfinance have stated that the central bank should supervise the sector and opposed the government’s plan to have second-tier institutions do it.

“Good policy and a strong regulatory framework from Nepal Rastra Bank can enhance this sector,” said Shankar Man Shrestha, chief executive officer of the Rural Microfinance Development Centre (RMDC) at a programme on microfinance held on Monday in the capital.

Currently, the government has been working on a Microfinance Authority Act. A draft of the act has recommended forming a separate second-tier institution to supervise microfinance institutions (MFIs)—microfinance banks, financial NGOs and cooperatives. NRB deputy governor Gopal Kafle said the central bank was planning to monitor the sector through the provision of second-tier institutions.

Addressing the programme, Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari said that the government would support the microfinance campaign. According to him, loans from microfinance institutions could be given to the Youth Self-Employment Programme from the next fiscal year.

NRB is also planning to form a Microfinance Development Fund through the new act. This fund will act as a wholesale lender and create special provisions for this sector.

The RMDC is planning to increase its capital base. RMDC chairman Ashok Rana said the equity capital of the centre would soon be increased. He added that International Finance Corporation of the World Bank was also investing in the RMDC. “We are also planning to make an initial pubic offering to increase the capital base of the organization.”

As of now, there are about 100 microfinance institutions and two dozen microfinance banks operating in the country with an investment of around Rs 5 billion in micro-lending. According to the RMDC, microfinance has benefited a total of 1.6 million families so far. NRB has directed all the commercial banks to double the amount of their lending to MFIs within the next three years.

Posted on: 2011-06-14 01:22

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