July 20, 2024, Saturday
Nepal 1:37:26 pm

Interest on MFI loans paining poor people

The Nepal Weekly
October 5, 2021

Finance Minister requests to reduce interest rate

Finance Minister Janardan Sharma on Sunday said that rate of interest on microfinance is too high for the users. That is one of the aspects hindering the socio-economic growth of economically weak people. Therefore microfinance institutions need to reduce the current interest rate on loans.  The standard of living of the poor people will not change until the interest rate on microfinance reaching the villagers is reduced, he opined. He also urged the representatives of Microfinance Association to bring an action plan to this effect. Minister Sharma assured the cooperation from the government side.

The delegation, in response, said that they receive loan from commercial banks mainly and until the interest rate on loans they take is not comfortable, it is remote to reduce the interest rate of microfinance. The microfinance institutions add only 2 per cent on the loans they receive, the delegations mentioned.

The state has sought setting up of microfinance funds in the areas of infrastructure, energy and agriculture. The microfinance policy 2064 BS formulated by the government cannot solve the current problems, therefore a new policy in this regard should be formulated, the delegation stressed.

The delegation had submitted demands for the smooth operationalization of microfinance institutions which was presented by president of Microfinance Association Jagat Bahadur Pokharel. The fund provisioned in the National Micro Finance Policy 2064 should be set up, institutional tax on microfinance should be halved, no interest tax should be levied on savings of the life and livelihood of group members and members should be insured and insurance companies have to sought reinsurance services were among the demands. As of last July, there are 70 microfinance institutions in all the districts. Of these, 48 are at the national level and 22 at the local level. The total investment of microfinance institutions is Rs. 39.92 billion. With pooled capital of over Rs. 130.42 billion, microfinance institutions have invested Rs. 365 billion in loans. Of this, 83.4 per cent has been invested without collateral. 97.8 per cent of microfinance takers are women.