Govt, microfinance victims ink six-point agreement; all protest programmes called off

The government and the struggle committee of victims of micro-financial institutions have inked a six-point agreement.

The dialogue committee headed by the Joint Secretary at the Ministry of Finance, Narayan Prasad Risal, and microfinance victims agreed in a discussion held at the Ministry of Finance.

After reaching the agreement, the microfinance financial institutions’ victims struggle committee has called off its all protest programs.

Both sides have agreed on the effective implementation of the rules and directives issued by Nepal Rastra Bank, the central regulatory body of microfinance companies.

An agreement was made to strictly enforce the NRB-issued directive for the microfinance financial institutions to obtain maximum interest rates and service charges from the debtors.

It has been agreed that the microfinance institutions, as per the directives of the Rastra Bank, will be able to take only the prescribed maximum interest rate and service fee from the borrowers.

Similarly, the government has agreed to effectively implement the provision prohibiting collective lending beyond the prescribed loan limit and take action against the institutions violating the provision.

According to the Ministry of Finance, the two sides also agreed to implement the provision of not allowing a borrower to take and give loans from more than one microfinance institution, make a certain percent of the amount deposited in the savings account without the permission of the borrower or by influencing the borrower while taking loan, and get the installment amount deposited in advance while disbursing the loan.

It has been agreed to take action against microfinance institutions acting against the directives of the Rastra Bank regarding the rescheduling and restructuring loans as per the prevailing law.

As pet the agreement, the central bank will make it mandatory for the concerned institutions to comply with the provision of providing loans to the borrowers only by imparting financial literacy and awareness while issuing loans.

The struggle committee had been demanding a one percent service charge and a single-digit interest rate. So, an agreement has been made to request the Nepal Rastra Bank (NRB) to study and submit a report on how the lending-deposit spread could be reduced.

As per the agreement, the NRB will be further requested via the Finance Ministry to conduct a study on national and international practices and submit a report on operating micro-credit and saving cooperatives for service purpose. This agreement was made in response to the struggle committee’s concern over such companies being registered under company laws and developed as profit making institutions.

Moreover, task force would be formed for further on study on the demands raised by the cooperatives victims. The agreement paper made public by the Finance Ministry following the dialogue stated that the task force would be formed having representation (3 persons) of agitating victims and experts, which would submit its report within two months of its initiation.

The government agreed for it because of the victims’ complaint that the microfinance did not write off the loan to real victims who also suffered from the Gurkha Earthquake, blockade and Covid-19.

The government would initiate a process to amend related policy and laws on regulation of micro finances on the basis of the report to be submitted by the taskforce.