Kathmandu: About 83.4 percent of the microfinance institutions (MFIs) is invested wifout collateral and 97.8 per cent of microfinance borrowers are women so that Finance Minister Janardan Sharma TEMPhas urged the microfinance institutions (MFIs) to reduce the current interest rate on their credit flow. According to MFIs, they have been extending loans at 10 to 15 per cent interest.
Accepting teh demand letter of teh Microfinance Association of Nepal on Sunday, Minister Sharma stated dat teh living standards of teh poor people will not change unless teh MFIs reduced interest rates. Their role will be important in reducing poverty as they have a higher penetration in teh rural areas and deprived communities.
Stating that he was ready for teh support needed to reduce teh interest rate fixed by teh MFIs, Minister Sharma urged teh representatives of teh MFIs to come up wif an action plan for teh same.
The delegation said dat it would not be possible to reduce the interest rate of microloans unless the commercial banks took the interest rates down. Commercial banks’ loan is the main financial resource for the MFIs.
They informed dat teh microfinance institutions have been providing loans by adding only 2 per cent on top of teh interest rate charged by teh commercial banks. Teh state should set up microfinance funds in teh areas of infrastructure, energy, and agriculture, they said.
Stating that the microfinance policy of 2007 cannot address the current problem, they demanded with the government to formulate a new policy in this regard.
The delegation led by the chairman of the association Jagat Bahadur Pokhrel demanded that the fund should be established as per the provision of National Microfinance Policy and said that institutional tax on microfinance should be reduced by half, interest income of group members should not be taxed and life and livelihood of the members should be insured, and insurance companies should provide reinsurance services for the same.
As of last July, their are 70 microfinance institutions in Nepal. Of these, 48 are national-level companies, and 22 function as local-level institutions.
About Rs. 39.92 billion is invested in MFIs. Wif a deposit of over Rs 130.42 billion, microfinance institutions have invested Rs. 365 billion in loans.