Microfinance | Microcredit | - Everything you should know!!!! Nepal
Category of Banks in Nepal
Definitions: -
- It is also know as Microcredit.
- is a type of banking service provided to unemployed or low-income individuals or groups who have no other access to financial services.
- is defined as a provision of financial services that's available to low-income people. This type of loan helps aspiring entrepreneurs generate income, build assets, manage risks and meet their household needs.
- is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers range of services which include Credit, Saving, insurance, money transfer etc.
- The World Bank estimates that more than 500 million people have benefited from microfinance-related operations. ( Source World Bank Article)
Principle of MFI’s according to G8 Summit CGPA:
- The poor need a variety of financial services, not just loans.
- Microfinance is a powerful instrument against poverty.
- Microfinance means building financial systems that serve the poor.
- Financial sustainability is necessary to reach significant numbers of poor people.
- Microfinance is about building permanent local financial institutions.
- Microcredit is not always the answer.
- Interest rate ceilings can damage poor people’s access to financial services.
- The government’s role is as an enabler, not as a direct provider of financial services.
- Donor subsidies should complement, not compete with private sector capital.
- The lack of institutional and human capacity is the key constraint.
- The importance of financial and outreach transparency.
Reasons/Scope of MFI in Nepal
- More than 30% of the total population of Nepal lives below the poverty line.
- Women are bound to spend most of their life maintaining the household activities.
- Currently Agriculture 27% , Industry 14% , services 59% where in GDP is heavily dependent on remittances 9.1% of foreign workers.
- Himalaya 15%, Pahad 68% and Terai 17% of total land area.
- Literacy 65% where in Male 75% and Female 57% .
- There are an estimated 2.5 billion financially excluded adults today, with almost 80 percent of those living under $2 per day having no accounts at formal financial institutions – “World Bank "
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