Nav Raj Simkhada
Microfinance programmes have emerged to serve the poor who are excluded by conventional banks and financial institutions. However, in the context of Nepal, accessible and sustainable financial services are still limited. Only 40 per cent of Nepalese are served by formal financial institutions. Experience has shown that people living in extreme poverty need several forms of support, such as grants for livelihoods and for purchasing productive assets, business development training, and financial literacy. This paper discusses barriers surrounding supply and demand side of financial systems for promoting financial inclusion. It argues that reaching the ultra-poor is only possible if appropriate strategies are devised to address the existing barriers that prevent inclusion of the unserved and under-served. The paper presents lessons learned from several initiatives to enhance financial inclusion in Nepal, and suggests approaches for serving the ultra-poor in the future.
Cooperatives are generally defined as community-based, and member-owned, managed, and controlled organizations. The first cooperative in Nepal was established in 1956. Due to a lack of a fundamental understanding of cooperatives, the movement was very weak in Nepal till 1992. A major change in the sector took place in 1992, when the Cooperative Act 1992 was promulgated. The Act specified that the government would no longer directly promote cooperatives. As a result, the independent growth of cooperatives took off and the number of cooperatives had reached over 26,500 as of July 2012. Cooperatives in Nepal offer a wide range of savings and credit, insurance, and non-financial services. Their accomplishments to date in the area of socio-economic development of members indicate that cooperatives can continue to grow as key players in the development of Nepal. This paper provides evidence that if cooperatives operating in different villages are strengthened, they will contribute significantly to improving access to finance and the well-being of members.