Our visit to Nepal has left us with wonderful memories, but above all, it has helped us to understand just how important microfinance can be for the Nepalese.

The territory of Nepal is divided into three distinct zones: the Himalayas to the north, hills in the centre and the Teraï plains to the south. Microfinance has developed primarily in the plains. However, 40% of Nepalese live in the hills, so MFIs (microfinance institutions) are beginning to develop activities there.

There are13 microfinance banks in Nepal, 47 FINGOs (Financial Intermediary Non-Governmental Organisations) and 4000 cooperatives. FINGOs are NGOs empowered to provide microcredit in addition to providing non-financial services such as training. Cooperatives are microcredit providers only. They do not provide any other service.

It’s important to know that there’s a huge demand for microcredit, and that the needs of many cannot be met, partly due to geographic circumstances of the prospective borrowers, and partly to a severe lack of funding. But there are also constraints in terms of thinking: some Nepalese in the poorest rural areas cannot imagine themselves becoming microentrepreneurs, because they do not think of farming as a business to be developed along commercial lines.

Another problem that should be highlighted is over-indebtedness. In practice, many microentrepreneurs have borrowed microcredit funds from a number of different MFIs, and they very quickly become unable to repay their debts. MFIs are not very thorough in checking the files of future microentrepreneurs, and the different MFIs become highly competitive, overlooking the fact that the microentrepeneurs already have outstanding loans.

In Kathmandu, we met several people directly involved in these issues, including Harihar Dev Pant, who is considered to be the founding father of microfinance in Nepal as well being the chairman of the microfinance bank Nirdhan Utthan Bank, the first institution to provide microcredits to poor women in rural areas.

Initially launched as a FINGO, Nirdhan was divided into two distinct entities five years after its creation in 1993 – the microfinance bank and the NGO – to better manage its activities in both the financial and non-financial sectors.

We also met with Ambika Pradhan, the Vice-President of Manushi, and with Rita Bhandary, the president of WEAN (Women Entrepreneurs Association of Nepal).
These two MFIs are FINGOs whose mission is to lend exclusively to women, considered to be “the poorest of the poor” in Nepal. Part of the microcredit loan is destined for training programs and a savings account for the microentrepeneurs, with the money being returned to the customers at the end of the microfinance program – a method that has proven to be the most reliable and which has recorded the greatest success.

Finally, we visited the headquarters of RMDC (Rural Microfinance Development Centre) to meet Shankar Man Shrestha, the senior director. The RMDC is one of the largest investment banks in Nepal, and finances 80 MFIs of all types (NGOs, cooperatives, banks, etc), which in turn fund the most needy, especially in the Teraï region.

We learned from these interviews that microfinance has a strong presence in Nepal, particularly in the south, and that it represents a very important issue in supporting the development of entrepreneurs – not only in developing their businesses, but also, and above all, in improving their standard of living.

While there are software programs to measure the “social performance” of microfinance, the proof of its effectiveness can be most clearly seen in the actions and the telling details in Nepal: increased income and greater access to food for microfinance customers. And above all, the chance to send their children to school!