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“Government is firm to keep tabs on cooperative sector”

CEO TAB by CEO TAB
December 23, 2019
in Opinion
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“Government is firm to keep tabs on cooperative sector”
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By Surya Prasad Gautam, Secretary, Ministry of Land Management, Cooperatives and Poverty Alleviation

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Cooperatives, no doubt, can help bolster the growth of an undeveloped economy like Nepal.  They play a vital role in creating economic linkages at the grassroots and help uplift the living standards of underprivileged communities. It is not for nothing that the constitution has termed them as the third pillar of economy. 

Some countries like India and Israel have leveraged the notion of cooperative extremely well to improve their respective rural economies.  But, unfortunately, the case of our country is not exactly so.  One of the prime reasons behind this is the brazen money-minded tendency of a number of the cooperatives, based mostly in urban areas.

Downplaying the collective welfare of their members, such cooperatives operate just as saving and lending organizations. They are not only offering excessively high returns to the depositors but also charging exorbitant interest rate on lending. At the same time, the promoters of some cooperative organisations have used the money of depositors’ money in real estate, land plotting businesses etc.   

Due to such imprudent practices, 12 savings and credit cooperatives including Oriental Cooperative have already suffered a major financial crisis are also declared as “troubled” by the government. This is indeed a matter of serious concern.

Realizing this, the government in last August decided to cap the interest rates on lending and deposits of the saving and credit cooperatives at 16 percent and 10 percent respectively for maintaining the spread rate at the maximum of 6%..

However, some cooperative operators have not following the very decision by creating unnecessary hullaballoo regarding it. They blame the government for setting the interest rate ceiling in an arbitrary and irrational manner. But such blame is literally hollow since the government did it in a meticulous and lawful fashion.

In fact, the rule of reference rates is set by properly assessing the interest rates of commercial banks, cost of operation, and interest rates charged by the Cooperative Bank. It also duly complies with the ‘Cooperatives Regulation, 2019’ and the ‘Cooperatives Act 2017’.

The Ministry of Land Management, Cooperatives and Poverty Alleviation is ready to apply every possible measure to effectively implement this rule. For instance, it is planning to delegate full authority to the Department of Cooperatives to coordinate with mayors and ward chairmen of the local government and the provincial administrative chiefs to instantly take action against the cooperatives involved in the misconducts.

As stated above, many urban-centric cooperatives are carrying out their businesses in a sloppy way to secure just hefty profits. Moreover, the promoters of some such cooperatives are found to have even fled with the depositors’ money.  

In this regard, the concerned associations of cooperatives shall also present themselves in a responsible manner by monitoring the activities of their members.  

There are more than 34,000 cooperatives across the country and they hold as much as Rs 300 billion in deposits. As such, maintaining good governance in the cooperative sector is simply the need of the hour. And, the government is simply firm to work toward this direction by taking visionary, concrete measures.

(Based on the talks with Mr. Gautam)

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Manish Raj Poudel
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