The non-performing loans of microfinance companies almost doubled in the first six months of the current fiscal year.
The progress report on ‘offsite supervision of the microfinance institutions’ unveiled by Nepal Rastra Bank (NRB) on Tuesday, shows that there has been a significant increase in the non-performing loans of both wholesale and retail lending microfinance institutions (MFIs) as of mid-January this year.
Out of 64 MFIs operating in the country, 60 work on retail lending while the remaining four deal with wholesale lending. The wholesale lending by the MFIs increased by 3.17 percent to Rs 59.78 billion during the review period. Out of the amount, Rs 520 million (0.87 percent) turned non-performing.
Similarly, the retail lending of the ‘D’ class financial institutions reached Rs 391.44 billion. Of the amount, Rs 18.34 billion (4.68 percent) was recorded as bad debt. The ratio of non-performing loans in the segment was only 2.56 percent as of mid-July 2022, according to the NRB.
MFIs are meant for providing quick and easy financial services in small amounts on needs basis to the people in rural areas. Breaching the norms, large numbers of MFIs have been found involved in misconducts like charging hefty interest rates and service charges to their clients while there are many cases of multiple MFIs providing loans to an individual.
Currently, large numbers of debtors have been complaining about the exploitation done by the MFIs. Staging a protest on Tuesday, they picketed Maitighar Mandala area of the capital.
Citing the anomalies in this sector, NRB tightened the lending of MFIs only a month ago. Now borrowers who have taken loans from any bank will not get loans from microfinance companies. In addition, NRB has made such arrangements that no one can take loans from more than one microfinance company.
