First Business News Portal in English from Nepal
KATHMANDU: Finance Minister Janardan Sharma has urged the microfinance institutions (MFIs) to reduce the current interest rate on their credit flow. According to MFIs, they have been extending loans at 10 to 15 per cent interest.
Accepting the demand letter of Microfinance Association of Nepal on Sunday, Minister Sharma stated that the living standards of the poor people will not change unless the MFIs reduced interest rates. Their role will be important in reducing poverty as they have higher penetration in the rural areas and deprived communities.
Stating that he was ready for the support needed to reduce the interest rate fixed by the MFIs, Minister Sharma urged the representatives of the MFIs to come up with an action plan for the same.
The delegation said that it would not be possible to reduce the interest rate of micro loans unless the commercial banks took the interest rates down. Commercial banks’ loan is the main financial resource for the MFIs.
They informed that the microfinance institutions have been providing loans by adding only 2 per cent on top of the interest rate charged by the commercial banks. The state should set up microfinance funds in the areas of infrastructure, energy and agriculture, they said. Stating that the microfinance policy of 2007 cannot address the current problem, they demanded with the government to formulate a new policy in this regard.
The delegation led by chairman of the association Jagat Bahadur Pokhrel demanded that the fund should be established as per the provision of National Microfinance Policy and said that institutional tax on microfinance should be reduced by half, interest income of group members should not be taxed and life and livelihood of the members should be insured, and insurance companies should provide reinsurance services for the same. As of last July, there are 70 microfinance institutions in Nepal. Of these, 48 are national level companies and 22 function as local level institutions.
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