1. Financial Inclusion:
In Nepal

2. An Introduction to Nepal
77 Districts; now 7 provinces and 753 local councils
26m pop (2011) (now estimated to be closer to 30m)
~47% < age 20
80% live in rural areas
Extremely diverse geography from lowest point (70m) to highest Mt Everest (8848 m)

3. An Introduction to Nepal
126+ ethnic groups
92 languages
94.2 M/F ratio
$25B GDP; $2,520 PPP dollars GNI per capita (2016)
~30% from remittances
~1,147 Nepalese migrate daily (48 per hour)
Roughly 1 in 8 Nepalese now lives and works abroad.
#145 on HDI but improving

4. High income segment (10%)
Nepal’s Financial Market
- 28 Commercial Banks; Full range of financial services for urban and semi urban people
- 83 ‘other’ Development Banks (credit, savings)
16 Savings/Credit Coops
( Licensed by central bank)
79 Finance Companies
(hire purchase, leasing, housing)
- 53 MF Dev’t Banks (savings, credit, insurance)
- 25 FINGOs (credit and member savings)
High income segment (10%)
Mid level (45%)
Poverty line
The Poor and Low-
Income segment
(45%; 80 % rural)
- Money lenders (credit)
- Over SCOs, NGOs, SHGs, Coops (informal credit and savings)

5. Financial Institution Type Paid Up Capital Requirement (USD Million)
Financial Inclusion in Nepal : Snapshot of BFIs
# of FIs licensed:
Category
Financial Institution Type
Number
Paid Up Capital Requirement (USD Million)
Class A
Commercial Banks 28 78
Class B
Development Banks 39 24
Class C
Finance Companies 8
Class D
Micro Finance Development Bank 53
0.98
Total
148
The cooperative sector is also a key provider of finance. There are over 35,000 Cooperatives.
Banking, microfinance, and cooperative sectors serve about 5.4m clients or roughly 27% of the adult population (doesn’t account for client duplication).

6. Status of Banking Industry
80 years of learning…
Massive Growth in Number of Branches
Overlapping of Branch Locations
No significant expansion in Financial Outreach
Source: NRB Quarterly Bulletin

7. Decentralization Political Administrative Fiscal
Economic or Market Decentralization

8. Implications for the Nepalese Financial Sector
Central Bank: Directive to open commercial bank branches in all 753 units
Efficient to decentralize authority within the FIs.
FIs headquartered at the capital and other main cities may choose to limit the authority of its local bank branches by setting up rules and regulations that constrain their actions and which centralize authority.
Lack of capacity may result restrictions on the loan approval and loan size restrictions for local bank branches, thereby continuing to centralize decisions on large scale investments

9. I Interpretation of the Challenges and Opportunities
Monitoring and Evaluation – 35,000 cooperatives, 77 Cooperative Division
Strengthening national economy through the participation and free development of public sector, cooperative sector and private sector
Diversifying and expanding markets for productions and services through the development and expansion of industries
Encouraging and mobilizing foreign capital and technology investment for infrastructure development in the areas of export promotion, and import to suit national interest
Promoting economic development by establishing coordination among provinces and between province and federation regarding industrial corridors, special economic zones, national projects and foreign investment projects
Formulating strategies and programs for sustainable socio-economic development under regional development plans for balanced and inclusive regional development and to implement them in a coordinated manner

10. Financial Sector and Reconstruction
Assessment of the supply constraints (particularly the market distortion and MFI constraints) and why the demand is not taking up as needed is likely the next step
Credit guarantee can be a substitute to collateral but not repayment capacity.
Banks and Reconstruction
Interest free loans
Skilled Labor
BFIs fear that government will come out with populist measure like ‘loan waiver scheme’ in future, which will penalize non-delinquent borrowers, risking future servicing of loan portfolio.
Average turnaround time for a refund of subsidy schemes such as the insurance premium and interest is 400 days and counting

11. Improve payments systems and interoperability
Opportunities for increasing Financial Inclusion in Nepal
Unlock credit and mobilize savings to invest in assets and productive capacity
Improve payments systems and interoperability
Leveraging remittances market via mobile wallets
Bolster risk-mitigation capabilities to weather risk events that can have significant impact on their financial situation
Build capacity of locally-based financial service providers
Design more demand-driven products
Enhance financial inclusion support in national governance
Strengthen consumer empowerment, protection and education
Strengthen support infrastructure including ICT and transportation.

13. Sakchyam’s Strategic Pursuits/Key Wins

14. Sakchyam’s Accomplishments