Emergence of MFIs
In recent years, an increasing number of Nepalese non-government organizations with considerable experience in the field of microcredit, have transformed themselves into full-fledged microfinance institutions (MFIs). With the advent of non-government MFIs, wholesale fund providers have emerged, providing seed as well as scaling-up funds to MFIs. Rural Microfinance Development Centre Ltd. (RMDC) is one such organization that started its operations in January 2000, to service retail MFIs such as rural development banks, rural cooperatives, NGO-financial intermediaries providing microfinance services to the poor, primarily the women living below the poverty line. The organization attains its funding from its promoters and shareholders, which consists of the Central Bank of Nepal, 13 commercial banks, 5 regional Grameen Bikas Banks, the Deposit Insurance and Credit Guarantee Corporation and Nirdhan. RMDC has also accessed funding support from various international organizations, such as Asian Development Bank (ADB) and Australian Agency for International Development (AusAID) as well. As of 2003, RMDC has provided wholesale loans to 25 MFIs, which in turn have provided microcredit services to 170,000 poverty stricken families in Nepal.
Diversified Portfolio of SBP
One of the larger MFIs supported by RMDC is CSD and its microfinance initiative, SB Bank. In September 1993, CSD received an initial seed capital of $50,000 from Grameen Trust, Bangladesh to implement Self-Help Banking Program (SBP), a Grameen Bank replication in Nepal. It received further scaling up funds from Grameen Trust to expand its program to other districts. In 2002, CSD transferred the assets and liabilities of eight districts – Siraha, Saptari, Udaypur, Dhanusa, Mahottari, Bara, Parsa and Makwanpur, belonging to SBP to form Swabalamban Bikas Bank Ltd. (SB Bank).
SB Bank, like other Grameen type microfinance programs, provides microloans to poverty stricken women for undertaking various income generating activities to promote self-employment. SB Bank offers five types of loans to its clients – General Loans, Seasonal Loans, Micro-Enterprise Loan and Housing Loans. The Bank also has a provision for emergencies where members can borrow upto Rs.2,000 for a maximum of one year from the Centre Fund or Group Savings Fund to meet emergencies. This provision has enabled many members when they had nowhere else to turn, to tackle medical or other contingencies. The Bank offers four types of savings – Group Savings, which involves a deposit of RS.10 by group members fortnightly, Center Fund, where borrowers have to save five percent of the first five consecutive general loan, Voluntary Savings, where members can deposit and withdraw any amount, anytime from their individual accounts and lastly the Welfare Fund, which is created by the members by means of donations, penalties etc.
SB Bank also offers insurance schemes for life, housing and livestock protection, which are also very popular with the clients as they compensate the poor members for their loss. SB Bank conducts periodic socio-economic development workshops for its members where various topics such as health, nutrition, adult literacy, leadership and other awareness issues are covered.
As of April 2004, SB Bank has been able to reach 33,741 poor women in eight districts through its 27 branches. It has provided its members with various economic and social services for the betterment of their livelihood. During that period, SB Bank disbursed $23.8 million in loans, of which $2.6 million remains outstanding with a repayment rate of 98%. As of December 2003, SB Bank has accumulated $1.13 million in members’ group savings.
Community Development Initiatives
SB Bank’s community venture, Centre for Self-Help Development or CSD is a not-for-profit and non-governmental organization. CSD was established in August 1991, with a mission to work for and with the rural poor to promote self-help groups. It provided the poor people, especially women, with microcredit and other business and social development services. CSD’s programs included community development, self-help banking, human resource development and training support program that involves publication and communication.
One of the interesting projects undertaken by CSD is the Community Health Initiative (CHI) Project in Jumla, Makawanpur and Okhaldhunga, all of which are poverty-ridden areas of Nepal. Part of the CHI Project is to promote and facilitate the installation of Improved Cooking Stoves (ICS). These stoves help in the reduction of respiratory diseases which is rampant in the villages due to improper use of wood burning stoves, and aids in the efficient use of fuel wood. Thus ICS helps reduce the women’s workload and time spent for the collection of fuel from the forest. The total number of ICS implemented in these regions is over 4,000 as of 2003.
The CHI Project also involved the construction of pit latrines in Jumla. As the awareness level for proper hygiene was extremely low amongst the community, open outdoor areas were the usual places for defecation causing serious threat to health. In order to tackle this issue, CHI constructed 4,385 pit latrines in Jumla.
Nutrition, Education and Rehabilitation Program (NERP) is also considered to be an integral part of the CHI Program as it organizes awareness sessions on acute malnutrition suffered by children in Jumla. As a result of the health and sanitation programs advocated by CSD, people have established kitchen gardens where they grow vegetables for better nutrition, keep their household and surroundings neat and clean and practice proper hygiene.
The activities of the microfinance institutions in Nepal are not only aiding in poverty alleviation, but they are also bringing about vast social changes in the country. In a male-dominated society, women are rarely expected to work for a living. But with the opportunities provided by MFIs, more and more women are breaking free from the shackles of male dominance and achieving financial independence.