Rajesh Sharma
NRB's probable policy intervention regarding MFIs' dividend
Micro-finance companies are patronized entities and are getting cheap fund from the banks as per NRB policy arrangement. Hence, they have higher vulnerability.
The second important factor is that they provide mostly collateral free loan and this is a great strength of them. But this is a weakness too as the default cases may rise due to several local factors such as failed micro-enterprises, political thugs borrow the money and so and so.
NRB's probable policy intervention regarding MFIs' dividend
Micro-finance companies are patronized entities and are getting cheap fund from the banks as per NRB policy arrangement. Hence, they have higher vulnerability.
The second important factor is that they provide mostly collateral free loan and this is a great strength of them. But this is a weakness too as the default cases may rise due to several local factors such as failed micro-enterprises, political thugs borrow the money and so and so.
Hence, those who put money in MFIs should have a higher risk absorption
capacity.
Right now, not only in Nepal, also in other countries, the interest MFIs charge has become an issue of debate as it is quite high.
The supporters of MFIs' higher rate plead that the money lenders may charge even more. However, this logic sounds strange in two counts. 1. The money MFIs cater is a drop in the ocean of credit need of the poor. And, many people have to go to money lender anyway, if so. 2. The dividend they are distributing is higher than the outright commercial ventures and they get this money from the poor. Me, a well enough individual and promoters several times well off than me are rightful persons/companies to get the value added by the people (borrowers of MFIs) who are in much disadvantaged situation? This ethical dimension also needs to be addressed by the policy makers. Therefore, I think, we should see this phenomenon in larger perspective.
My comment on Sudip Ojha ji's post on Share Bazar Kurakani.
Right now, not only in Nepal, also in other countries, the interest MFIs charge has become an issue of debate as it is quite high.
The supporters of MFIs' higher rate plead that the money lenders may charge even more. However, this logic sounds strange in two counts. 1. The money MFIs cater is a drop in the ocean of credit need of the poor. And, many people have to go to money lender anyway, if so. 2. The dividend they are distributing is higher than the outright commercial ventures and they get this money from the poor. Me, a well enough individual and promoters several times well off than me are rightful persons/companies to get the value added by the people (borrowers of MFIs) who are in much disadvantaged situation? This ethical dimension also needs to be addressed by the policy makers. Therefore, I think, we should see this phenomenon in larger perspective.
My comment on Sudip Ojha ji's post on Share Bazar Kurakani.
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