According to a recent article in the Kathmandu Post, Nepalese microfinance institutions (MFIs) that used to borrow from commercial banks at a four percent interest rate now have to borrow at seven percent—a 75 percent increase—due to the liquidity crunch. As a result, MFIs are passing these costs on to their borrowers.
“Higher lending rates of banks and financial institutions have compelled us to increase our lending rate…. We have to make an immediate move to increase the lending rates,” said Mr Harihar Dev Pant, Chairman of Nirdhan Utthan Bank, a Nepalese MFI with over 68,000 active borrowers.
MFIs in Nepal lend roughly NPR 30 billion (USD 415 million) annually, but could face a shortage of up to NPR 15 billion (USD 207 million) due to the liquidity crunch, reported Mr Tejhari Ghimire, CEO of the Centre for Micro-Finance (CMF), a Nepalese microfinance consultancy firm.
By: Stefanie Rubin, Research Assistant
About the Centre for Micro-Finance (CMF):
The Centre for Micro-Finance was established in Nepal in 2000 with the purpose of providing training, technical assistance and consultancy services for microfinance-related activities.
CMF began as a project implemented by the Canadian Centre for International Studies and Cooperation (CECI) with funding from the United States Agency for International Development (USAID). According to its website, “CMF is now an autonomous, sustainable and wholly privately owned Nepali Company which is capable of providing technical services to strengthen the MF sector in Nepal and the region.”
Additional Resources
Source Article: The Kathmandu Post: “Liquidity Crunch Hits MFIs,” http://www.kantipuronline.com/the-kathmandu-post/2010/01/18/Business/Liquidity-crunch-hits-MFIs/4204/
Centre for Micro-Finance: http://www.cmfnepal.org/
The MIX Market: Nirdhan Utthan Bank: http://www.mixmarket.org/mfi/nirdhan
MicroCapital Universe: Centre for Micro-Finance (CMF): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Centre+for+Micro-Finance+%28CMF%29
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