Financial Institutional Operations In NepalEssay Preview: Financial Institutional Operations In NepalReport this essayBackground of the CountryNepal is one of the least developed countries in the world having US$ 220.00 per capita income. The Nepalese economy is predominantly an agricultural economy. About 81 percent of the population is engaged in the agriculture sector whereas about 86 percent of the population lives in the rural sector of the country. Agricultural sector contributes 40 percent to Gross Domestic Product (GDP) of the country. According to the National Living Standard Survey 1996, about 42 percent of the population were found to be living below poverty line but at the end of the Ninth Plan 2001, the figure has comedown to 38 percent.
Nepal GDP: $250.00 per capita
FEDUCATION FESTS: The Nepalese population are illiterate. Despite being one of the poorest in the world, they are classified as a religious minority. Over 85 percent of the population are considered a minority. Over 25 percent of non-Muslims are illiterate. According to the National Living Standard Survey 1996, about 66 percent of Nepalese youth are at risk of poverty for a family of four. This is the country where 70 percent of the girls live in hiding. According to the National Living Standard Survey 1996, the country has almost 50,000 persons a year who are classified as a religious minority.
In 2013, the Government of the Nepalese signed a memorandum of understanding with Saudi Arabia to give the aid to the Ministry of Health of Nepal. The Nepal Development Council has issued the development aid in connection with the development of the National Health Mission. It was expected to be done by next year.
Education FESTS: Nepalese children of India are in great need of education. Approximately 75% of the Nepalese population have taken advantage of the state education system. Nearly 20 percent of the state’s adult population has graduated from a higher school. About 85% of the adult population receive schooling in school but only 9.5 percent of the population receive at least one year of school education. Approximately 2.5 million people in Nepal attend the National Secondary School System (NASS).
KUNDA-MUDHAL NANA: According to the Indian Government, Nepal has only 500 official medical personnel working in Nepal. The ministry has been criticized by many for not doing more to address the lack of medical services in Nepal. Over 75 percent of the Nepalese government employees are men. Over 25 percent of the official staff are women and one in two women has the condition “permanent” for a period longer than seven years. The government has been criticized for not providing adequate public facilities for the patients in crisis who need it most. Nepal’s Ministry of Health and Family Planning released a health awareness letter in January 2016 which stated that the Ministry of Health of Nepal would continue to provide health education for the entire country.
Education FESTS: Nalu and Sanga have two unique educational traditions. Nalu teaches education for the population of the country and offers education to the young to promote cultural awareness in the national schools. Sanga teaches education to the community and serves as a teacher during schoolwork to raise the morale amongst the youth. According to Wikipedia, the Nepalese have an income of about $10,000 ($8,500) a year. Approximately 30 percent of the people of Nepal are illiterate, the rest are illiterate. Approximately 25 percent of the children of Nepal are poor. The Nepalese economy depends upon the local communities and the rural development and food supply of Nepal. The Ministry of Health and Family Planning released a report in November 2016 which stated that the Ministry of Health has provided education
Nepal has been witnessing planned development efforts since the last four and a half decades. The Ninth Five Year Plan has just completed in 2001. The objectives envisaged in most of the plans aim at reducing poverty. However, the intensity of poverty in the country calls for massive and genuine efforts.
An Overview of Financial SystemThe history of modern financial system of Nepal was begun in 1937 with the establishment of the Nepal Bank Ltd. (NBL) as the first commercial bank of Nepal with the joint ownership of government and general public. As mentioned above, Nepal Rastra Bank (NRB) was established after 19 years since the establishment of the first commercial bank ( i.e.,NBL). After the establishment of NRB, Nepal witnessed a systematic development of the financial system. After the restoration of democracy in 1991, Nepal has clearly been following a liberalized economic policy and witnessing diversification in financial system. As a result, various banking and non-banking financial institutions have come into existence. As of mid-July 2002, there are 16 Commercial Banks, 16 Development Banks, 5 Regional Rural Development Banks, 54 Finance Companies, 34 Saving and Credit Cooperatives and 25 Non Governmental Organizations (NGOs) operating in the country. These financial institutions are under the regulation and supervision of the NRB. Besides these institutions, there are more than 1500 registered saving and credit cooperatives operating in the different part of the country and there are many NGOs involves in this sector.
Evolution of Institutional Micro Credit ActivitiesThe banking system in Nepal was introduced with the establishment of Nepal Bank Ltd. (NBL) in 1937. However, the activities of the bank was confined to accepting deposits & providing loans only to the commercial sector in Kathmandu and other limited urban areas. The countrys central bank- Nepal Rastra Bank ( NRB) was established in 1956. In the initial years of operation, the NRB had been focusing towards monetization of the economy by circulating Nepalese currency all over the country. After achieving some progress, it started taking initiation towards institutional development. Consequently, Nepal Industrial Development Corporation (NIDC), Agricultural Development Bank (ADB/N) and Rastriya Banijya Bank (RBB) had been established.
The establishment of ADB/N was a landmark in the development of rural financial market in Nepal. However, it would be worth mentioning that the institutionalization of rural credit was actually begun in 1956, when cooperatives were established in Chitwan with a view to providing credit support to the resettlers. In the year 1974, the NRB introduced the concept of directed lending so that a said proportion of the commercial banks sources could be utilized for the development of rural and agricultural sectors. The concept of directed lending was also considered to be a ground breaking initiative in the development of small sector comprising agriculture, cottage industry and services.
In order to support the national goal of poverty reduction, Nepal Rastra Bank has been carrying out a number of developmental functions along with its core function of central banking. For the development of rural financial system in particular, the NRB has initiated institutional development programs as well as various rural financing programs aimed at raising the standard of living of the people living in abject poverty below the poverty line and reduce the regional disparities. At the same time, it also encourages private sectors to take part in the rural financial system.
Micro-Finance Policies in NepalNepal Rastra Bank Act, 2002 has empowered the NRB to inspect and supervise all financial institutions including Rural Micro-Financial Institutions and issue directives. So, NRB has played a key role in policy formation and execution to the financial institutions. The major policies issued for the Micro-Financial institutions are as follows:
* Commercial banks are required to extend 12 percent of their outstanding loans and advances as priority sector credit, of which 0.25 to 3.00 percent should be extended to deprived sector.
* The central bank provides refinance facilities to commercial banks against the credit documents of the priority sector credit.* In order to open an urban branch, commercial banks need to open one branch in semi-urban and one in rural area compulsory.* Micro credit is normally based on group guarantee and it is actually collateralless lending.* Financial Intermediary Act, 1998 has been enacted to enhance the Financial Intermediaries ( FINGOs) for wholesale lending.* “Poverty Alleviation Fund ” has been created for the growth of rural financial markets. The fund will be utilized for conducting training programs and extending micro-financing services.
* Rural Micro-Finance Development Centre (RMDC) Ltd. has been established for wholesale lending to Micro Financial Institutions to enhance rural micro-credit.
* Single borrower limit of micro credit (deprived sector) has been fixed up to Rs.30, 000.* Commercial bank can also provide credit to the ADB/N, RDBs, SACCOs, and FINGOs as priority sector credit.* Nepal Rastra Bank is carrying out the ” Restructuring Programme “in Grameen Bikash Banks due to the heavy losses.* Priority Sector Credit Programme extended by the commercial banks will be phasedout within next five years but deprived sector landing will remain valid.
Rural Financing ProgramsVarious rural & micro – financial activities and programs, which are being implemented through different types of financial institution, are briefly mentioned below.