Microfinance in Nepal: An Overview

Abstract

This paper aims to explore the current challenges and opportunities of the microfinance sector in Nepal. The secondary data and descriptive research with a critical approach are adopted to explain the study. The data were mainly collected from Nepal Rastra Bank's (NRB) annual Reports, and other available literature. The result shows that the center numbers (numbers of microfinance user group) change ratio was reduced from 17.11% to 1.30%, the total group numbers were 13% to 2.88%, the borrower 7.51% to (-9.66%), staff progress 9.75% to (-3.48%), loan outstanding 41.18% to (-5.06), profit 150.53% to (-7238), active loan 40.26 to (-7.94), and saving  22.87 to 3.91 between 2020/2021 to 2022/2023. Similarly, the Overdue member change ratio increased upto 53.66%, the passive loan from 79.47% to 104.3%, and the NPL increased continuously from 2.56% to 5.52%. So, all microfinance institutions are in a critical situation in Nepal. However, microfinance is an important concept to reduce poverty and unemployment. Further, it enhances easy access to financial institutions in rural where large banking institutions are merely available. However, microfinance in Nepal is facing critical challenges as many fraud cases are emerging. The policy implication is crucial as policymakers should formulate both long-term and short-term policies and implement those policies immediately in microfinance to revive the critical current situation.