CENTRE FOR SELF-HELP DEVELOPMENT

Institute of micro-finance and cooperative development.

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A Dialogue Program on Issues of Microfinance

A one-day dialogue on microfinance was organized by Unique Nepal Laghubitta Bittiya Sanstha Ltd. on February 9, 2019 (Magh 26, 2075) in Hotel Atithi, Kohalpur. A total of 42 participants, including board officials, senior officials and branch managers discussed on pertinent issues faced by the MFI.

A major issue was high loan overdue and dropout rate. It was observed that the high dropout rate could be due to group based lending mechanism.

Speaking on the occasion, Mr. Shankar Man Shrestha, Chairman of CSD, suggested that group guarantee should be relaxed from the members. "Dropout is caused as loan size increases and the financial pressure to bear the loan liability of other group members is also increased. Thus, members do not want to stay in the group. The problem is that good clients who have good credit history are the ones who leave. Those borrowers who have default their loans do not leave because their delinquent loan will be covered by other members. It may be necessary to revise the concept of group guarantee in Nepal. Bangladesh does not have group guarantee. The modified version of Grameen model, G II, does not have group guarantee system,” shared Mr. Shrestha.

In Unique, branch managers with more than 2,100 members are eligible for a higher pay package as incentive. The branch managers felt the need to revise the policy because if branch managers who had worked tirelessly in increasing the member size to above 2,100 and then got transferred to another branch which had lower than 2,100 members, he misses out on the incentive package.

Mr. Bechan Giri, Executive Chief of CSD, encouraged the staff to transform dormant members into active members as there are many members in Unique who had not taken loan.

Executive Director of Unique Nepal, Dr. Gopal Dahit said, "Client registry is a good concept and will help us to have updated database of clients. This way, we will be able to develop intervention programs based on capacity development initiative for micro-entrepreneur members. It would also help in targeting new members, decreasing dropout and increasing loan and savings."

"Trainees have rigorously expanded members in some branches. The same energy and vigor should be shown by the other staff in our branches," said Dr. Dahit.

He further added that remittance service initiated by Unique was not effective. It is necessary to develop a policy where 40% of the remittance is put into saving. This policy will help UNYC to cover loan outstanding amount through internal saving.

In his closing remarks, Mr. Shankar Man Shrestha urged the officials and staff to adequately educate their members on the risk of multiple borrowing and over-indebtedness and to remain in only one organization. He also advised to increase the borrowers to members' ratio to 95% and to reduce drop-out to zero as a strategy to improve quality and minimize risk. In the end, he cautioned them to refrain from client poaching and instead develop each client as an entrepreneur.

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