Nepal Rastra Bank (NRB), the Central Bank of Nepal, was established in 1956 under the Nepal Rastra Bank Act, 1955, to discharge the central banking responsibilities including guiding the development of the embryonic domestic financial sector. Since inception, there has been a significant growth in both the number and the activities of the domestic financial institutions.
To reflect this dynamic environment, the functions and objectives of the Bank have been recast by the new NRB Act of 2002, the preamble of which lays down the primary functions of the Bank as:
• to formulate necessary monetary and foreign exchange policies to maintain the stability in price and consolidate the balance of payments for sustainable development of the economy of the Kingdom of Nepal;
• to develop a secure, healthy and efficient system of payments;
• to make appropriate supervision of the banking and financial system in order to maintain its stability and foster its healthy development; and
• to further enhance the public confidence in Nepal’s entire banking and financial system.
The Bank is eminently aware that, for the achievement of the above objectives in the present dynamic environment, sustained progress and continued reform of the financial sector is of utmost importance. Continuously aware of this great responsibility, NRB is seriously pursuing various policies, strategies and actions, all of which are conveyed in the annual report on monetary policy.
NRB has also played an important role in building up prudential and institutional mechanism to avail microfinance easily and smoothly to promote the income generating activities of the rural households. With the adaptation of liberalized regime by NRB in 1991, this paved the way for the growth of Grameen Bikas Banks and Replicates.
NRB’s Monetary Policy of 2007/08 has accorded top most priority to the development of microfinance sector confessing its importance and relevance especially in poverty reduction efforts. Accordingly, it has urged commercial and development banks to disburse credit to the deprived sector up to 3 percent and one percent of their total outstanding credit respectively. It also spells that a directive will be issued to the finance companies to disburse gradually credit to the small and marginal tea farmers to establish orthodox tea plants, line of credit facilities etc. are the examples of inclusion of MF sector in monetary policy of NRB. Under the initiative of Government of Nepal (GON), NRB and donors, microfinance programmes such as Production Credit for Rural Women (1988), Micro Credit Project for Women (1993), Third Livestock Development Project (1997), Poverty Alleviation Project in Western Terai (1998), Community Ground Water Irrigation Sector Project (1999) etc. were successfully run in the past and benefited by the poor rural household members including women.
Being Central Bank of the country NRB is responsible to address the policy that easy opens access to the microfinance and other financial services to the poor. Apart from formulating the monetary policy the Microfinance Department of the Bank has formulated the mission of making microfinance services more accessible to the poor and weaker section of the society in a sustainable and competitive way thereby developing a vision of microfinance for all deprived sector by the year 2010. In order to contribute on the vision, it has developed the Microfinance Policy and is in the process of enactment by the Government of Nepal.
Flagship Programme Profile
The Rural Self Reliance Fund (RSRF) was established in 1991 to provide credit to the rural deprived people for carrying out income generating activities using their skills, labors and other local resources, and thereby help the people to achieve economic self-reliance over the years. Initially, Government of Nepal provided a corpus fund of Rs. 20 million to the RSRF. During its establishment Nepal Rastra Bank also provided Rs. 100 million in this fund to boost up the capacity of micro finance institutions specially cooperatives & NGOs (micro credit institutions).
The target group of the fund ranges from individual to households, holding less than 15 ropanies (0.82 hectare) of land in the hills or less than 1 bigha (0.71 hectare) of land in terai (plain) and those who cannot meet the minimum annual consumption needed for their family members from their family income and who have not used credit facility from any other bank and financial institutions.
The RSRF provides credit to the saving and credit cooperatives (SACCOs) and NGOs on the basis of total regular savings/ or share capital. The ceiling of credit to the SACCOs and NGOs is 10 times or their total savings/ or share capital or a maximum of Rs. 1 million which ever is lower. The fund provides a small loan up to Rs. 60,000 per borrower. The interest charged to the credit is 8 percent. It is so arranged that the borrowers are liable to receive rebate of 75% in case of timely repayment of installment of their loans.
RSRF provides wholesale lending to the locally created cooperative society and non-government organization to lend its poor local members for the income generating activities. By mid-January 2008, the fund has disbursed loan to 252 cooperative societies and 53 non-government organizations in 50 districts through out the country benefiting 13420 poor households. Of the total 161.5 million rupees disbursed, 89.8 million rupees have been repaid and 71.7 million rupees remained outstanding till date. The repayment rate is 91.6%.
All the clients of RSRF have used credit for running various income generating activities, with same using it for other purpose as well. The main activities have been livestock raising (43 percent), followed by retail shops (26.5 percent) and vegetable farming (14 percent). The impact study of RSRF reveals that the investment mode by RSRF to the borrowers has contributed to generate employment opportunity to two persons each households.
It is estimated that 40 percent of the RSRF’s clients are women and are engage in various income generating activities in rural areas. The large proportion of women beneficiaries has reported that the access to RSRF loan of NRB has not only helped in income generating activities but also in developing self-confidence among them. Thus, RSRF has played a significant role in the empowerment of women in rural areas of Nepal.