Financial Inclusion

The Financial Inclusion component is one of three major components of the Sakchyam Access to Finance Programme. Under this component, the Programme works with Nepal’s Microfinance Institutions (MFIs) including Microfinance Development Banks (MFDBs), Financial Intermediary Non-Governmental Organizations (FINGOs), Cooperatives, and insurance and remittance companies.

Working together, our objective is to make financial products and services inclusive by enhanced access in the programme areas, particularly in rural and difficult-to-reach areas where a majority of the population including the extreme poor, women, and members of disadvantaged groups (DAGs) are un- or underserved. Due to remoteness and difficult topography, physical, communication and institutional infrastructure is limited or non-existent. This results in the exclusion of the majority of the region’s population, from formal financial services.

Our support is focused on the following areas:

  • Branch expansion: Most financial institutions, including MFIs, are currently concentrating their services in district headquarters. Opening up branches in remote and less accessible areas is expensive for them. We help them expand their branches into remote and less accessible areas in order to improve their outreach while maintaining financial viability.
  • Product and service development: Products and services offered by MFIs are largely uniform and do not meet clients’ needs. We help them design, price and launch new, innovative financial products and services oriented toward the poor, women, and DAGs as well as combating climate change. To name a few, we are working with our partners to develop alternative energy, migration, MSME loans along with remittance and micro insurance products, including for the first time in Nepal, weather-based index insurance (WII) to reduce farmers’ risk. We are also promoting alternative guarantee mechanisms, beyond traditional collateral which many poor and underserved groups do not have.
  • Alternative delivery channels: Currently, MFIs and rural clients are limited by limited infrastructure, but mobile technology is changing that. We work with our partners to expand financial access by introducing appropriate technologies including mobile banking and branchless banking.
  • Capacity building: In order to ensure the viability of our partners and our projects long after Sakchyam, we are committed to improving the institutional capacity of our partners and the industry as a whole. We work with our partners to conduct a capacity assessment and create a capacity strengthening plan that focuses on the following areas: 1) Improving MIS 2) Expanding the Outreach; 3)   Enhancing Sustainability; 4)   Improving Efficiency; 5)    Incorporating Client Protection.
    • In particular, we are committed to building our partners’ Management Information System (MIS) working with the NMBA to provide an industry-level software that provides quality accounting and reporting. Second, we are working to connect the industry to the national credit bureau to reduce financial risk and over indebtedness nationwide.
  • Financial Capability: In close collaboration with Component 3, we are working to build our partners’ and their clients’ understanding and uptake of financial products and services through effective and innovative financial literacy. Learn more here.
  • Legal & Regulatory Support: We work with stakeholders to identify and address key legal and regulatory barriers affecting the MFI industry in Nepal. Learn more here.

Interested in being a partner financial institution of Sakchyam? Learn more here.

Chhimek Laghubitta Bittiya Sanstha Ltd. – Project 1

DIGITAL MAHILA: DIGITAL WOMEN CHANNEL PARTNERS FOR GENDER INCLUSIVE MICRO FINANCE SERVICES

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, disadvantaged groups (DAGs), and women to formal financial service provider in order to enable them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are critical. Sakchyam believes a paradigm shift is needed in the microfinance sector with the adoption of new technology, helping it achieve organisational efficiency and expand its outreach in a more self-sustainable manner.

Challenges 

Given the diverse socio-economic and geographical context of Nepal, the need to adopt innovative solutions backed by technology is necessary to make easy, convenient, and affordable financial products and services possible for the rural poor. Currently, microfinance in Nepal is considered expensive due to high operation and monitoring costs. The sector lacks a sophisticated management information system (MIS), let alone other technological innovations that can reduce the costs of taking financial services to remote, hard-to-access areas. With limited options, microfinance institutions (MFIs) usually resort to the traditional style of doing almost everything manually. Illustratively, all loan and savings transactions are conducted manually at the centre meeting (during the time the group meets, in most cases, monthly—requiring the entire meeting time to collect repayments of loan, savings and making demands for loan and in some cases disbursement of smaller loans and entering the transactions in both the collection sheets as well as client’s pass books). This leaves little to no time for discussions on financial literacy, client protection, or explaining about other products or services offered by the financial institution. Additionally, loan officers have to spend significant time traveling back and forth to a branch or home office and entering the data manually at the branch. New loan applications often require a visit to the branch and a laborious paperwork process. This can result in decreases in productivity and morale. For many potential clients, they’ll often forego the extra effort as a local moneylender offers money immediately. Therefore, technology to provide alternative delivery channels has the ability to tackle these challenges head on.

Sakchyam’s Interventions

Chhimek Laghubitta Laghubitta Bittiya Sanstha Ltd (Chhimek) is a ‘D’ class national level financial institution licensed by the Nepal Rastra Bank (NRB). Chhimek is at the forefront of using mobile-based technology with its core banking system (CBS) to extend its services to remote regions of Karnali and Province 5 & 7. With Sakchyam’s support, it has launched tablet banking programme through female agent called “Digital Mahila” to efficiently deliver financial services in the remote areas and increase its outreach. These female agents are used to be active clients of Chhimek who are able to reach other women, understanding their needs and challenges.

A Digital Mahila is able to identify target clients, conduct financial literacy classes and group/unit meetings every month. She serves 250-350 clients with savings and lending products, especially in those remote areas that are not usually covered by the brick and mortar branches of the financial institutions. Every day she records transactions on the tablet, which is synced with the bank’s core banking system online. Every month, branch managers and M&E officers visit her to ensure compliance with Standard Operation Procedures (SOPs) and provide her with any onsite support needed. Any request for loan products exceeding NRP 50,000 will be recommended to the nearest branch.

Impact: As of June 2018 Chimmek has,

  • Selected and trained 108 Digital Mahilas
  • Operated 164 Digital Points and served 26,000 clients
  • Opened two new branches in Dadeldhura and Kailali to better serve both its agents and clients
  • Disbursed loans amounting to more than NPR 1 billion
  • Deposited more than NPR 8 billion in savings

IME Digital

IME DIGITAL SOLUTION’S IME WALLET (MOBILE FINANCIAL SERVICES) THROUGHOUT THE COUNTRY

Background

The financial sector of Nepal is growing steadily, offering financial products and services through its various delivery channels. However, the challenge is to address the constraints that exclude a larger population from full participation in the financial system. Even today, large rural populations in the country lack access to formal financial services as reach with brick and mortar branches are financially not viable.

Nepal Rastra Bank (NRB) came out with a licensing policy for the Payment Service Providers (PSP) and Payment System Operators (PSO) to provide financial services by using internet, mobile device and or payment card services in 2016. This policy opened the avenues for Telecom companies and other non-financial companies to come into the business of financial services.

Challenges Faced

People in the region are involved in stable income sources from activities like agriculture and remittance income, yet they are compelled to rely upon informal sources and high cost financial sources. Many financial institutions are reluctant to spread its outreach in the mentioned areas due to poor infrastructure, cost, and security among other reasons.

MFS has greatly changed the access to finance status in many developing countries in Africa, Latin America and Asia Pacific. There had been some initiatives in the past to offer the mobile financial services (MFS) in Nepal but they did not have a sizable traction of customers, merchants and utility companies. Basically, the MFS were of small scale, lower investment and did not have synergy effect with the partners. It is also clearly learnt that the Agent Network Management (ANM) was the biggest drawback of such initiatives whereas, for any MFS to be successful there is a need of a strong ANM. Likewise, a value proposition to different stakeholders was missing to make them interested in the MFS business.

Sakchyam’s Intervention

IME Limited- the largest remittance company in Nepal bringing in more than USD 1 billion from abroad every year is serving millions of customers for more than 15 years now. IME has a strong agent network of more than 5,000 agents throughout the country with established cash management and settlement mechanism. IME has a vision to digitise this remittance and bring its customers into financial services arena through the mobile wallet services whereby linking them with banks for further financial services and also link to insurance products.

Sakchyam had been looking for a strong partner to come into MFS business who could make a national level impact in the outreach of financial services.  Amongst the proposals received as a response to Sakchyam RFP (Request for Proposal), IME Digital Solution (subsidiary of IME) was found to be the strongest one. Sakchyam believed the objective of reaching out a larger customer base with MFS would be possible through this partnership.

Likely Impact

The project offers nationwide MFS bundled with products like money transfer, bill payments, account opening, deposit and other banking and insurance services. It will start the implementation from existing remittance receiver client base (about 450,000) and gradually move towards other customers. In order to create a sustainable financial ecosystem, IME will be partnering with MNOs, commercial banks, BLB agents, merchants in reaching out the financially excluded sub-urban/rural, under-banked and unbanked population and offer an alternative payment channel.

Target beneficiaries (886,915): Students, working Professionals, traders, agricultural businesses, and G2P recipients. 75% of the target beneficiaries shall be youth, 45% women, and 35% DAG.

Key Innovation:

  • Introduction of interoperable and large scale third party led mobile wallet products in Nepal
  • Transition from traditional remittance payment system to mobile wallet based payments
  • Linking mobile wallet with the bank accounts
  • Rolling out of simpler infrastructure to facilitate Person to Person, Person to Business, Business to Person, Business to Business, Person to Government, Government to Person payments

Through this partnership IME Pay has already brought on board 65,000 customers, over 13,000 agents and over 400 merchants in its network which includes IME Remittance Agents and new agents. This partnership aims to have 15000+ agents and 1 million customers in the next one year.

Kisan Cooperative – Project 1

KISAN TAB BANKING FOR ENLARGEMENT OF MICRO FINANCE

Background

Connecting the rural poor, disadvantaged groups (DAGs) and women to formal financial services to enable them with choices to save, borrow, invest, and earn is one of the core objectives of UKaid Sakchyam Access to Finance Programme (Sakchyam). While enhancing access to finance for people living in the remote and inaccessible regions is the immediate goal of Sakchyam, its replicability and sustainability long-term are key. Thus, Sakchyam promotes sustainable, efficient, and tailored products and services that create a win-win situation for both the service provider – Financial Institutions and their beneficiaries (clients).

Challenges

Microfinance seeks to reach those traditionally excluded by the formal banking sector and instead, who are exploited by local moneylenders who charge exorbitant interest rates and impose strict conditions. Yet, microfinance is a costly business with high operation costs and it is very human resource intensive. Most microfinance institutions (MFIs) do not use a sophisticated Management Information Systems (MIS), let alone other technological innovations that would bring down the costs of reaching more remote areas with poor infrastructure. Instead, they often resort to traditional styles of doing almost everything manually.

Sakchyam’s Interventions

Sakchyam supported Kisan Bahuudyasiya Sahakari Sanstha Limited’s (KBBSL), a multipurpose cooperative society to extend microfinance services in order to enhance financial access in remote parts of Kailali district. Through the project, KBBSL aimed to transform its financial transactions recording system through tablets which was previously done manually. With Sakchyam’s support, KBBSL reviewed its current product offerings and looked for ways in which to innovate. Finally, KBBSL prioritized financial literacy in collaboration with Sakchyam and explored new ways to deliver financial education to its clients.

Likely Impact

The project has been success in increasing financial inclusion in the intervention areas and transforming the centre meeting process, as tablets have replaced the manual way of recording transactions in the field. This has reduced time, costs, and human resources that has benefited the institution as well as the clients.  KBBSL is one of the first pioneers of this technology, so they have served as an example to the rest of the industry as well. Similarly, an increased focus on financial literacy has increased client protection and responsible finance.

As of June 2018, KBBSL has,

  • Launched 6 branches serving more than 12,000 beneficiaries
  • Disbursed NPR 552 million in loans and mobilised NPR 168 million in savings
  • Reached 13,839 beneficiaries through financial literacy programme
  • Fully digitized 200 microfinance centre’s transactions and converted into paperless transaction centres

Kisan Microfinance – Project 1

SAKCHYAM KISAN RURAL MICROFINANCE PROJECT

Background

Connecting rural poor, disadvantage groups (DAGs) and women to formal financial services for enabling them with choices to save, borrow, invest and earn is one of the core objectives of UKaid Sakchyam Access to Finance Programme (Sakchyam). While enhancing access to finance for people living in the remote and inaccessible regions is the immediate goal of Sakchyam, efficiency and sustainability of financial service delivery to these people are matters of long term concern. Therefore, Sakchyam conceives that there should be a paradigm shift in the service delivery channels of microfinance sector. This sector should resort to advanced technology to achieve organisational efficiency and expand its outreach in self-sustainable manner.

Challenges

Microfinance service is considered expensive due to its high operation cost (service delivery at the door step of clients with manual operation). This sector is deprived of sophisticated Management Information System (MIS) until now, let alone other technological innovations that would bring down the cost of catering service to remote areas with poor road network and other infrastructure. They resort to traditional style of doing almost everything manually. Resistance to change is a common phenomenon among microfinance actors. Instead of taking lead at experimenting something new, they rather choose the comfortable path of following what has already been tried and tested. In the given scenario, institution opting for technology and adopting alternative delivery channel for service delivery is rare. However, given the diverse socio-economic and geographical context of Nepal, adoption of innovative solutions backed by technology is irrefutable for providing easy, convenient, quick and accessible financial services to people living in every nook and corner.

Sakchyam’s Interventions

Kisan Micro Finance Bittiya Sanstha Ltd. (KMF) is a ‘D’ class national level financial institution that was established in 2012. It is licensed by Nepal Rastra Bank and Sakchyam partnered with them to adopt mobile technology in its core banking system to extend its services to remote regions of mid- and far- western regions (Dailekh, Dadeldhura, Kalikot, Salyan, Jumla, Jajarkot, Accham, Kailali, Doti, Darchula, Baitadi and Bajhang districts) of Nepal.  Online MIS, Tablet Banking as part of the core banking system and Mobile Banking were the innovative interventions proposed by KMF under “Sakchyam Kisan Rural Microfinance” (SKRM) project. These interventions have brought transformational change in traditional way of carrying out microfinance services. In addition to that, the project has also ensured access to remittance services, insurance products and financial literacy program that has led to self-employment opportunities and improved livelihood of the deprived people.

Impact

As of June 2018, under the SKRM Project, Kisan Microfinance has,

  • Established 16 new branches
  • Reached over 15,000 beneficiaries
  • Disbursed over NPR 899 million in loans and collected more than NPR 94 million in savings

 

Mahila Sahayatra

MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) LOAN PRODUCTS FOR DEPRIVED WOMEN

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, disadvantaged groups (DAGs) and women to formal financial products and services in order to enable them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are critical. To do so, Sakchyam partners with financial institutions who are committed to downscaling, innovation, and sustainability.

Challenges Faced

In the hilly region of Province 5 of the country, people face a number of challenges in accessing and utilizing finance products and services. These include lack of bank branches and branchless banking (BLB) points; a weak entrepreneurial base, insufficient use of product processes and technology and limited social mobilisation; and, a lack of appropriate financial products and services, including products for agricultural mechanisation and climate/green/energy financing.

Sakchyam’s Interventions

Mahila Sahayatra Microfinance Bittiya Sanstha Ltd. (MS) is a registered Microfinance Development Bank (MFDB). MS partnered with Sakchyam to establish five new branches to serve marginalized communities in Rolpa, Rukum, Salyan, and Surkhet districts in Province 5. MS identified the target communities and introduced entrepreneurial capacity building activities such as training, exposure visits, market/ trader linkage, etc.

In addition to its existing products and services, MS also introduced loan products such as Mechanisation, and Education, aiming to provide credit for the modern agriculture tools; reduction of carbon emission; and higher education of clients’ children. As part of the project, MS integrated financial literacy as a vehicle to reach more clients with a better understanding of the products and services, along with money management skills. New technologies like Interactive Voice Response (IVR), short films, flip chart, brochure etc. have also been introduced. MS have also introduced Enterprise Development Service (EDS), an inbuilt model of skilled training along with the loan which help its client better utilize the loan, with the technical support of Berendina, a pioneer of EDS activity in Sri Lanka. Through the EDS services, MS offers paid skill trainings to its clients to start and up-scale the enterprises along with loan.

Impact

As of June 2018, Mahila Sahayatra has,

  • Launched all 5 branches, reaching over 4,600 beneficiaries
  • Disbursed over NPR 362 million in loan and collected NPR 30 million in savings
  • Disbursed 885 Business Loan valued over NPR 140 million
  • Launched EDS activities in 10 branches

Nepal Insurers’ Association (NIA)

PARTNERSHIP BETWEEN NEPAL INSURERS’ ASSOCIATION AND NEPAL MICROFINANCE BANKER’S ASSOCIATION TO DISTRIBUTE INSURANCE PRODUCTS

Background

Figure 1: Partnership of NIA and NMBA

Insurance is a means of protection from the financial loss which is caused by different risk events in people’s lives. It is particularly crucial to protect low-income people’s lives and assets. Without such protection, an unfortunate event can push the low-income people into or further into poverty. This need is particularly acute in Nepal, where insurance has believed to reach about 10% of the total population.

Challenges Faced

High distribution cost, lack of awareness on insurance are considered as some of the major obstacles to expand the reach of insurance product to the low-income households. Due to these factors, insurance companies mostly focus on reaching higher income individuals in urban areas.

Sakchyam Intervention

In an effort to expand insurance to the low-income households by reducing distribution cost and increasing insurance awareness, UKaid Sakchyam initiated a discussion among stakeholders of insurance sector in Nepal. After several rounds of discussions, associations of insurance and microfinance industries represented by Nepal Insures’ Association (NIA) and Nepal Microfinance Banker’s Association (NMBA) agreed to distribute insurance products via microfinance institutions (MFIs). NIA and NMBA signed a Memorandum of Understand (MoU) to distribute microinsurance products to MFI clients. This is the first time a partnership between these associations has been established to expand the reach of microinsurance to the low-income households.

As part of the partnership, NIA has formed a pool of all 17 non-life insurance companies working in Nepal, where Shikhar Insurance Company Ltd. has been appointed as the pool manager. A management team at NIA and Shikhar Insurance will coordinate with MFIs and other insurance companies to distribute insurance products (the modality of the partnership is shown in Figure 1). NIA will offer ranges of microinsurance and agriculture insurance products via this partnership and will further develop tailor-made microinsurance products to meet the insurance need of MFI clients as per their feedback.

Sakchyam has provided financial and technical support to NIA to materialize this partnership and expand the reach of insurance in rural and the low-income people. Sakchyam’s support will mainly be utilized to run operation of NIA, train MFIs and conduct different awareness campaigns.

Likely Impact

The aim of this initiative is to expand the reach of microinsurance in rural parts of the country. Therefore, NIA aims to reach more than 400,000 beneficiaries within the three years of its partnership with NMBA. To do so, NIA will launch nation-wide awareness campaign to increase the level of awareness on the products. In addition, this will also minimize the instances of offering informal in-house insurance products which are currently offered by some MFIs.

As of June 2018:

  • 19 MFIs have received agency license.
  • More than 700 MFI branch staff have been trained.
  • Sold insurance policies to 4,855 beneficiaries.

Nepal Women Community Service Centre (NWCSC)- Project 1

PROMOTING ECONOMIC OPPORTUNITIES OF RURAL FAMILIES BY ENHANCING ACCESS TO FINANCIAL SERVICES IN UN/UNDERSERVED AREAS OF RAPTI ZONE

Background

For more than a decade, development in much of mid-western region of Nepal was arrested by a civil war that used its scenic villages as its headquarters. Infrastructure such as schools, health posts, bridges, and numerous government and non-government offices were destroyed. Agricultural and animal husbandry were disturbed as able youth (between 18-39 years) were recruited as guerrilla soldiers. And education took a backseat as schools became command centres. Access to essential services such as education, health and finance were cut off.

Challenges

One of the essential elements required to recover from such destruction is access to financial services. The challenges related to access to finance faced by these communities are: a lack of financial services in rural and remote regions – financial institutions are more likely to open branches in district headquarters than in rural areas; marginalized groups remain as backward as ever; women are overburdened not only by their household chores but also with micro-finance services. Most microfinance institutions target women as their clients – however in many cases, they borrow the cash and transfer it to their husbands. Other challenges are a lack of financial products targeted to remittance-earning Nepalese migrant workers; lack of basic financial skills on the part of rural households; lack of technical skills; absence of use of modern technology to promote inclusive finance; and limited impact assessment of developmental works as and when they happen.

Sakchyam’s Interventions

UKaid Sakchyam Access to Finance Programme (Sakchyam) has supported Nepal Women Community Service Centre (NWCSC), a financial non-government organization (FINGO) to enhance financial access in remote areas of Dang, Rolpa, Rukum, Salyan and Pyuthan. Through this partnership, 5 new branches have opened in those districts targeting women and marginalized groups such as DAGs and households affected by the civil war. The branches have continued to provide NWCSC’s various savings and loan products, adapt existing product and or design new products depending on specific client needs. To align their beneficiaries with improved financial services, financial literacy campaigns – to help beneficiaries make informed financial decisions, as well as technical training – to allow locals to start SME/MSMEs, have also been launched as part of the project.

Impact

Sakchyam’s support to NWCSC in its various initiatives has resulted in improved access to financial services for beneficiaries who were out of range of available financial institutions. NWCSC’s understanding of the needs of beneficiaries in the region coupled with innovative financial services has helped boost economic activity, support real needs such as for remittance earners, and help launch multiple small enterprises as a result of the financial literacy and skill training. Such a holistic approach to access to finance has been a step towards helping the region recover and move into a more sustainable and secure future.

As of June 2018 NWCSC has,

  • Established 10 new branches reaching over 9,700 beneficiaries
  • Disbursed more than 14,600 loans worth at NPR 483 million and collected more than NPR 115 million in savings
  • Designed and launched Migration Loan product; disbursed more than 400 Migration Loans valued at NPR 48 million and performed 11,233 remittance transactions valued at NPR 360 million
  • Started implementing EDS Activities, with the technical support of Berendina Microfinance, and issued more than 2,000 coupons and trained over 1,300 clients

NMB Microfinance

ENHANCING FINANCIAL ACCESS ON RURAL TOURISM

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed in connecting rural poor, disadvantaged groups (DAGs), and women to formal financial institutions in order to provide them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are also critical. When it comes to informal entrepreneurs in Nepal’s remote Himalayan districts, unless a concerted effort is done to meet their financial service needs, their choice is limited to informal financial sources. Sakchyam believes a paradigm shift is needed in the microfinance sector to strengthen the capacity of microfinance institutions (MFIs) so that they are able to achieve organizational efficiency and expand their outreach in a sustainable manner.

Challenges

Given the diverse socio-economic and geographical context of Nepal, the need to adopt innovative solutions backed by technology is necessary to enable convenient and affordable access to financial products and services for rural poor communities. Currently, microfinance in Nepal is considered expensive due to the high start-up and monitoring costs. Moreover, Micro, Small and Medium Enterprises (MSMEs) which focus on rural tourism, agribusiness, livestock farming and other micro entrepreneurial activities, have additional challenges because of lack of appropriate products offered by formal financial service providers to meet their financial service needs.

Sakchyam’s Interventions

NMB Microfinance Bittiya Sanstha (NMB MF) is a ‘D’ class financial institution licensed by Nepal Rastra Bank in January 2012 under the Bank and Financial Institution Act 2006. NMB MF is a subsidiary of NMB Bank and was established with core mission of inclusive banking. With Sakchyam’s support, NMB MF launched “Enhancing Financial Access on Rural Tourism” project to provide access to financial services in five remote districts Manang, Mustang, Rukum, Myagdi and Illam. NMB MF proposes to establish two new branches and five sub branches through this project and introduce new financial product for the entrepreneurs.

Impact

Over a two-year period, NMB MF planned to increase its outreach to serve more than 7,000 individuals, all who will be women and 30% of whom will be from DAGs. It also aimed to create at least 3,500 sustainable MSMEs. To do this, NMB MF introduced Easy Loan, a new financial product for micro-entrepreneurs. In addition it has also introduced tablet banking after piloting in two branches.  NMB MF has also developed a comprehensive financial literacy programme paired with business skills development training including on tourism and hospitality.

As of June 2018 NMB Microfinance has,

  • Established 2 branches and 6 sub branches, reaching over 3,800 beneficiaries
  • Offered financial literacy training to all beneficiaries, and skill training to 270 clients
  • Disbursed over NPR 323 million in loans to more than 3,200 clients and mobilized NPR 26 million in deposits
  • Disbursed 285 Easy Loan valued over NPR 54 million
  • Reached to over 2,500 clients with tablet banking

Nirdhan Uthan Bank Limited – Project 1

ACCESS TO FINANCE IN REMOTE HILL & MOUNTAIN AREAS AND ADOPTION OF NEW TECHNOLOGIES FOR FINANCIAL INCLUSION

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting rural poor, disadvantaged groups (DAGs), and women to formal financial products and services in order to provide them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are also critical. When it comes to informal entrepreneurs in Nepal’s remote Himalayan districts, unless a concerted effort is done to meet their financial service needs, their choice is limited to informal financial sources. Sakchyam believes a paradigm shift is needed in the microfinance sector to strengthen the capacity of microfinance institutions (MFIs) so that they are able to achieve organizational efficiency and expand their outreach in a sustainable manner.

Challenges

Financial products and services are often designed to cater to urban and semi-urban populations. People of ‘topographically-difficult’ districts, mostly in Karnali and Province 5 & 7, are either forced to make use of whatever options there are available, or depend on informal sources, mainly money lenders to take care of financial needs. Tailored and adopted financial products and services for rural poor are almost unheard of and the adoption of modern technology, rampant in urban areas, to benefit these rural poor communities, which is an excellent, cost-effective and practical way of providing guidance and training on financial behaviour, is an approach that is yet to see efficient implementation. Capacity enhancement for capable entrepreneurial minds, specially residing in remote hills and mountainous area, a potentially sustainable investment toward promoting economic self-sufficiency is largely absent and financial institutions often do not keep in mind profiles of customers when providing services to them.

Sakchyam’s Intervention

With Sakchyam’s support, Nirdhan Utthan Laghubitta Bittiya Sanstha (Nirdhan) aimed to expand access to finance in remote locations of Darchula, Mugu, Humla, Bajhang and Accham districts by establishing 5 new branches. They also adopted technology such as Point of Sale (POS) machines to improve efficiency and transparency while offering financial services by their loan officers in several districts including the 5 new branches. Nirdhan provided financial education and entrepreneurship training prior to giving out loans to ensure productive use of loans to improve household economy.

Impact

As of June 2018, Nirdhan has,

  • Established all 5 proposed branches reaching 4,600 beneficiaries
  • Disbursed NPR 363 million in loans and collected NPR 79 million in deposits
  • Reached more than 4,600 beneficiaries through financial literacy

 

Nirdhan Uthan Bank Limited – Project 2

JOB CREATION THROUGH MICRO AND SMALL ENTERPRISES FINANCING WITH SUPPORT FROM FINANCIAL LITERACY, ENTREPRENEURSHIP & SKILL TRAINING

Background

Despite the successes in the Nepali microfinance sector and Government of Nepal’s strategic support to the same, Small and Medium Entrepreneurs (SME) or “missing middle”, in Nepal still lack basic access to finance. As their credit requirement (loan size) is considered as higher than microfinance institution’s (MFI’s) common loan size and lower than Commercial Banks and also have little or no exposure to enterprise training, they are generally excluded from the formal financial sector. In addition the normal Pre-Group Training (PGT) materials used by MFIs do not contain the financial literacy messages that such missing middle need in order to run their enterprises successfully.

Challenges 

Despite of being a client of a MFI for several years and with gaining adequate experience to run the SMEs, such clients do not get access to the special financial service they need as the financial products and services are not designed in a way that suits their requirement. Similarly, there is no practice in microfinance sector to “graduate” them and refer them to Commercial Banks. Nepal Rastra Bank has been increasing the loan sizes for MFIs from time to time. However, the average loan sizes of the MFIs have not increased significantly over the last few years as they are not confident enough to lend larger loan without collateral. In addition, lack of adequate and appropriate enterprise training and financial literacy in potential clients also prohibit MFIs to lend larger loans.

Sakchyam’s Intervention

With UKaid Sakchyam Access to Finance Programme’s (Sakchyam) support, Nirdhan aimed to expand access to finance to such missing middle in 92 existing branches of 25 districts by designing and serving SME loans to such clients with appropriate enterprise training and financial literacy interventions. Through this project, Nirdhan provides financial education and entrepreneurship training prior to giving out loans to ensure productive use of loans to improve household economy.

Impact

As of June 2018, Nirdhan has,

  • Reached more than 17,000 beneficiaries
  • Disbursed NPR 1.8 billion in loans
  • Reached over 35,000 beneficiaries through financial literacy initiatives

 

Rural Microfinance Development Centre (RMDC)

ENHANCE INCLUSIVE FINANCIAL FRONTIER TO THE POOR

Background

The UKaid Sakchyam Access to Finance Programme (Sakchyam) is helping the RMDC Laghubitta Bittiya Sanstha Ltd.  (RMDC) to increase financial access in Sakchyam’s working districts. RMDC is an apex institution, mandated to provide wholesale loan and build institutional capacity of microfinance institutions (MFIs) in Nepal. RMDC works with leading MFIs including Microfinance Development Banks (MFDBs), Financial Intermediary NGOs (FINGOs), and Cooperatives, and is one of the prominent wholesale lending organizations in the country. Its partners’ outreach constitutes nearly 70% of the entire microfinance industry. Because of limited presence of RMDC, however, small MFIs located in rural areas had difficulty in accessing loan from RMDC making it difficult to meet the loan demand of their clients.

Sakchyam’s Interventions

This 3-year project is expected to establish a long-term partnership between RMDC and local MFIs to allow these MFIs to receive wholesale credit to fulfil the credit needs of low-income households. As a result, clients of these MFIs, many living in rural and semi-urban areas, will be able to use the financial resources to generate income-generating activities to improve their economic status. Sakchyam’s support will enable RMDC to open two separate branch offices in strategic locations with additional human resources so that it can reach more remote districts and small MFIs. Sakchyam support will also help RMDC to provide institutional capacity building support to over 90 different MFIs around the country. RMDC will on-lend NPR 1 billion  to partner MFIs, which in turn, will be channelled to their members/clients to establish income-generating activities.

RMDC will develop the capacity of these partner MFIs and their members/clients by offering financial literacy training, sector-specific Small and Medium Enterprise (SME) promotion trainings, and organizational management support including new product design and digitalising manual transactions.

 

Likely Impact

Through the new established regional branches, RMDC plans to provide wholesale loans to its partner financial institutions working in those geographic areas. They aim to forge partnerships with around 90 MFIs (60 new MFIs and around 30 existing RMDC partners) to provide access to finance to an additional 42,000 members/clients in Sakchyam’s intervention districts. Through this they plan to on-lend NPR 1 billion wholesale loans to partner MFIs.

Similarly, through the project, they plan to provide financial literacy to potential and existing clients of partner MFIs. RMDC also plans to provide capacity building training of partner MFIs and facilitate loan among partner MFIs to better cater to the needs of microfinance clients in rural areas.

As of June 2018, RMDC has,

  • Established 2 new branches, first time outside of Kathmandu
  • On-boarded 41 new MFIs/Cooperatives and working with 30 existing MFIs/Cooperatives in Sakchyam priority districts.
  • Reached more than 48,000 new microfinance clients
  • Disbursed more than NPR 404 million in loans
  • Reached more than 10,134 clients with Financial Literacy initiatives

Sahara Nepal – Project 1

SCALING UP ACCESS TO FINANCIAL PRODUCTS AND SERVICES IN RURAL NEPAL

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, disadvantaged groups, and women to formal financial products and services in order to enable them with choices to save, borrow, invest, and earn. Appropriate design of financial products and services is one of the pre-requisites for meaningful access to finance, especially for the poor living in remote and unbanked regions. Sakchyam believes a paradigm shift is needed in the microfinance sector with innovative and client need based product design and delivery that ensures viability of the products and hence supports competitiveness and sustainability of the institution.

Challenges

Despite a mission to serve the poor, rural, and unbanked populations, many microfinance institutions (MFIs) are heavily concentrated in accessible areas. Unavailability of basic infrastructure and high operational costs in remote areas are the main challenges.  Additionally, financial institutions normally offer industry products and services that may not match the needs and preferences of the specific clients and also the capacity of the institution. This results in less effective demand for the product, often misuse of the product, and poor portfolio quality. A lack of competitive products adversely affects efficiency and sustainability of the institution as well. Moreover, lack of proper information on the available financial options, including the products and services, to the target population limits access. As a result poor people are often using costly and inappropriate products and services due to inadequate financial literacy.

Sakchyam’s Intervention

Sahara Nepal Saving and Credit Cooperative Ltd. (Sahara), registered at Jhapa District Cooperative Office, is one of the largest cooperatives in Nepal. Sahara offers various financial products as well as socio-economic services including insurance, remittances, renewable energy, skill training, awareness and empowerment programs in six districts in Province 1. With Sakchyam’s support, it plans to open seven new branches in Jhapa, Ilam and Sunsari districts; develop/refine innovative products like loans for alternative energy; housing construction and climate resiliency; rural micro, small and medium enterprises (MSME) development; and other financing needs across the value chain. It also aims to offer its members with savings and micro insurance products along with a comprehensive financial literacy package. Sahara also aims to get SMART Certification, adopting globally-recognized client protection principles. These interventions will improve access to finance for the poor by i) reaching the remote and unbanked areas; ii) providing appropriate financial products and services to the clients; and, iii) supporting clients to make informed financial decisions.

Impact

As of June 2018 Sahara has,

  • Established 7 branches, reaching over 9,000 beneficiaries
  • Disbursed over 5,000 loans valued at NPR 560 million and collected NPR 136 million deposits from the members
  • Offered Tablet banking to more than 25,000 clients in 27 branches
  • Designed and disbursed Commercial Agriculture Loan valued over NPR 34 million to 111 clients after piloting in two branches
  • Re-engineered and disbursed Renewable Energy Loan valued NPR 0.6 million to 50 clients after piloting in two branches
  • Offered direct financial literacy to over 18,000 clients through PGT/ Center meeting/ Training/ Drama/ Video
  • Signed in agreement with Good Return to receive technical assistance for Smart Certification

Shikhar Insurance

Sustainable Weather Index Insurance Initiative

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, Disadvantaged Groups (DAGs) and women to formal financial products and services to protect themselves from ranges of risks they face in their daily lives.  While enhancing access to finance for people living in remote and inaccessible regions, offering insurance product in addition to saving, loan and remittance is equally important to protect them and give the feeling that they are secured. As majority of insurance businesses are focused in urban and high income market segment, there is a large scope for financial institutions in developing appropriate financial products to protect low income households from different risk they face.

Challenges

Weather related risks has increased the vulnerability of smallholder farmers and has negatively impacted their livelihoods. Apple farmers are facing weather related risks such as drought and hailstorm which hampers their apple production. Farmers have bad experiences of production volume and quality of apple due to hailstorm. Limited rainfall in April and May also contributes to less production of apples as rainfall is required during its flowering season. Due to climate change, the adverse weather has severely impacted farmer’s productivity. In addition, due to hailstorm, the production volume and quality of apple is degraded.

Sakchyam’s Interventions

In this scenario, Weather Index Insurance (WII) can present significant economic efficiency by allowing farmers to put more resources on agriculture. It also helps open doors to avail ranges of other financial services. In an effort to contribute to WII sector, Sakchyam collaborated with Shikhar Insurance Company Ltd. (Shikhar) to introduce WII of apple farmers of five apple farming districts in mid-western region for the first time in Nepal.

Sakchyam assisted Shikhar in developing appropriate WII product to minimize the effect of adverse weather in apple farming. Sakchyam and Shikhar conducted feasibility study to understand the need of insurance products for farmers. After analyzing historical weather data and production data of apple, appropriate WII product was developed. Hailstorm was also added as an additional rider, as it is not measured via weather index, to address farmer’s risk of hailstorm.

Sakchyam supported Shikhar Insurance to introduce WII product in Jumla, Kalikot, Mugu, Dolpa and Mustang. Shikhar started implementing WII in Jumla from 2016 and expanded to Kalikot, Mugu, Dolpa and Mustang districts. With Sakhyam’s support, Shikhar has also expanded WII product in paddy and sugarcane in Kailali and Kanchanpur. In addition, Sakchyam also supported Shikhar to open branches in Doti and Dailekh to provide agriculture insurance services to farmers in close collaboration with CONNECT, another DFID funded project.

Likely Impact

Through its Sakchyam-funded project, Shikhar aims to serve more than 11,000 clients in different intervention districts.  They will also expand crop and livestock insurance to needy farmers. The product will cater to large sections of disadvantaged and marginalized farmers. This initiative is also expected to be replicated by other insurance companies in relevant crop and geography.

As of June 2018,

  • More than 1,500 weather index insurance policies to apple farmers insuring more than 41,397 apple trees worth NPR 89 million
  • Paid claim worth 1.5 million NPR to 278 farmers

United Youth Community Nepal (UNYC) – Project 1

INCREASING ACCESS TO MICROFINANCE SERVICES TO RURAL AREAS 

(This partnership has successfully concluded)

Background

Socioeconomic exclusion of the rural disadvantaged population, predominantly women, remains as one of the major challenges faced by Nepal when it comes to development. Vulnerable communities are denied basic rights such as education confining them to illiteracy and poverty. Often they also lack a voice to express their concerns, and are rarely consulted. UKaid Sakchyam Access to Finance Programme (Sakchyam), believes providing access to financial services to these disadvantaged groups is a crucial agent for change. In the context of Nepal, people not only lack basic financial services but are also unable to financially sustain themselves even when financial services are made available. Additionally, development efforts for socioeconomic and gender inclusion are not fairly distributed across all regions. Illiteracy rates in the Far West, as reported by HDI for instance, lies roughly between 40-55%[1]. According to the United Nations Development Assistance Framework (UNDAF) for Nepal published in June, 2018, the Mid- and Far-Western Regions rank the lowest on both the Gender Empowerment Measure and the Gender-related Development Index (GDI).[2]

The Problem

Due to the lack of formal financial services, people depend on local money lenders for financial transactions. Without legal accountability, the cost of borrowing money with these lenders is often high and exploitative. Another problem is that of the financial services available, most are catered towards the needs of urban rather than rural populations. Tailored financial products and services for the rural poor are unheard of and the adoption of modern technology is yet to see efficient implementation. While majority of households stated agriculture as the major source of income in Kailali, only 22% of households claimed to have agricultural credit highlighting the need for more financial literacy initiatives in these areas.[3]

The Solution

Sakchyam went into its partnership with United Youth Community Nepal (UNYC) to expand financial services through nine new branches in Bardiya, Kailali and Dadeldhura districts and promoted financial literacy in these areas.

The Sakchyam – UNYC partnership was aimed at expanding UNYC’s outreach to the priority districts to: a) tackle the problem of informal channels for financial transactions; and, b) focusing on rural needs, encouraging micro-entrepreneurship through financial products such seasonal loans, loans for housing, foreign employment and emergencies. UNYC channeled skills development training to the entrepreneurs having businesses or taking business loans for the same purpose. To further ensure that loans are used in an efficient manner, skills development through training in piggeries, poultry farming, goat rearing, pickle-making and farming, among others, was prioritized with financial literacy. They also encouraged savings on an individual as well as group basis. Social and gender exclusion was also addressed by setting a target to bring about 15,000 women from indigenous Tharu, Dalit, Muslim, Madhesi communities and those freed from Kamaiya, Kamlahri, Adherawa, and Haliya communities into the financial system. The criteria set was such that only women who have less than 10 katthas of land, no government jobs, or make less than NPR 50,000 annually were eligible.

The Result

By the end of the project period in February 2018, UNYC successfully established 13 new branches and reached more than 16,800 beneficiaries; disbursed over 41,000 loans valued at NPR 965 million; collected NPR 145 million deposits. Through the partnership, UNYC also designed, piloted and launched two new loan products viz. Business loan and Ujyalo (Alternative Energy) Loan. They had disbursed 4,845 Business loans valued at NPR 480.6 million and  151 Ujyalo Loans valued at NPR 4.5 million by the end of project. In a separate update to Sakchyam, they have reported disbursing 6,887 business loan valued over NPR 692 million and 160 Ujyalo loan valued about 5 million by July 2018. In addition. Financial Literacy has been promoted through PGT, centre meetings, IVR and other initiatives reaching a total of 18,277 beneficiaries.

Lessons Learnt and Sustainability

  • MFIs must research geographic and socio-economic factors before expanding into new areas. This requires significant resource commitment, time and staff.
  • MFIs need to invest in the development of their staff to undertake systematic financial product design to ensure product sustainability, better customer satisfaction and client retention.
  • MFIs need to undergo regular review of their products and services. This review will need to follow appropriate market research, demand studies to meet their clients’ needs.
[1] “Human Poverty Index by Districts (2011).” Open Nepal, http://data.opennepal.net/content/district-wise-human-development-index-2011-bardiya
[2] ““United Nations Development Assistance Framework for Nepal (UNDAF) 2018-2022.” United Nations Nepal Information Platform, un.org.np/reports/united-nations-development-assistance-framework-nepal-undaf-2018-2022
[3] “District Profiles « Sakchyam Programme.” Sakchyam Programme, sakchyam.com.np/work-area/district-profile/.

Vijaya Laghubitta Bittiya Sanstha Limited (VLBS) – Project 1

IMPROVING LIVELIHOODS SITUATIONS OF DISADVANTAGED COMMUNITIES THROUGH ACCESS TO FINANCE

(The project has successfully concluded)

Background

One of the major components of the UKaid Sakchyam Access to Finance Programme (Sakchyam) is to work with Nepal’s Microfinance Institutions (MFIs) to make financial products and services affordable, available and accessible to the disadvantaged populations of the country. Millions of Nepalese still lack basic access to finance, especially in Karnali and Province 5 & 7 due to difficult topography and lack of physical infrastructure. In the face of these challenges, Sakchyam has worked closely with MFIs to resolve the problem of lack of formal financial institutions and financial inclusion – focusing on areas of branch expansion, product and service development, alternative delivery channels, capacity building and financial literacy. Most interventions are set in priority districts where better financial services have the potential to empower rural communities by making them financially independent.

The Problem

The problem of topography and lack of institutional infrastructure extends beyond the difficulty of providing financial services – it means people are unaware of the possibilities of these services in the first place. In Rolpa, most young men opt for foreign employment and 74 percent of girls get married as adolescents making them financially reliant on their families.[1] In families where agriculture is the main source of income (about 93 percent households) in Salyan, only about 20 percent households had agricultural credit. This means that there are limited financial services available, in which most do not cater for the needs of the rural population. Furthermore, in all of the districts VLBS aimed to open its branches, the population served per branch is much higher than the national average of 8,960, highlighting the need for more branches in these areas.[2]

The Solution

Sakchyam partnered with Vijaya Laghubitta Bittiya Sanstha (VLBS) in March 15, 2015 to open five new branches in Dang, Salyan, Pyuthan, Rolpa and Rukum districts. The project was undertaken to provide entrepreneurship training prior to giving out loans and implement financial literacy initiatives by adopting Mobile Technology and Community Radio Programmes making it one of the first MFIs to do so. The initial aim was to reach about 4,000 beneficiaries with the financial product and services.

To effectively address the existing problems, the Sakchyam and VLBS partnership intended to both financially educate the population of these regions (mainly poor and disadvantaged people – particularly the Dalits, Janajati, Women and other Minorities) and then provide the services necessary to unleash their full potential. To make the people financially literate, mobile and FM radio programmes were used. VLBS also employed the ‘Be with your client’ approach which used SMS and voice messages as a method to engage with clients. Through this partnership, for the very first time in Nepal, Interactive Voice Response (IVR) technology was used for financial literacy. Additionally, to improve the connectivity of branches, an enhanced MIS system was used to link branches to their head office.

The Result

Sakchyam’s partnership with VLBS has been successful on various fronts. Up to 2017, the partnership enabled the opening of eight new VLBS branches, three more than targeted. From December 2017 to March 2018, the total number of loans disbursed has increased from NPR 764 million to NPR 818 million and collecting NPR 55 million in deposits. In the last few months before completion of the project with Sakchyam involvement, in February 2018, VLBS has been able to achieve the targets it had set at the beginning of the project.

Lessons Learnt and Sustainability

  • IVRs are an efficient and cost-effective medium to transmit short financial education voice messages. The VLBS IVR initiative has been replicated by eight Sakchyam partner MFIs, reaching over 22,000 individual clients.
  • Before broadcasting IVR messages, MFI needs to inform their clients in advance.
  • Radio has been adjudged to be the most effective medium of delivering financial literacy in rural areas. But, IVR and radio jingles also need to be enhanced by visuals such as flip charts, posters and drama.
[1] “District Profiles « Sakchyam Programme.” Sakchyam Programme, sakchyam.com.np/work-area/district-profile/
[2] “District Profiles « Sakchyam Programme.” Sakchyam Programme, sakchyam.com.np/work-area/district-profile/.

Janautthan Samudayic Laghubitta Bikash Bank

INCREASING RURAL ACCESS TO FINANCE FOR PRODUCTIVE ENERGY USE

Background

According to a 2013 report published by the IFC, 76.1% of employment in Nepal is generated through Small and Medium Enterprises (SME). The same survey shows that 68.8 % of SMEs identify electricity supply as being a major constraint on productivity. Owing to lack of finances and reliable energy, entrepreneurs are finding it difficult to make investment decisions for business start-ups and the expansion of SMEs. Existing SMEs face financial challenges to purchase machinery and new technology. So, they instead utilize manual labor which is slower and reduces productivity. Using costly energy sources such as fossil fuel to run machinery is not viable for SMEs, consequently their hours of operation are limited, or they must adjust work time based on grid power availability.

Challenges 

Though the use of climate resilient technologies help people reap the benefit in many ways, due to lack of financial resources, marginalized people are not in the position to properly utilize those technologies. In addition, formal financial services offered are inadequately reaching the marginalized people and their SMEs. Due to this, marginalized and disadvantaged populations tend to rely on informal lending networks and end up paying a higher rate of interest. In order to address this issue, it is important that Banks and Financial Institutions (BFIs) develop a credit financing designed to cater to rural population’s needs and narrow the financial need for energy disparity while ensuring affordability.

Sakchyam’s Interventions

With UKaid Sakchyam Access to Finance’s (Sakchyam’s) support, Janautthan Samudayic Laghubitta Bikash Bank Ltd (Janautthan) aims to provide necessary financial services to the marginalized group to help them purchase appropriate climate resilient technologies. The project will provide a new credit facility for climate resilient technology for SMEs and households which can be used to create or expand businesses and income generation activities (IGAs). In addition, Janautthan will also link their financial products with insurance on credit products to reduce the risk to both clients and MFIs. Winrock International, a pioneer Climate Resilient Energy promotor in Nepal, is the technical partner of the project.

With the help of Sakchyam, Janautthan plans to launch the project in six districts namely Kanchanpur, Kailali, Bardiya, Dang, Rupandehi and Kapilvastu and open three new branches in Kanchanpur, Bardiya and Kapilvastu districts. The project will design new financial product for Climate Resilient Technologies, assess business opportunities of energy financing specifically for SMEs, orient and train the staff and its members on the new products. They also plan to conduct training on financial literacy which will empower entrepreneurs and aid in their business development. They plan to replicate the project activities in other branches to make the new product viable.

Likely Impact

Investing in SMEs for productive uses of energy is anticipated to improve rural economy by increasing incomes, jobs, and the demand for financial services. The availability of finance for climate resilient products will not only accelerate the productivity and profitability of households and SMEs, but it will also increase their resilience to climate change by increasing incomes, improving the efficient use of available energy, and decreasing dependency on wood and fossil fuels. During the project period, Janautthan is expected to reach 7,500 beneficiaries with new and existing financial products. They have also estimated to serve 1,000 SMEs beneficiaries during the project period.

As of June 2018 Janauthhan has,

  • Reached more than 700 clients through financial services
  • Disbursed more than 500 loans valued at NPR 44 million
  • Designed Energy Loan in Sakchyam’s Technical Assistance and disbursed over NPR 1 million to more than 140 clients for their SMEs like furniture, irrigation, poultry and hotels
  • Partnered with local venders to supply affordable and reliable Energy technologies to the clients

Nerude Laghubitta Bikas Bank

ENTERPRISE DEVELOPMENT AND DIGITALIZATION OF MICROFINANCE SERVICES

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, disadvantaged groups (DAGs), and women to formal financial products and services in order to enable them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are critical. Sakchyam believes a paradigm shift is needed in the microfinance sector with the adoption of new technology, helping it achieve organisational efficiency and expand its outreach in a more self-sustainable manner.

Challenges 

In recent years, as number of microfinance institutions (MFIs) has sprouted in Nepal, they are also reaching new geographical areas and a new set of clients. MFIs have been struggling to find client with adequate skills to start/run a business and as a result it has been difficult to maintain the utilisation of loan. MFIs now need to focus in providing/linking skill training to their clients. Due to inadequate skills, loan offered by MFIs are either spent in unproductive activities or the use of loan has not generate optimum revenue which a skilled entrepreneur could earn. This has alerted MFIs to provide or link with skill training with the loan availed by their clients.

Sakchyam’s Intervention

In an effort to provide skills-based training to MFI clients, Nerude Laghubitta Bikas Bank (Nerude) has partnered with Sakchyam to launch “Enterprise Development Service (EDS) Sakchyam Loan” to its clients. EDS is a unique feature which Nerude plans to initiate where support is provided to the under-privileged population to lift them out of poverty. Through this partnership, in order to provide EDS training services, Nerude will issue coupons with loans to utilize training services and the value of the coupon without interest is paid to Nerude with the loan instalment. They are planning to start sustainable EDS service in seven districts of Nepal – Jhapa, Illam, Sunsari, Sarlahi, Rupandehi, Kapilvastu and Arghakhanchi. Nerude will adapt/replicate a successful EDS program that Berendina Microfinance, a MFI based in Sri Lanka, has been successfully implementing in Sri Lanka. This service is expected to help Nerude clients excel in micro-enterprises and agriculture.

Similarly, Nerude also plans to equip their loan officers with tablets to automate their manual transactions. It will help increase efficiency of clients while reducing the possible human errors while conducting centre meetings. These tablets will also help Nerude in delivering financial literacy. Taking an innovative approach to delivering financial education, with Sakchyam’s support, Nerude has introduce Buzz Nerude – a mobile platform set in a vehicle to disseminate messages in different places. Moreover, Nerude also plans to introduce mobile banking system to notify its clients on the financial transactions.

Likely Impact

Nerude aims to reach more than 3,400 clients with EDS Sakchyam Loan over a 3-year project period. During the project period, Nerude will also establish three new branches in Rupandehi, Kapilvastu and Arghakhanchi with the support of Sakchyam. In addition, Nerude will also serve other beneficiaries through different non-financial services. Nerdue plans to reach more than 29,000 beneficiaries via new and revised financial literacy program.

As of June 2018, Nerude Microfinance has,

  • Introduced “Buzz Nerude” – a mobile platform set in a vehicle to disseminate FL messages.
  • Disbursed over NPR 12 million in loans
  • Launched EDS activity
  • Launched tablet banking from a branch; planning to expand in 16 EDS implementing branches

Kisan Cooperative – Project 2

KISAN RURAL DIGITAL BANKING

Background

Connecting the rural poor, disadvantaged groups (DAGs), youth and women to formal financial services to enable them with choices to save, borrow, invest, and earn is one of the core objectives of UKaid Sakchyam Access to Finance Programme (Sakchyam). While enhancing access to finance for people living in the remote and inaccessible regions is the immediate goal of Sakchyam, its replicability and sustainability long-term are key. Thus, Sakchyam promotes sustainable, efficient, and tailored products, services and intervention that create a win-win situation for both the service provider – Financial Institutions and their beneficiaries (clients).

Challenges

Microfinance operation is becoming competitive and costly day by day due to high cost of fund and low profitability. Keeping operation cost low and efficient delivery of financial services have become major challenges to the microfinance institutions. Manual operating system, inefficient MIS, large number of human resource involved in the operation, time consuming transaction management and lack of innovation in the product and services are few factors for high cost and low profitability for the MFIs.

Sakchyam’s Intervention

Kisan Bahuudyasiya Sahakari Sanstha Limited (KBBSL) piloted tablet banking by implementing “Kisan Tablet Banking for Enlargement of Microfinance” project with Sakchyam. The success of the first project encouraged KBBSL to replicate and scale up the digital service delivery channel for entire operation offering better financial services to its client.

Through this project KBBSL plans to conduct all their center meeting transactions with the use of tablet. They also plan to establish Point of Sales (PoS) in all of its branch and introduce cards to ensure instant cash for the microfinance clients.

Likely impact:

  • Convert 2,400 center’s transaction paperless by use of tablets
  • 7,000 new beneficiaries to be enrolled and 50,000 clients to be benefitted with the introduction of digital service delivery channel (tablet banking)
  • NPR 423 million loan to be unlocked
  • More than 600 business loans to be promoted
  • 5,500 clients to be provided with financial literacy

Vijaya Laghubitta Bittiya Sanstha Limited (VLBS) – Project 2

IMPROVEMENT LIVELIHOODS SITUATIONS OF DISADVANTAGED COMMUNITIES THROUGH ACCESS TO FINANCE
Background

One of the major components of UKaid Sakchyam Access to Finance Programme (Sakchyam) is to work with Nepal’s Microfinance Institutions (MFIs) to make financial products and services affordable, available and accessible to the disadvantaged populations of the country. Millions of Nepalese still lack basic access to finance, especially in Karnali and Province 5 & 7 due to difficult topography and lack of physical infrastructure. In the face of these challenges, Sakchyam has worked closely with MFIs to resolve the problem of the lack of formal financial institutions and financial inclusion – focusing on areas of branch expansion, product and service development, alternative delivery channels, capacity building and financial literacy. Most interventions are set in priority districts where better financial services have the potential to empower rural communities by making them financially independent.

Challenges

The problem of topography and lack of institutional infrastructure extends beyond the difficulty of providing financial services – it means people are unaware of the possibilities of these services in the first place. In Rolpa, most young men opt for foreign employment and 74 percent of girls get married as adolescents making them financially reliant on their families.[1] In families where agriculture is the main source of income (about 93 percent households) in Salyan, only about 20 percent households had agricultural credit. This means that there are limited financial services available, in which most do not cater for the needs of the rural population. Furthermore, in all of the districts VLBS aimed to open its branches, the population served per branch is much higher than the national average of 8,960, highlighting the need for more branches in these areas.[2]

Sakchyam’s Intervention

To effectively address the existing problems, the Sakchyam and VLBS partnership intended to both financially educate the population of these regions (mainly poor and disadvantaged people – particularly the Dalits, Janajati, Women and other Minorities) and then provide the services necessary to unleash their full potential. To make the people financially literate, mobile and FM radio programmes were used.

Impact:

As an extension of the first project, VLBS opened four branches in the remote location to expand access to financial services as part of its second project with Sakchyam. These branches are expected to help low-income clients in rural area to access required financial services and start entrepreneurial activity. Up to June 2018 VLBS has,

  • Reached more than 2,800 beneficiaries
  • Disbursed more than 295 million NPR loan to clients
  • Collected more than 17 million NPR as saving
[1] “District Profiles « Sakchyam Programme.” Sakchyam Programme, sakchyam.com.np/work-area/district-profile/  [2] “District Profiles « Sakchyam Programme.” Sakchyam Programme, sakchyam.com.np/work-area/district-profile/.

Sahara Nepal – Project 2

TECHNOLOGY ENABLED POULTRY AND GOAT VALUE CHAIN FINANCING

Background

UKaid Sakchyam Access to Finance Programme is committed connecting the rural poor, DAGs, and women to formal financial products and services in order to enable them with choices to save, borrow, invest, and earn. Appropriate design of financial products and services to meet specific needs at different stages of the Value Chain of the clients’ businesses is one of the pre-requisites for meaningful access to finance, especially for enterprising clients. Sakchyam believes that the microfinance sector with innovative and client need based products such as Value Chain Finance can have visible positive impacts on clients’ socio-economic status and also leads the institution towards its mission with dedicated clients, quality portfolio, improved  competitiveness and sustainability.

Challenges

Despite a mission to reduce poverty, many of the microfinance institution’s (MFI’s) clients are living in subsistence economy even after a long time affiliation to them. Lack of appropriate products and services to support on significant increase on the clients’ income, employment and professionalism is one of the various causes of this situation. The clients mostly affiliate with MFIs with hope to improve their income and livelihood through financial access and exposures. On the other hand, MFIs too seek their client utilize the products and services, get benefit, and hence become disciplined and loyal to the institution. But lack of suitable products and services to match their needs demotivates especially the enterprising clients so that they may affiliate with many similar institutions in pursuit of desired products or limit their aspirations at subsistence level. As a result, despite MFI’s programmes and hard effort, their strategy fails to achieve desired results that may lead to insignificant improvement in outreach, portfolio, efficiency, effectiveness and sustainability.

Sakchyam’s Interventions

Sahara Nepal Saving and Credit Cooperative Ltd. (Sahara), registered at Jhapa District Cooperative Office, is one of the largest cooperatives in Nepal. It is implementing another project ‘Scaling up Access to Financial Products and Services in Rural Nepal’ with Sakchyam’s support to open new branches; develop/refine innovative products; tablet banking and comprehensive financial literacy. This project is specifically targeted to establish sustainable value chain systems for commercialization of goat and poultry farming using latest efficient technologies in each of the six work districts of Sahara namely Jhapa, Ilam, Sunsari, Morang, Panchthar and Udayapur in technical partnership with Sahara NGO and Heifer International. For this, the project is developing 10 and 15 pocket areas of poultry and goat respectively in 101 clusters. It aims to support more than 14,900 SME clients including poultry and goat farmers, processors and suppliers. Fifty veterinary health workers will also be trained and deployed to deliver their services. Existing Commercial Agriculture Loan, new SME loan, Kisan Saving and Entrepreneur Saving products will be developed to meet the entrepreneurs’ needs. This will unlock over NPR 3,000 million loan and mobilize NPR 510 million deposits. The project also aims livestock insurance by 14,000 clients and offer training/exposures to 20,000 clients. Eight resource centres with laboratory, 500 improved fresh houses, and 8 market pavilions will be established in suitable locations. The entire project activities, beneficiaries, market and other value chain actors will be linked with mobile application to facilitate automatic dealing on their wards. Value Chain Financial literacy campaigns through various modes such as audio-visuals, apps, meetings, radio etc. will reach to 20,000 people to support improving financial behaviour of the clients and other stakeholders. Sahara plans to reach 60% rural, 35% poor, 95% women, and 40% youths among the beneficiaries.

Likely Impact

Despite proposal to implement in 6 districts, as the project is new and challenging, it was approved to pilot it only in one district, Jhapa for the first year. This has limited the targets of the project as well. As of June 2018 Sahara Nepal has,

  • Prepared detailed implementation plan for the pilot period
  • Established office, hired 17 staff with 8 technical on VC
  • Signed contract with Sahara Nepal and Heifer
  • Prepared project information package
  • Given orientation to project staff, board of directors, management, area and branch on project activities
  • Conducted baseline survey on goat and poultry value chain
  • Developed linkages with 4 municipalities for hygienic meat promotion
  • Identified 4 pocket areas (Bahundangi, Shantinagar, Arjundhara, Shivasathasi) and 11 clusters[1] to pilot goat/ poultry value chain financing.
  • Prepared curriculum and conducted ToT on Basic Animal Husbandry Training to 23 technical person
[1] Pocket areas – Bahundangi, Shantinagar, Arjundhara, Shivasathasi Clusters: Bahundangi area – 1. Baudhamode and Gadagalli, 2. Telpani and Bahuban; Shantinagar area – 3. Ayabari and Kharkhola, 4. Barne/Sunmai and Bhotetar; Arjundhara area – 5. Shisne and Shadhutaar, 6. Kalisthan and Saalbadi, 7. Khudunabari and Beltaar, 8. Jukekhaadi and Bhangbaari and; Shivasathasi area – 9. Srijana toll and Dudhe, 10. Chillagadh and Sirijung and, 11. Domukha and Sukedaangi

Nepal Women Community Service Centre (NWCSC) – Project 2

PROMOTING ACCESS TO FINANCE THROUGH EDS AND TABLET BANKING SERVICES

Background

Number of Microfinance Institutions (MFIs) have sprouted in recent years in Nepal. This increase in number has helped increase the financial access while there are instances of multiple borrowing and over-indebtedness as well. Number of additional players in MFI sector haven’t increased the innovation and diverse ranges of financial and non-financial services tailored to need of clients.

Challenges

With the increased competition in MFI industry, they have been struggling to find client with adequate skills to start/run a business and as a result it has been difficult to maintain the utilisation of loan. MFIs now need to focus in providing/linking skill training to their clients in addition to currently offered financial services. Due to inadequate skills, loan offered by MFIs are either spent in unproductive activities or the use of loan has not generate optimum revenue which a skilled entrepreneur could earn. This has alerted MFIs to provide or link with skill training with the loan availed by their clients. Moreover, clients are also struggling to find proper market to sell their produce which discourages to start/up-scale businesses.

Sakchyam’s Interventions

UKaid Sakchyam Access to Finance Programme has supported Nepal Women Community Service Centre (NWCSC), a financial non-government organization (FINGO) to expand Enterprise Development Service (EDS) in its branches located in Dang, Rolpa, Rukum, Salyan and Pyuthan. Through this partnership, NWCSC will also introduce Tablets to digitize its operation and link with the EDS operation. NWCSC will also be working with other agencies to create market linkages. To align their EDS beneficiaries with improved financial services, relevant financial literacy campaigns will also be organized. NWCSC will take technical support from Berendina Microfinance, which has pioneered EDS activity to MFI clients in Sri Lanka.

Likely Impact

Sakchyam’s support to NWCSC in its various initiatives should see improved skills of new and existing entrepreneurs along with financial services to start and up-scale their business. NWCSC’s understanding of the needs of beneficiaries in the region coupled with the EDS and Tablet services will help boost economic activity and help launch multiple small enterprises as a result of the financial literacy and skill training. Through this project, NWCSC will offer micro-enterprise loan along with other auxiliary support to 6,000 beneficiaries. NWCSC has also committed to provide skill training to some 3,300 beneficiaries. In addition, NWCSC will launch tablet banking in all 22 branches. Use of tablet is also expected to help track the production of EDS clients.

Chhimek Laghubitta Bittiya Sanstha Ltd. – Project 2

INCLUSIVE MICROFINACE THROUGH DIGITIZATION OF BUSINESS PROCESSES

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) is committed to connecting the rural poor, disadvantaged groups (DAGs), and women to formal financial service provider in order to enable them with choices to save, borrow, invest, and earn. While enhancing access to finance for people living in remote and inaccessible regions is an urgent need, efficiency and sustainability of doing so are critical. Sakchyam believes a paradigm shift is needed in the microfinance sector with the adoption of new technology, helping it achieve organisational efficiency and expand its outreach in a more self-sustainable manner.

Challenges

Currently, microfinance in Nepal is considered expensive due to high operation and monitoring costs. The sector lacks a sophisticated management information system (MIS), let alone other technological innovations that can reduce the costs of taking financial services to remote, hard-to-access areas. Traditional business practices by microfinance institutions (MFIs), has contributed to high cost of operation and inefficient services to its clients. Illustratively, all loan and savings transactions are conducted manually at the centre meeting. This leaves little to no time for business expansion and client education. Additionally, loan officers have to spend significant time traveling back and forth to a branch or home office and entering the data manually at the branch. This decreases productivity and has made operation inefficient resulting into losing comparative market.

Sakchyam’s Interventions

Chhimek Laghubitta Bittiya Sanstha Ltd. (Chhimek) is at the forefront of using mobile-based technology with its core banking system (CBS) to extend its services to all over Nepal. After successful implementation of first project “Digital Mahila – Digital Women Channel Partners for Gender Inclusive Microfinance Services” with Sakchyam; Chhimek plans to scale up digitization of business process for its entire business under this second project – “Inclusive Microfinance Through Digitization of Business Process” in partnership with Sakchyam.  Chhimek will expand its business network by the use of technology – by mobilising Digital Mahilas and through the establishment of Point of Sales (PoS) Services.

Likely Impact

The project aims to;

  • Reach 400,000 clients along with 48,661 new clients (100% women)
  • Unlock total loan of NPR 1 billion and mobilize NPR 471 million in deposits
  • Reach 112,000 clients through digital financial literacy campaigns