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 Bikash Bank Ltd.

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

Background

UKaid 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 (MFI) sector with the adoption of new technology, helping it achieve organisational efficiency and expand its outreach in a more self-sustainable manner.

Challenges Faced

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 start-up 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, 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 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. This decreases productivity and morale. New loan applications often require a visit to the branch and a laborious paperwork process. For many potential clients, they’ll often forego the extra effort as a local moneylender offers money immediately. Technology to provide alternative delivery channels has the ability to tackle these challenges head on.

Sakchyam’s Interventions

Chhimek Laghubitta Bikash Bank 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 the Mid- and Far-Western Development Regions (MFWDRs). With Sakchyam’s support, it has launched a female agent banking programme to efficiently increase its outreach. The women recruited include clients of Chhimek who are able to reach other women, understanding their needs and challenges.

An agent of Chhimek are 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 system online. Every month, branch managers and M&E officers visit her to ensure compliance with Standard Operation Procedures (SOPs) and provide her any onsite support needed. Any request for loan products exceeding NRP 50,000 will be recommended to the nearest branch.

Likely Impact

The project aims to deploy 104 women to become agents of the microfinance development bank (MFDB), using technology to significantly reduce the costs of outreach and monitoring. The agents will distribute numerous savings and lending products to more than 24,000 new female clients over the 3-year project period, unlocking over NPR 613 million in loan funding. Of these clients, 60% will be youth and come from marginalized communities, and over 1,000 new small and medium enterprises (SMEs) will be served.

Latest Updates: As of December 2017 Chimmek has,

  • Selected and trained 108 Digital Mahilas as against the target of 104
  • Operated 164 Digital Points and served 21,517 clients through 8 branches
  • Opened two new branches in Dadeldhura and Kailali to better serve both its agents and clients
  • Reached 19,137 beneficiaries through various financial literacy initiatives such as PGT and centre meetings
  • Disbursed loans amounting to more than NPR 630 million
  • Deposited more than NPR 728 million 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

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. 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 (MFIs) and their beneficiaries (clients). Kisan Bahuudyasiya Sahakari Sanstha Limited’s (KBBSL) ‘Kisan Tab Banking for Enlargement of Microfinance’ project meets these objectives and promises to offer innovation through technology to the institution and industry.

Challenges Faced

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 administrative costs. It is very human resource intensive. Most 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 will support KBBSL, a multipurpose cooperative society licensed by Nepal Rastra Bank for conducting limited banking activities, to extend microfinance services in order to enhance financial access in remote parts of Kailali district. Moreover, KBBSL will be transforming its financial transactions recording system through tablets which was previously done manually. Transactions recorded in tablet will get automatically updated in their central MIS which will minimize time and cost for the institution and consequently, benefit the clients. (Long term, KBBSL seeks to hire local agents and equip them with tablets to offer financial and non-financial (e-ticketing, fast remit & mobile balance transfer) services.) With Sakchyam’s support, KBBSL will be reviewing its current product offerings and looking for ways in which to innovate. Finally, KBBSL will be prioritising financial literacy in collaboration with Sakchyam and exploring new ways to deliver such to clients.

Likely Impact

The project will increase financial inclusion in the intervention areas and transform the centre meeting process, as tablets will replace the manual way of recording transactions in the field. This should reduce time, costs, and human resources that will benefit the institution as well as the clients.  KBBSL is one of the first pioneers of this technology, so they will serve as an example to the rest of the industry. Similarly, an increased focus on financial literacy is expected to increase client protection and responsible finance.

Latest Updates: As of December 2017, KBBSL has,

  • Launched 6 branches serving more than 7000 beneficiaries
  • Disbursed NPR 133 million in loans and mobilised NPR 35 million in savings
  • Reached 13,839 beneficiaries through financial literacy programme

Kisan Microfinance

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. 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 delivery channels of microfinance (MFI) sector. This sector should resort to advanced technology to achieve organisational efficiency and expand its outreach in self-sustainable manner.

Challenges Faced

Microfinance is considered an expensive service due to its high operation cost. 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 is one of the partners of Sakchyam 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 lending system and Mobile Banking are phenomenal interventions proposed by KMF under “Sakchyam Kisan Rural Microfinance” project. These interventions are expected to bring transformational change in traditional way of carrying out microfinance services that is labour intensive and heavily dominated by and contingent on contextual factors such as available infrastructure, geographical integration and scattered settlements. In addition to that, the project also ensures access to remittance services, insurance products and financial literacy program that would lead to self-employment opportunities and improved livelihood of the deprived people.

Likely Impact

The project will provide financial services to 25,000 members over the period of three years. It is likely to set milestone in use of tablet and mobile technology in microfinance sector to bolster organisational efficiency and enhance outreach of the institutions to un/underbanked poor and vulnerable people living in the remote regions of the country. The empowered collection centres by this project will prove that microfinance services can go beyond brick and mortar physical branch and become self-sustainable without regular involvement of their staff by exploiting existing social capital in the community.

Latest Updates (Project 1): As of December 2017 Kisan Microfinance has,

  • Established 16 new branches
  • Reached over 12,000 beneficiaries
  • Established 104 tab points serving 8,246 users
  • Disbursed NPR 579 million in loans and collected NPR 68 million in savings

Latest Updates (Project 2): As of December 2017 Kisan Microfinance has,

  • Established 6 new branches
  • Reached over 2,381 people
  • Disbursed NPR 26 million loans and collected NPR 4 million in savings

Mahila Sahayatra

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

Background

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, UKaid Sakchyam partners with financial institutions who are committed to downscaling, innovation, and sustainability.

Challenges Faced

In the Mid-Western Development Region (MWDR) 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). It has been providing microfinance to targeted poor households in the Central Development Region and the MWDR. MS has partnered with Sakchyam to establish five new branches to serve marginalized communities in 25 VDCs in Rolpa, Rukum, Salyan, and Surkhet districts in the MWDR. With consortium partner White Lotus Centre (WLC), MS will identify the target communities and introduce entrepreneurial capacity building activities such as training, exposure visits, market/ trader linkage, etc.

In addition to its existing products and services, MS will introduce the following new loan products: Mechanisation, Climate Finance (Alternative Energy) and Education, aiming to provide credit for the modern agriculture tools; reduction of carbon emission; and higher education of clients’ children. MS will also integrate 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 animated films, television programs etc. and other methodologies such as case studies, posters, and pamphlets will be used to make financial literacy interesting and effective. In addition to revamping its Pre Group Training (PGT), MS will introduce short sessions during monthly centre meetings on different aspects of financial literacy such as budgeting, savings, loan features, and enterprise development.

Likely Impact

Through its Sakchyam-funded project, MS aims to reach 10,000 new clients and create at least 5,500 sustainable Micro, Small and Medium Enterprises (MSMEs). Out of the total number of new clients, 90% of them will be women, 65% from indigenous groups/Janajatis, 24% Brahmin and Chhetris and 11% Dalits.

Latest Updates: As of December 2017, Mahila Sahayatra has,

  • Launched all 5 branches, reaching 3,570 beneficiaries
  • Disbursed NPR 240 million and collected NPR 99 million in savings
  • Reached 3,728 beneficiaries through financial literacy initiatives

NEFSCUN

Increased Capacity of Financial Cooperatives and Linkage with Wholesale Lending:
Enabling Cooperatives to Serve Members in Remote Areas with Increased Capacity and Adequate Resources 

Background

UKaid Sakchyam is committed to connecting rural poor, Disadvantaged Groups, 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 critical. Cooperative institutions have played an important role in reaching remote and inaccessible areas of Nepal where most banks and financial institutions do not have a presence. Sakchyam believes a paradigm shift is needed in the microfinance sector to strengthen the capacity of such cooperatives 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 access to financial products and services for rural poor communities. Currently, microfinance in Nepal is considered expensive due to high start-up and monitoring costs. Although cooperatives are providing such services, they are doing so with limited institutional capacity and financial resources. Most of these cooperatives working in remote areas undertake credit services through the savings of their members; this does not meet the credit need of their members. There are several wholesale lending financial institutions as well as funds available to MFIs from commercial banks through Deprived Sector Lending (DSL) for these cooperatives.

However, due to their poor institutional capacities, wholesale lending institutions are not channelling their funds to these cooperatives.

Nepal Federation of Savings and Credit Cooperatives Unions Limited (NEFSCUN) has its own inter-lending program through which it provides wholesale loans to cooperatives. But as smaller cooperatives have limited capacity and linkages with NEFSCUN in Kathmandu, these cooperatives are not able to access resources from NEFSCUN itself. With limited reach in remote areas, NEFSCUN too has its own challenges for reaching out to these cooperatives.

Sakchyam’s Interventions

NEFSCUN is the apex institution for Nepal’s savings and credit cooperatives movement and is registered with the Department of Cooperatives. It has its own training units and has been implementing promotional activities for savings and credit together with inter lending program since the last two decades. With UKaid Sakchyam’s support, it will launch an “Increased Capacity of Financial Cooperatives and Linkage with Wholesale Lending” program to improve its outreach efficiency. NEFSCUN will add two field offices, in Dang and in Dadeldhura, to reach cooperatives that have not been able to access loans from NEFSCUN’s inter lending programs and also cooperatives that have already borrowed from NEFSCUN but have been unable to diversify their borrowing through other wholesale lenders.

Likely Impact

NEFSCUN will increase its outreach to 30,000 new cooperative members by strengthening the institutional capacity of 200 cooperatives over the project’s 3-year duration. With increased institutional capacity, these cooperatives will be able to access loans from wholesale lending institutions including NEFSCUN and will on-lend to their members more than NPR Six billion in remote outposts of Kailali, Dadeldhura, Doti, Baitadi, Kanchanpur, Rolpa, Pyuthan, Dang, Rukum and Salyan districts.

Latest Updates: As of June 2017, NEFSCUN have,

  • Established both field offices in Dang and Dadeldhura
  • Completed preliminary capacity analysis for all 200 SACCOS;
  • 30 SACCOS received portfolio management training and 25 SACCOS received TOT on financial cooperative management
  • 17 SACCOS received whole sale lending; 39m NPR loans disbursed.
  • 7 SACCOS adopted NEFSCUN MIS.

Project completed Aug ’17.

Nepal Insurers’ Association

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 5% 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 Prudential Insurance Company Ltd. has been appointed as the pool manager. A management team at NIA and Prudential 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.

Nepal Women Community Service Centre

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 Faced

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 will support 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. The partnership will open 5 new NWCSC branches in those districts which will target women and marginalized groups such as DAGs and households affected by the civil war. The branches will continue 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, will be launched. NWCSC will partner with Global IME Bank Limited to open Branchless Banking touch points to expand their financial services. The organization will also make assessments at the end of the 3-year duration of the project to gauge improvement in locals’ livelihoods by using indicators such as improved lifestyle, access to health facilities, and education, among others.

Likely Impact

Sakchyam’s support to NWCSC in its various initiatives should see 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 will help 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 will be a step towards helping the region recover and move into a more sustainable and secure future.

Latest Updates: As of December 2017 NWCSC has,

  • Established 10 new branches reaching 8,274 beneficiaries
  • Disbursed 8,696 loans valued at NPR 465.9 million and collected NPR 82.6 million in savings
  • Designed and launched Migration loan product; disbursed 300 migration loans valued at NPR 35 million and performed 7,421 remittance transaction valued at NPR 234million
  • Established Client Grievance Mechanism to comply with Smart Campaign, received training on CPPs, conducted self-assessment of CPPs, endorsed Smart Campaign
  • Started piloting Berendina model to integrate skill training for micro-enterprise loan

NMB Microfinance

ENABLING FINANCIAL ACCESS ON RURAL TOURISM

Background

UKaid 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. UKaid 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 Faced

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 (NMB MF) registered as a Company, received its banking license in January 2012, from Nepal Rastra Bank under the Bank and Financial Institution Act 2006.  It was established with core mission of inclusive banking. NMB MF is a subsidiary of NMB Bank. With Sakchyam’s support, NMB MF has launched “Enabling 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.

Likely Impact

Over a two-year period, NMB MF will increase its outreach to serve more than 7,000 individuals, all who will be women and 30% of whom will be from DAGs. It will also create at least 3,500 sustainable MSMEs. To do this, it will introduce Sakchyam Udyamsil Karja, a new financial product for micro-entrepreneurs. In addition it will also introduce mobile banking to clients including launching a Point-of-Service (POS) machine system for rural tourism entrepreneurs to accept cards. In doing so, tour operators hope to be able to increase the amount of transactions received. NMB MF will also develop a comprehensive financial literacy programme paired with skills development training on tourism and hospitality.

 Latest Updates: As of December 2017 NMB Microfinance has,

  • Opened 2 branches and 6 sub branches
  • Reached 2,301 beneficiaries
  • Disbursed over NPR 204 million in loans and NPR 11.9 million in savings have been mobilised

Nirdhan Uthan Bank Limited (NUBL) 1

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

Background

UKaid 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 Faced

Financial products and services are often designed to cater to urban and semi-urban populations. People of ‘topographically-difficult’ districts, mostly in mid and far-western regions, 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

Nirdhan Utthan Bank Limited (NUBL) will expand access to finance in Darchula, Mugu, Humla, Bajhang and Accham districts by establishing 5 new branches in rural and remote VDCs in those districts where such services are currently unavailable. They will also adopt 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. NUBL will provide financial education and entrepreneurship training prior to giving out loans to ensure productive use of loans to improve household economy. In order to stretch the financial frontier in remote areas, NUBL is adopting innovation by introducing Self Reliance Group Approach (SRG) where SRG becomes a financial intermediary between NUBL and clients. To expand access to finance rapidly in those areas NUBL will also use SRG as their agent for financial transaction using POS similar to branchless banking unit.

Likely Impact

NUBL is aiming to reach more than 5000 Households with loan and insurance products in five years from their five new branches (4,620 HHs during Sakchyam’s support); covering 25000 HHs with POS device services. Apart from savings, credit and insurance, NUBL will also offer remittances services to all members and non-members in the areas for which they partnering with over 16 remittance companies.  The target group will be disaggregated into 99% women, 40% youths and more than 43% from Disadvantaged Groups. These targets will benefit from loan capital to be created during the project period of NPR 177 million.

Latest Updates: As of December 2017, NUBL has,

  • Established all 5 proposed branches reaching 4,250 beneficiaries
  • Disbursed NPR 310 million in loans and collected NPR 61.5 million in deposits
  • Reached 4,223 beneficiaries through financial literacy
  • Got approval from NRB to rollout in additional 18 branches. Roll out in other branches will be replication of Sakchyam’s support

Nirdhan Uthan Bank Limited (NUBL) 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 the 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 they need) is considered as higher than MFI’s common loan sizes 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 Faced

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. NRB 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

NUBL will expand access to finance to such missing middle in its 25 existing districts with designing and serving the SME loans to such clients with appropriate enterprise training and financial literacy interventions. NUBL will provide financial education and entrepreneurship training prior to giving out loans to ensure productive use of loans to improve household economy.

Likely Impact

NUBL will either provide training itself or link the clients with training available at the district levels. With this project NUBL will reach 8,091 SMEs and disburse NPR 1.6 billion SME loans.  Apart from savings, credit and insurance, NUBL will also offer remittances services to all members and non-members in the areas for which they partnering with over 16 remittance companies.

Latest Updates: As of December 2017, NUBL has,

  • Reached more than 11,000 beneficiaries
  • Disbursed NPR 1.2 billion in loans and collected NPR 1.5 billion in deposits
  • Insured 14,088 clients
  • Reached 2,906 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 Rural Microfinance Development Centre (RMDC) to increase financial access in Sakchyam’s working districts. RMDC is an apex institution, mandated to provide wholesale lending and build the institutional capacity of MFIs in Nepal. RMDC works with leading MFIs including MFDBs, FINGOs, and cooperatives (single purpose and multi-purpose), and is one of the prominent wholesale lending organizations in the country. Its partners’ outreach constitutes nearly 70% of the entire microfinance industry. Currently, RMDC has only head office in Kathmandu with limited human resources, making it difficult to reach remote and inaccessible areas like Karnali, and it is challenging for small MFIs to travel to Kathmandu for receiving lending and capacity building services. 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. At the same time, RMDC will on-lend 1 billion NPR to partner MFIs, which in turn, will be channelled to their members/clients to establish income-generating activities.

Objectives of Partnership

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. This partnership is also expected to enhance the capacity of MFIs by providing regular training and IT support to automate their manual transaction system. This holistic intervention will help make paradigm shifts in the microfinance industry.

Sakchyam’s Interventions

Sakchyam’s support will enable RMDC to open two separate branchl offices in strategic locations so that they can reach more remote districts and small MFIs moving forward. Additionally, Sakchyam’s support will also help RMDC to provide institutional capacity building support to over 90 different MFIs around the country.  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 Outcomes

RMDC plans to establish two new branch offices in Kohalpur (Mid-Western Development Region) and Ithari (Eastern Development Region) 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 and saving product development among partner MFIs to better cater to the needs of microfinance clients in rural areas.

Latest Updates: As of December 2017, RMDC has,

  • Opened the proposed 2 branches
  • Reached 21,963 beneficiaries and disbursed NPR 176.5M in loans
  • Reached 8,357 clients with financial literacy initiatives

Sahara Nepal

SCALING UP ACCESS TO FINANCIAL PRODUCTS AND SERVICES IN RURAL NEPAL

Background

UKaid Sakchyam is committed to 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 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 Faced

Despite a mission to serve the poor, rural, and unbanked populations, many MFIs are heavily concentrated in accessible areas. Unavailability of basic infrastructure and high operational costs in the 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. Moreover, lack of proper information on the available financial options, including the products and services, to the target population limits access. 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 the largest cooperative in Nepal. Sahara offers various financial products as well as socioeconomic services including insurance, remittances, renewable energy, skill training, awareness and empowerment programs in six districts in the Eastern Development Region of Nepal. With Sakchyam’s support, it will open seven new branches in the Jhapa, Ilam and Sunsari Districts; develop/refine innovative products like loans for alternative energy; housing construction and climate resiliency; rural MSME development; and other financing needs across the value chain. It will also offer its members 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.

Likely Impact

The project will enable Sahara to reach 22,935 new clients in 45 VDCs across the three districts with 80% in rural areas, 95% women, 40% youth, and 50% from ethnic populations. During the 3-year project period, Sahara will disburse NPR 53 million in renewable energy loans to 6,057 clients, NPR 90 million in low-cost housing Loans to 3,024 clients, and NPR 1.7 million in agriculture, livestock, rural MSME and value chain financing loans to 5,482 clients. Additionally, it plans to issue NPR 3.6 million in micro insurance coverage to 14,563 clients. Similarly, Sahara will provide financial capacity development services to 50,000 clients, financial literacy to 25,000 clients, and youth focused activities to 1,000 clients. With this, Sahara will create 12,000 new jobs, assist 1,323 SMEs, unlock loan NPR 389.89 million and mobilize NPR 1.70 million in savings.

Latest Updates: As of December 2017 Sahara Nepal has,

  • Established 7 branches, reaching 7,382 beneficiaries
  • Disbursed 4,767 loans valued at NPR 364.2 million and collected NPR 105.9 million in deposits
  • Conducted PGT, Centre Meeting, FM Radio, Street Drama, school-based financial literacy programs and reached over 13,000 people
  • Re-engineered existing solar and biogas loan products into Renewable Energy Loan Product; piloting in 2 branches
  • Started piloting tablet banking in two branches

 

Shikhar Insurance

Sustainable Weather Index Insurance Initiative

Background

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 business 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 Faced

Weather related risks has increased the vulnerability of smallholder farmers and has negatively impacted their livelihoods. 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.

Apple farmers are facing weather related risks such as drought and hailstorm which hampered their apple production. Farmer had 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 & Partner’s Interventions

In an effort to contribute to WII sector, UKaid Sakchyam collaborated with Shikhar Insurance Company Ltd. to introduce WII of apple farmers of five apple farming districts in mid-western region for the first time in Nepal.

Sakchyam assisted Shikhar Insurance 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 analysing 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 Insurance has started implementing WII in Jumla from 2016 while it has opened three more branches in Kalikot, Mugu and Dolpa to start selling WII in 2017.

WII is gradually gaining momentum. Shikhar was only able to sell the WII product to 41 apple farmers in the first season but expanded the product to 410 apple farmers in second season to reach a total of 585 farmers as of September, 2017. Total sum insured of the insured farmers is more than NPR 41 million.

Shikhar is also in the process of expanding WII product in paddy in Kailali and Kanchanpur, with the support of Sakchyam. They are expecting to introduce WII of paddy from this season.

Likely Outcome

Through its Sakchyam-funded project, Shikhar will 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.

Latest Update: As of September 2017, Shikhar Insurance have,

  • Reached 585 beneficiaries with its insurance services
  • Insured the total amount of NPR 41 million

United Youth Community Nepal (UNYC)

INCREASING ACCESS OF MICROFINANCE SERVICES TO RURAL AREAS OF MID AND FAR- WESTERN REGIONS

Background

Despite Government of Nepal’s strategic support to the microfinance sector and the successes it achieved in Nepal, millions of rural Nepalese still lack basic access to finance particularly in hilly and mountain districts of Mid and far west  of Nepal. In addition to this, for many centuries, Nepali society followed a now-out-dated traditional hierarchy system. This belief-based system placed certain people higher in the system than others, considering those placed low to be ‘untouchable’ and depriving them of basic necessities such as education. Such communities such as Dalits and Janajatis were reduced to performing pre-determined tasks in society.

Although such a belief system that was also biased toward women and racial minorities is non-existent now, in remote regions of the country such as villages in far-western region, the repercussions of such a system has left long-lasting problems. In this region, people from such social backgrounds are stuck in vicious cycles. Poverty is a crippling factor with ripple effects – the poor often do not get even primary level education and this leads them to having little to zero literacy in terms of financial behaviour. Poor decision making puts them back on the cycle, making lives harder and seemingly without a way out of such hardships.

Challenges Faced

In the absence of formal financial institutions, people are dependent on local money lenders to fulfil their financial needs. The cost of borrowing from the local money lenders is very high, and often exploitive. Similarly, financial products and services are often designed to cater to urban and semi-urban populations only. Members or rural communities are either forced to make use of whatever options there are available or depend on informal sources to take care of their financial needs. Tailored financial products and services for rural poor are unheard of and the adoption of modern technology, rampant in urban areas, to benefit these rural poor communities, 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, which could prove to be a sustainable investment toward promoting economic self-sufficiency is largely absent and financial institutions often do not keep in mind profiles of the customers when providing services to them.

Sakchyam’s Intervention

UNYC Nepal with support from UKaid Sakchyam will roll out various products through 9 new branches in Bardiya (2), Kalilali (7) and in Dadeldhura (1) with one branchless banking point. UNYC Nepal will develop a market place within the catchment area of each new branch and will offer entrepreneurship development training to their potential clients. The financial products being developed and offered include loans for productive use, seasonal loans, loans to encourage micro-entrepreneurship, as well as loans for housing, foreign employment and unexpected emergencies. They will also encourage savings on a group basis, individual saving plans, and for children. The skills development will include training in piggeries, pigeon, poultry and goat rearing, vegetable farming, bee keeping, as well as pickle-making.

Likely Impact

The project aims to bring around 15,000 women into the financial system. All of the target groups are from disadvantaged women; especially from indigenous Tharu, Dalit, Muslim, Madhesi, and ethnic communities and women from freed Kamaiya, Kamlahri, Adherawa, and Haliya communities. Further, the eligibility criteria is women with less than 10 katthas of land, or who have no government jobs, or make less than NPR 50,000 as annual earning.

Latest Updates: As of December 2017, UNYC Nepal has,

  • Established 13 new branches, reaching 16,500 beneficiaries
  • Disbursed 36,840 loans valued at NPR 871.3 million and collected NPR 130.8 million in deposits
  • Designed and launched Business Loan product with Sakchyam’s support – 2,579 business loans have been disbursed valued at NPR 247.2 million
  • Designed and launched Ujyalo (Alternate Energy) Loan product – 147 loans have been disbursed valued at NPR 4.37 million
  • Delivered financial literacy through PGT, centre meetings, IVR and other initiatives to 17,304 clients

 

Vijaya Laghubitta Bittiya Sanstha Limited (VLBS)

IMPROVEMENT OF LIVELIHOODS OF DISADVANTAGED MEMBERS THROUGH ACCESS TO FINANCE IN MID- WESTERN DEVELOPMENT REGIONS

Background

Despite the successes in in Nepal of the microfinance sector and Government of Nepal’s strategic support to the sector, millions of rural Nepalese still lack basic access to finance particularly in hilly and mountain districts of Mid and far west of Nepal. In addition to this, for many centuries, Nepali society followed a now-out-dated traditional hierarchy system. This belief-based system placed certain people higher in the system than others, considering those placed low to be ‘untouchable’ and depriving them of basic necessities such as education. Such communities such as Dalits and Janajatis were reduced to performing pre-determined tasks in society.

Although such a belief system that was also biased toward women and racial minorities is non-existent now, in remote regions of the country such as villages in mid-western region, the repercussions of such a system has left long-lasting problems. In this region, people from such social backgrounds are stuck in vicious cycles. Poverty is a crippling factor with ripple effects – the poor often do not get even primary level education and this leads them to having little to zero literacy in terms of financial behaviour. Poor decision making puts them back on the cycle, making lives harder and seemingly without a way out of such hardships.

Challenges Faced

Financial products and services are often designed to cater to urban and semi-urban populations. Members or rural communities are either forced to make use of whatever options there are available or depend on informal sources to take care of their financial needs. Tailored financial products and services for rural poor are unheard of and the adoption of modern technology, rampant in urban areas, to benefit these rural poor communities, 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, which could prove to be a sustainable investment toward promoting economic self-sufficiency is largely absent and financial institutions often do not keep in mind profiles of the customers when providing services to them.

Sakchyam’s Intervention

With support from UKaid Sakchyam, Vijaya Laghubitta Bittiya Sanstha (VLBS) will work in Dang, Salyan, Pyuthan, Rolpa and Rukum to establish 5 new branches and expansion of the services from one existing branches to rural and remote VDCs in those districts where such services are currently unavailable. They will provide financial education and entrepreneurship training prior to giving out loans to ensure productive use of loans to improve household economy. For financial education they are using technology such as mobile and FM radio programmes.  They will employ the Be With Your Client approach through SMS and voice messages. At the same time they will improve the connectivity of branches through enhanced MIS system that will link branches to their head office that will eventually become online MIS system.

Likely Impact

VLBS is aiming to reach 4,219 households with loan and insurance products, and mobilise 5,860 households with savings. This will create 4,219 SMEs who will benefit from the project.  The target group will be disaggregated into 75% poor, 80% women, 30% youth and 40% from the disadvantaged groups. These targets will benefit from loan capital to be created during the project period of NPR 168.8 million.

Latest Updates (Project 1): As of December 2017 VLBS has,

  • Established 8 new branches
  • Reached 6,611 beneficiaries
  • Disbursed NPR 764 million in loans and collected NPR 49 million in deposits

Latest Updates (Project 2): As of December 2017 VLBS has,

  • Established 4 new branches
  • Reached 1,698 beneficiaries
  • Disbursed NPR 126 million in loans and collected NPR 6.2 million in deposits

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 firms 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 Faced

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 service providers have, so far, not given much priority to these climate resilient technologies. 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’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.

With the help of Sakchyam, Janautthan plans to open three new branches in remote locations. The project will orient and train the staff of Janautthan and its members on potential opportunities for developing loan products by utilizing innovative business models. They also plan to conduct training on financial literacy which will empower entrepreneurs and aid in their business development.

Furthermore, successful borrowers will be guaranteed easy access to subsequent loans including loan for climate resilient technologies leading to access to reliable energy. These actions will in turn help increase economic activity in rural areas and decrease energy disparity between rural and urban areas.

Likely Outcome

Investing in SMEs for productive uses of energy is anticipated to increase rural economic development across sectors, which in turn will increase 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.

Nerude Laghubitta Bikas Bank

ENTERPRISE DEVELOPMENT AND DIGITALIZATION OF MICROFINANCE SERVICES

Background

UKaid 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 (MFI) sector with the adoption of new technology, helping it achieve organisational efficiency and expand its outreach in a more self-sustainable manner.

Challenges Faced

In recent years, as number of 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 transaction. 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 will introduce Buzz Nepal – 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 Outcome

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 and they will also provide entrepreneurship/skill development training to more than 17,000 beneficiaries.