Mega Bank Nepal

MEGA AARTHIK SAKCHYAM

Background

UKaid Sakchyam Access to Finance Programme (Sakchyam) works in partnership with financial institutions, especially commercial banks, and facilitates easy access of innovative new financial products and services to Small and Medium Enterprises (SMEs) to unleash their potential in Nepal. The programme provides technical support to financial institutions in rolling out innovative financial products and services (savings, credit, payment and insurance), and in the use of alternative delivery channels to increase the outreach of the financial service provided in far-flung areas. The programme also provides technical assistance to partner financial institutions to help them service the SME sector in a more focused and structured way. These interventions work towards ensuring improved SME finance as banks and other financial institutions provide tailored, suitable and better financial services to SMEs.

The Problem

A few kilometres outside the towns in the mid- and far-west regions of Nepal, villages have starkly different environments. Although these villages have immense potential in areas such as agriculture and tourism, access to basic services such as education, healthcare and finance have hindered their progress. Most financial institutions provide services in urban and semi-urban areas, catering to relatively affluent populations. Branching out with financial products and services tailored to these remote communities would truly help unlock opportunities for them and for the service providers.

Due to the absence of formal financial institutions in the remote rural areas, locals avail loans at extortionately high interest rates from the local money lenders who often exploit the inability of the borrowers to repay the loans. Also, the habit of saving and investing in productive activities is found to be severely lacking in such communities.

The Solution

Sakchyam pushes commercial banks into reaching out for the underserved population of Nepal. We encourage them to take risks by supporting their endeavors so that initiatives they wouldn’t take at full risk and liability are taken. In this regard, the partnership with Mega Bank aimed to establish physical branches and BLB touchpoints, in rural parts of Karnali & Province 7. Mega Bank opened the Sakchyam-supported branches in few of the remotest locations – Safebagar of Achham district, Jogbuda of Dadeldhura district, Khalanga of Salyan district and Khalanga of Darchula district. The partnership was also successful in launching 11 BLB touchpoints.

Another innovative scheme introduced through the partnership was the “Mega Laghu Karja”. The scheme was the first of its kind to address the political turmoil of the Maoist Insurgency of 2006 which had left a lot of the infrastructures in districts like Achham destroyed. Most importantly, government documents for properties of people and their blueprints were damaged or missing which meant that they had no collateral to provide to banks for loans. Through the scheme, people were able to obtain loans in groups with group collateral provided. The initiative proved very helpful for a lot of locals although its original form had to be discontinued. While the scheme allowed for people to provide collateral in groups and receive loans, later it only allowed microloans for individuals due to the alarming rate of defaulters. So now even though people cannot receive loans through group collateral they still have the facility of micro loans.

The Result

As a result of the Sakchyam and Mega Bank’s endeavor, within three years Mega Bank was able to create over 7,600 beneficiaries, disburse over Rs. 356 million in loans, accumulate over Rs.221 million in deposits, exceeding most of their target numbers.

Lessons Learnt & Sustainability

  • Reliable internet connectivity is needed to seamlessly operate BLB devices.
  • BLB agent selection, good strategizing and motivation are needed to operate sustainable financial services: retention of trained agents and getting the agent to deliver consistent results requires investment from banks to develop a sound agent network management system.
  • Institutionalising the new initiatives is necessary for banks to successfully deliver the project activities.

The project has successfully concluded