Laxmi Bank

 Laxmi Bank Limited – Extension of banking products and services to rural and earthquake-affected districts

 

Background

Most of the rural areas in Nepal have small populations scattered over VDCs that are difficult to reach. The economic landscape of these areas is quite basic – markets consist of small retail outlets and eateries. Most of the youth work abroad as migrant labour. The main source of income is either agriculture or remittance. Also, Nepal was recently hit by devastating earthquake on the 25th of April 2015 which killed thousands of people and left even more homeless. Some districts have been more affected than others and so, the government has identified 14 earthquake affected districts to help focus the rescue, relief and rehabilitation efforts.

 

Challenges Faced

Many people in the earthquake affected districts, especially the rural areas, had their houses completed destroyed or rendered uninhabitable by the quake. They have had to resort to living in temporary communal shelters or risk their lives living inside their damaged homes. The people who want to rebuild their houses do not have access to formal financial services and so, have to rely on extremely expensive informal money lenders or local financial institutions. Besides this, the people who might want to start or re-establish their businesses cannot do so. Also, they lack the required financial information and education to make sound financial decisions.

 

Sakchyam’s Intervention

Sakchyam and Laxmi Bank have agreed to establish the ‘Laxmi – Grameen Sambriddhi Yojana’. The two will collaborate to provide 2 distinct loan products through 34 branches of Laxmi Laghubitta Bittiya Sanstha Limited (LxLB), Laxmi Bank’s MFI subsidiary. The project will spread across 27 districts including the earthquake affected ones; Sindhupalchowk, Dolakha, Nuwakot and Dhading.

‘Micro Mortgage Loan’ up to a maximum value of NPR 0.40 million shall be provided for the purpose of construction/reconstruction of residential buildings on land owned by borrower or his/her immediate family member. Special pricing/concession may be provided to the victims of the Gorkha Earthquake in line with Nepal Rastra Bank’s guidelines. The maximum value of such loans shall be NPR 0.20 million. No loan will exceed a maximum tenure of 60 months and 12 months moratorium period.

‘Laxmi Udyami Karja’ will be provided to finance the working capital requirement and capital expenditure of the small businesses and it will cater the missing middle segment. This is the first instance where D class Microfinance Bank Customers will be catered by A Class commercial bank from the branches  D Class bank . The loan will be provided for a maximum tenure of 84 months and up to a maximum value of NPR 1.00 million.  Financial literacy programs will also be operated for the first 12 months.

 

Likely Impact

The main aim of the project is to improve the living standards of the target population. Micro Mortgage loan facility will provide / improve shelter which is one of the basic needs of human beings. Laxmi Udyami Karja will enable the borrowers to earn a better livelihood and also expand their business. The target of the project is to build a portfolio of around NPR 400.0 million within a period of 1 year through 1000 borrowers. . Total loan disbursal in the period of 3 years shall be NPR 1.10 billion.

 

Update on Sakchyam – Laxmi Bank Partnership

As of September 2017, Laxmi Bank have,

  • Developed 5 different loan products for the project.
    • Sakchyam Udhyami Karja
    • Micro-mortgage Home Loan
    • Livestock Loan
    • E-rickshaw Loan
    • Tractor Loan
  • Reached 1,678 beneficiaries through different loan products
  • Disbursed the loan amount of NPR 553 Million