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.
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.
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 March 2019, Nirdhan has,
- Reached more than 8,400 beneficiaries
- Disbursed NPR 2.7 billion in loans
- Reached over 56,000 beneficiaries through financial literacy initiatives