Vijaya Laghubitta Bittiya Sanstha’s 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.
DFID Sakchyam’s Intervention 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.