NEPAL

Enhancing Access to Financial Services project supports the micro-finance institutions to provide rural women with access to formal savings and credit services in the many areas of rural Nepal where access to such services is non-existent or limited.

Background Many small businesses and low-income households in Nepal'sremote hills and mountains find it difficult to access formal financial services to manage their savings and remittance receipts and their credit and insurance needs. Such households turn to their friends and family, and small businesses to their suppliers for credit. Very few of the poorest Nepalis use bank accounts with only about 12% of the least economically well-off half of the population having an account.

It is poor people in remote areas that find it most difficult to access financial services. This seriously constrains them from developing their livelihoods as it means, for example, that poor farmers are unable to buy the inputs and access the technology to make their farms more productive. The poor also need access to financial services to help them weather untoward events such as crop failures and low points in seasonal cash flows. Also, the targeting of state-owned financial institutions by the insurgents during the conflict seriously undermined these institutions' ability to reach out to poorer rural people.

Project details
 

About the Project

The Enhancing Access to Financial Services (EAFS) project is extending access to formal financial services for micro and small enterprises and low income households in line with the Government of Nepal's banking and microfinance sectors- the Nepal Rastra Bank with support from UNDP and UNCDF.

It is working to:

Extend the reach of financial service providers to an additional 330,000 people (mostly poor women) in Nepal's remoter areas;

Strengthen Nepal's micro-finance institutions to enable them to lead the growth of inclusive finance across the whole of Nepal; and

Bring about an enabling policy environment for micro-finance in Nepal.

The overall aim is to give poor rural people the means to develop their livelihoods and improve their incomes. The project is providing incentives and capacity building support to make the provision of financial services to the rural poor into a sustainable proposition for financial service providers. It is also helping link formal banking and community banking to deepen financial inclusion.

Achievements

The project is having a large impact on advancing the Nepali government's mission of creating access to financial services for all its citizens. It has already supported the opening of new branches of financial service providers in 27 of its 38 priority districts with the project's priority districts being the poorest districts that have the least access to micro finance services.

In April 2010, the project entered into agreements with 18 financial service providers. Ten 'strategic partners' are being supported to extend their reach and eight 'innovative partners' to pilot innovative ways of delivering financial services in rural areas. The agreements are that the project provides these 18 partners with financial incentives and capacity building support whilst the providers reach a fixed number of new clients with financial services or pilot innovative ways of reaching new clients.

Importance for achieving the MDGs

Access to affordable credit is crucial for enabling poor people to break out of the vicious cycle of poverty and to bring the number of Nepalis living below the poverty line down to Nepal's MDG 1 target of 21% by 2015. Access to formal sources of credit decreased during the conflict due to the security situation. Increasing access is a key to building prosperous communities that denotes need to fight for their rights.

Sources of business and household loans for the poorest and richest Nepalis (%)



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