Microfinance institutions (MFIs) focus on providing financial services to the rural population and low-income individuals who do not have access to mainstream banking.
As of December 2024, the Nepal Rastra Bank (NRB) has licensed 52 Class ‘D’ Microfinance Financial Institutions (MFIs) in Nepal. Out of these, 51 are currently operational, while one Super Laghubitta Bittiya Sanstha has been declared problematic by the NRB, i.e., Central Bank of Nepal, and is undergoing a resolution process. Their primary services include:
- Small Loans: They provide small loans to help people start small businesses or improve their living standards.
- Savings Products: They offer savings accounts that help low-income individuals save for the future.
- Financial Inclusion: MFIs aim to bring financial services to marginalized or underserved groups, including women, rural farmers, and small traders.
MFIs play a crucial role in poverty reduction and economic empowerment, especially in rural areas where traditional banking services may be unavailable.
Microfinance companies are also regulated by Nepal Rastra Bank, which requires less capital compared to commercial banks, development banks, and finance companies. There are four types of banks categorized by Nepal Rastra Bank as follows:
Class D – Microfinance Institutions
List of Microfinance Financial Institutions in Nepal
As of December 2024, There are total of 52 Class ‘D’ Microfinance Institutions licensed by Nepal Rastra Bank. Out of these, 51 are currently operational, while 1 institution, Super Laghubitta Bittiya Sanstha has been declared problematic and is under the resolution process.
Capital Requirements of Microfinance Companies of Nepal
Microfinance Financial Institutions are the Class D type of Banks, to ensure their financial stability and protect depositors, NRB has established specific capital requirements for these institutions.
Minimum Paid-Up Capital Requirements
NRB mandates the following minimum paid-up capital for microfinance institutions:
National-Level MFIs: NPR 100 million
Regional-Level MFIs: NPR 60 million
District-Level MFIs: NPR 20 million
These capital thresholds are designed to ensure that MFIs have a solid financial foundation to support their operations and absorb potential losses.
Capital Adequacy Ratio (CAR)
In addition to the paid-up capital, MFIs must maintain a Capital Adequacy Ratio (CAR) of at least 15% of their risk-weighted assets. This ratio helps ensure that MFIs can withstand financial stress and continue to operate effectively.
By meeting these capital requirements, microfinance institutions in Nepal contribute to the overall health and stability of the country’s financial system.
