March 20: In the first eight months of the current fiscal year, more than 250 borrowers of microfinance companies have been blacklisted by the Credit Information Center. The number of borrowers who are blacklisted by the center has increased at a time when the movement of non-payment of loans is intensifying in the context that microfinance companies are charging high interest rates.
As per the directives of Nepal Rastra Bank (NRB), the microfinance companies have started exchanging loan investment information with the center from the current fiscal year (FY). There is a provision that microfinance institutions should recommend blacklisting borrowers who default on loans of more than Rs 500,000. If the organization wants, they can also recommend blacklisting borrowers who take loans of less than Rs 500,000.
According to this arrangement, 260 borrowers were blacklisted between mid-July to mid-February on the recommendation of microfinance companies. According to the data published by the center, only one debtor was in the blacklist in the first month of the current fiscal year (mid-July to mid-August) and three in the second month (mid-August to mid-September), and since then it has been increasing.
The center informed that 15 debtors were blacklisted in mid-September to mid-October, 42 in mid-October to mid-November, 53 in mid-November to mid-December, 97 in mid-December to mid-January, 19 in mid-January to mid-February and 30 in mid-February to mid-March.
People who are blacklisted by the information center cannot open accounts and take loans from banks and financial institutions. There is a provision that the concerned organization should recommend to the information center to remove the blacklisted person from the blacklist after paying the entire interest of the loan.
In order to eliminate the duplication of credit and credit abuse seen in microfinance, the central bank had instructed microfinance institutions to become members of the center two years ago and exchange information. Accordingly, there is a provision that microfinance must obtain credit information from the center about borrowers/customers before disbursing loans, renewing old loans, restructuring or rescheduling loans.
Prakash Raj Sharma, president of the Microfinance Bankers Association, said that as per the instructions of the central bank, all microfinance institutions are members of the information center and are exchanging information on loan investments.
"Now we send all microfinance loans to the information center," he said, "Since all the institutions started exchanging information, the number of bad borrowers in the blacklist has also started to increase."
Non-performing loans of organizations are increasing as the recovery of microfinances is affected due to the movement started with the demand of loan waiver following the decline in the ability of the customers to pay the loan installments.
According to NRB, the non-performing loans of microfinance institutions reached 4.68 percent by the second quarter of the current year. Until a year ago, the non-performing loans of microfinance companies was 2.94 percent.
At present, 64 microfinance institutions have formed 1,381 groups and are providing financial services to 5,988,000 people. Among them, 3.2 million members have taken loans.
By creating a group of poor and disadvantaged people who do not have access to banks and financial institutions, microfinance has been giving loans from the collective deposits and without collateral. Microfinance institutions are allowed to invest up to Rs 700,000 per member in collective deposits and up to Rs 1.5 million by keeping property as collateral.
However, the microfinance institutions are being criticized for lending more than they need to the needy and being unable to repay them. Keeping this in mind, the central bank has issued instructions on February 22 that a person can take loans from only one institution and those who have taken a loan from a microfinance company cannot take loans from banks and financial institutions.
