February 18: Finance Minister Dr Prakash Sharan Mahat has warned to punish the people who urge others not to repay bank loans by spreading rumours that banks are about to become bankrupt.

Speaking at the 4th National Microfinance Members' Conference in Kathmandu on Saturday, Finance Minister Dr. Mahat said that attempts are being made to destabilize the banking sector by creating fake rumors that banks and becoming bankrupt. He said some elements are trying to invite trouble by urging the depositors to withdraw their money from banks.

"I would like to warn them on behalf of the government that we will not hesitate for a moment to take action against such tendencies under any circumstances,” said the finance minister.

He also urged the borrowers not to be under the illusion that they do not have to pay their debts. Certain groups with vested interest are trying to play the spoilsport by raising hopes that they do not have to pay the loan and that the government will waive the debts, said the minister.

"The loan taken from the savings of the depositors can never be waived. On the other hand, the government is facilitating those who are in trouble to repay their debts. But the debts must be paid,” he added.

He suggested that microfinance institutions should be focused on rural development, micro-enterprises and self-employment rather than as profit-making tools.

"If someone has acted contrary to the purpose of being a microfinance operator, has misused it, and is trying to gain personal benefits in an opaque manner, then all of you should discourage it," he said.

Acting Governor of Nepal Rastra Bank Dr Neelam Dhungana Timsina praised the role played by microfinance at a time when 21 percent of the population does not have access to formal channel of financing.

Stating that there is risk when the non-performing loan increases above 6 percent, she suggested that everyone should work responsibly to prevent the situation from deteriorating further.

Shankarman Shrestha, president of Swabalamban Development Center, the organizer of the conference, said that microfinance was started with a target to facilitate the poor and the disadvantaged families and pointed out the need to bring those who have gone astray on the right path.

In the meantime, Shrestha shed light on some problems observed in the microfinance sector.

He noted that microfinance institutions were run in accordance with the Companies Act. According to Shrestha, microfinance companies drew investors after they started issuing dividends to the shareholders

“The investors believed that microfinance was a place where they could make a lot of profit. We did not make the members of the microfinance as shareholders, which was a big mistake," he said. "There was carelessness even while giving loans.”

Ram Bahadur Yadav, president of Nepal Microfinance Bankers Association, complained that the government has neglected the microfinance sector, which has promoted investment and enterprise along with financial awareness in the villages through its nearly six million members.

According to him, the reason for the current problem is that the government has not paid much attention to the areas such as spreading economic activities in far-flung areas, uplifting the poor, ending poverty, and empowering women.