Banks like Bank of Kathmandu and Megha bank are building their business model around SME and deprived sector. They claim that here is a huge opportunity at the bottom of the pyramid market. Class A,B and C commercial banks also require to lend certain percentage of its loan portfolio to deprived sector.Nepal Rastra bank is interested in increasing the financial inclusiveness of the country ,where as commercial banks are interested in penetrating uncharted market for profit (in this competitive market ) .... If Nepal Rastra bank are relaying on private banks to explore uncharted rural market then the cap on interest charge by the commercial banks in these market should not be removed .... Private sector only reacts to PROFITS..if you cap the lending rate then their will be less incentive for private banks to explore new market ..................Growing competition between the banks will help the banks to charge much lower rate then what is being charge by the local money lender ................
Here in an interesting article that was published in economic times that talk about microfinance and intrest cap ... Click here to read
1 comment:
Oxfam is working with a commercial bank to finance a new SME in rural Nepal. We were not aware that there was an interest rate cap, as implied by your post, and would be interested to know what that rate is. Also,would you know whether loans that are insured with DIGC count against the requirement (3%) to be lent to the deprived sector? It would seem logical to exclude these, as the bank is not taking any risk.
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