In Collaboration with:

Access to Finance for the Poor Programme

Demand Driven Assessment Report

Inception Phase Deliverable A2.2

December 2014

DISCLAIMER The Access to Finance for the Poor Programme in Nepal is funded by UK aid from the UK government; however the views expressed in this report do not ecessarily reflect the UK government’s official Policies. This report, including any attachments hereto, may contain privileged and/or confidential information and is intended solely for the attention and use of the intended addressee(s). If you are not the intended addressee, you may neither use, copy, nor deliver to anyone this report or any of its attachments. In such case, you should immediately destroy this report and its attachments and kindly notify Louis Berger. Unless made by a person with actual authority. The information and statements herein do not constitute a binding commitment or warranty by Louis Berger. Louis Berger assumes no responsibility for any misperceptions, errors or misunderstandings. You are urged to verify any information that is confusing and report any errors/concerns to us in writing.

Contents EXECUTIVE SUMMARY ................................................................................................................................ i

I. Introduction and Background ............................................................................................................ 1

A. Objectives of the Demand Driven Assessment .......................................................................... 1

B. Methodology and Limitation ......................................................................................................... 2

II. Supply and Demand of Financial Services & Products in Nepal .................................................. 4

III. Major findings and discussions .......................................................................................................... 5

A. Existing Financial Ability ................................................................................................................ 6

B. Demand for Financial Services ...................................................................................................... 7

C. Demands for Financial Products ................................................................................................... 8

D. Financial Education ....................................................................................................................... 10

IV. Summary of Findings ......................................................................................................................... 12

V. Recommended Areas of Interventions ........................................................................................... 13

A. Financial Products to Meet the Demand ................................................................................... 13

B. Financial Services and Technology to Improve the Efficiency ............................................... 15

C. Financial Education to Empowering the Poor .......................................................................... 19

VI. Work Plan for Recommended Implementation Areas .................................................................. 20

VII. Conclusion and Way Forward .......................................................................................................... 21

Annex I: Name of Organizations Visited Annex II: Demand for Agricultural Finance

Acronyms

AFP Access to Finance for the Poor Programme

DFID Department for International Development

DSS Dalit Sewa Sangh

FGD Focus Group Discussion

FINGO Financial Intermediary Nongovernmental Organisation

FSP Financial Service provider

GMUK Grameen Mahila Utthan Kendra

GON Government of Nepal

IGA Income Generating Activities

KM Kilo meter

LDO Local Development Officer

MFDB Microfinance Development Bank

MFI Microfinance Institutions

MFWR Mid and Far Western Region

MIS Management Information System

NGO Non-Governmental Organisation

NPR Nepalese Rupee

NRB Nepal Rastra Bank

POS Point of Service

RFP Request for Proposal

RMDC Rural Microfinance Development Centre

RSRF Rural Self Reliance Fund

SACCOS Savings and Credit Cooperatives

SRG Self Reliance Group

TOR Terms of Reference

VDC Village Development Committee

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EXECUTIVE SUMMARY

This demand driven assessment report (Inception Phase Deliverable A#2.2) was a critical planning tool to identify the demand for financial products and services at the Access to Finance for the Poor (AFP) Programme in select districts. The assessment report will assist to form an understanding of how effectively the existing formal and information financial institutions are fulfilling the households and enterprises’ demand for financial products and services by examining the demand for financial products and services in the AFP Programme prioritized 8 districts: Bajura, Accham, Baitadi, Dadeldhura and Kailali in the Far West, and Rukum, Salyan and Dang in the Mid-West. The main objective in conducting this assessment is to identify and measure demand for financial services and products at the household and enterprise levels. For that, an intensified field study and assessment on current and potential demand for these services was conducted at select 5 districts in the Far West. The assessment also included conducting an assessment of both Financial Service Providers (FSPs) and their members in 3 priority districts in the Mid-West, namely Rukum, Salyan and Sang.

While probing the demand of financial products and services, four major areas were analysed: 1) existing financial ability of the poor, 2) demand for financial services, 3) demand for financial products and 4) demand for financial education. Inferences were drawn based on these areas of analysis.

Despite several efforts of the Government of Nepal (GoN) to improve access to financial services in Nepal, it’s evident that majority of the rural poor in those districts are still lacking access to financial services currently offered by the formal and informal financial institutions. Similarly, important financial products such as agricultural financing and value chain financing are mostly absent from the service and product offering by these institutions, despite the fact that the majority of the population in the AFP Programme prioritized areas are farmers and there is tremendous potential for value chain financing .

This report recommends that AFP Programme’s support should focus on providing support through three major areas: 1) technical assistance and support to Partner Financial Institutions (PFIs) to design new financial products, 2) support PFIs to improve the effectiveness of their financial services and 3) targeted interventions in partnership with PFIs towards enhancing the financial literacy and capability of their members (households and enterprises) with different intervention activities for which different activities were also recommended.

A Capacity Gap Assessment of the FSPs as well as gaps identified in financial literacy is provided separately under inception phase deliverables #A2.1 and A#3.1. In these documents, a review is conducted of the current capacities of FSPs to offer the financial products and services. This report along with deliverables #A2.1 and #A3.1 will provide a complete picture on the supply and the demand of financial products as well as financial education in the areas and the set of interventions presented in the three reports are designed to improve access to finance in AFP Programme districts.

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I. Introduction and Background

Over the past 25 years, Nepal’s financial sector has grown in coverage, and the types and number of financial intermediaries that help people get access to financial services have grown rapidly. However, access to finance from formal sources is still an issue in the country. Available research and statistics indicate that 38% of people in Nepal, particularly low-income families, still rely on the informal sector for loans and that only 15% have obtained financial services from formal financial institutions including Commercial Banks, Development Banks, Financial Intermediary NGOs (FINGO), Microfinance Development Banks (MFDBs) and Cooperatives1. Thus, it can be argued that the impact of growth of the financial sector has been limited to mostly urban areas where the formal financial institutions network of branches is concentrated. Access to financial services still remains limited in most of the mountainous and hilly districts particularly in the Mid- and Far-Western Regions (MFWR) of the country. Moreover, many low-income people in the mountainous districts particularly Salyan, Rukum, Baitadi, Bajura and Accham believe that obtaining financial services is cumbersome and time-consuming. Similarly, people from the rural areas think that obtaining loans, for instance, from informal sources is easier than from formal financial institutions. The Access to Finance for the Poor (AFP) Programme has been designed to enhance access to finance for the poor in targeted areas also called as priority areas for the programme. The programme will initially focus on 8 districts (Dang, Rukum, Salyan, Kailali, Achham, Bajura, Dedeldhura and Baitadi). The programme will gradually expand to other districts in these regions benefiting from the experience and lesson learned from the programme activities in these eight districts. This report examines the current status of the demand of financial services and products that exist in all eight districts with a focus on three districts in particular: Dang, Rukum and Salyan. Similarly, this report also recommends some of the interventions that are important for the AFP Programme to implement in order to improve access to financial services for the poor in all programme districts.

A. Objectives of the Demand Driven Assessment The objective of this demand driven assessment is to assess the demand of poor people in the AFP Programme areas in terms of demand for financial products and services. The specific objectives are the following: • Assess and identify the state of the current demand of households and enterprises for

financial products and services in the priority districts; • Assess the gap between the demand and the supply of financial services in the priority

districts; and • Based on the gap, recommend necessary interventions of the AFP Programme and its

partners in the priority districts.

1Access to Financial Services in Nepal (p 14)-World Bank 2006

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B. Methodology and Limitation

Assessment design In order to undertake assessment in the priority districts, AFP Programme Team decided to conduct the survey in three districts namely Rukum, Salyan and Dang, which we deemed representative of most of the mountainous and hilly districts in Mid-West and Far-West. Specially designed questionnaires were prepared for both detail assessment of FSPs and to conduct FGD for clients. The questionnaire formats were designed so that it generates all information required to analyse to prepare a comprehensive report. To ensure a high quality in conducting the intended assessment activities, key staff members (including Output leads) were assigned to participate in the field visits in order to conduct the assessment activities. This has also helped the AFP Programme Teams to gain first-hand knowledge of the districts in terms of value chain and quick win opportunities.

In the process of selecting the target institutions for the survey and prior to starting the survey, AFP Programme Team contacted district level cooperative unions to obtain a list of cooperatives operating in the target districts and based on which we selected a number of the cooperative deemed to be representatives of all the cooperatives in the districts. The assessment team coordinated the survey activities with the select cooperatives to ensure their willingness and availability. However, the team also visited other cooperatives without prior notification to understand a real picture of their operations and activities in the field. For FGDs the assessment team coordinated with the FINGO being visited for this assessment to arrange meetings with their members.

Several indicators can be used to undertake a demand driven assessment. While doing this assessment in the field, using a framework (see Figure 1), we broadly categorised four kinds of demand-related issues that are important for poor and marginalized people to get access to financial services;

• Existing financial ability • Demand for financial services • Demand for financial products • Financial capability and education

While assessing existing financial ability the focus was on members’ current household income, current food security, and current savings. Similarly, for “demand for financial services”, we assessed their knowledge of Financial Service Providers (FSPs) and their services, their level of satisfaction of current services and products, remittance services, and procedures for client protection.

Under “demand for financial products”, the assessment focused on the type of general loan products they are obtaining and the associated collateral requirements. It also looked at special loan and savings products demanded including agricultural loans, value chain financing, and loans for foreign employment. Likewise, the focus for financial capability and education was on assessing their ability to manage their income by making a family budget, preparation prior to obtain loans, awareness of micro insurance, and understanding issues of multiple borrowing or over-indebtedness.

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Are

as Existing

Financial Capability

Demand for Financial Services

Demand for Financial Products

Financial Education

Ind

icat

ors

1. Current household income

2. Food security

3. Current savings status

1. Knowledge of FSP in the areas and their products

2. Remittance services

3. Client protection

1. Access and use of current loan products

2. Collateral requirements 3. Agricultural financing

products 4. Other products such as

value chain financing, foreign employment, etc.

1. Managing limited income by making household budgeting

2. Necessary preparation prior to obtain loans (business plan)

3. Awareness on micro-insurance

4. Understanding issues of multiple borrowing

Figure 1. Demand Driven Assessment Framework Data Collection and Analysis As noted earlier, we selected Cooperatives and FINGO for detail assessment. We assessed 15 Financial Service Providers (FSPs). While assessing those FSPs we also asked them to arrange a FGD with their members and we conducted 10 Focus Group Discussions (FGD) in these districts due. A total of 87 members participated in the 10 FGDs. Of them, 60 were female and 27 male. Similarly, 20 were from Dalit, 22 from ethnic community and the rest were from other communities (see Figure 2).

Figure 2. Break up of participants based on communities in FGDs

Both primary and secondary information were collected for the purpose of this report. In the process of conducting this Demand Driven Assessment and in order to obtain both qualitative and quantitative primary data directly from the targeted individuals, groups and institutions of this assessment in the AFP Programme districts, AFP Programme teams conducted two field visits. The first was to Kailali, Dadeldhura, Baitadi, Doti, Acham and

Dalit 23%

Ethnic community

25%

Other community

52%

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Bajura in the Far Western Region (from Sept 7-12 2014) and second was to Dang, Rukum and Salyan in the Mid-Western Region (Oct 7-15 2014). During the first field visit, the assessment focused on areas of opportunities for increasing access to finance in key value chains and identifying the financial institutions that are currently working in those districts. While no detailed assessments were carried out during this mission, detail discussions with key organizations were conducted along with several informal meetings with key stakeholders. This provided a cursory overview of the current demand and supply of financial services in these districts.

During the second mission, a detailed survey was conducted among sample cooperatives, Microfinance Development Banks (MFDBs), and a Financial Intermediary Non-governmental Organization (FINGO) in all three districts. The survey was conducted using a set of questions presented in the form of a questionnaire specifically designed for this purpose. A total of 15 cooperatives were interviewed including savings & credit cooperatives (SACCOs), women savings & credit cooperatives and multipurpose cooperatives. Similarly one FINGO (Grameen Mahila Utthan Kendra) with two branch offices in Salyan and Dang were interviewed along with two MFDBs in Swabalamban and Nirdhan. Additionally, 10 focus group discussions (FGDs) with individual members of cooperatives and the FINGO were also conducted in order to further understand their specific and unique demand for financial services. The assessment allowed the Programme to obtain a first-hand understanding of the household need and demand for financial services and products from the demand side perspective. The findings from the assessment process were based on the detailed assessment carried out in those three districts, but were also supported by additional information collected from the other five districts where appropriate.

We also utilised secondary information from several sources such as the World Bank, the Grameen Mahila Uthan Kendra (GMUK) and the NRB to substantiate the findings and recommendations.

II. Supply and Demand of Financial Services & Products in Nepal

This assessment was designed to explore the demand of households and enterprises for financial services and products. In planning for the assessment, emphasis was placed on identifying financial products of higher importance in these districts; the households’ understanding of financial product and services available to them; current loan and savings products offered by the FSPs; and their need of financial education for better use and manage the available financial products.

For low income groups in those districts, mostly MFIs (MFDB and FINGO) and cooperatives are providing financial products and services and therefore, we looked into both the demand and supply of financial services of MFIs to find the gaps.

As noted earlier, for the past several decades, the Government of Nepal has been trying to increase access to formal financial services to small businesses and low-income households across the country in general and in the mountainous and hilly districts in particular, by creating a more favourable regulatory environment to further facilitate the supply of formal financial services. However, these services are still offered at a limited scope in the AFP

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Programme priority districts in MFWR. In the districts surveyed in this assessment, it was found that most of the banks, MFIs and cooperatives are located in urban centres. Most of the people in the rural areas are still dependent on money lenders to access financial services.

Several financial institutions including commercial banks, development banks, and MFDBs have set up branches in these areas also due to the regulatory requirement of opening a branch in remote districts in order to open a branch in an urban centre. Despite increased geographical presence, their coverage is still limited and largely concentrated in easy to reach areas. Currently, three wholesale Microfinance Development Banks (RMDC, SFDB and The First Microfinance Bank) and the Rural Self Reliance Fund (RSRF) of NRB provide wholesale lending to formal financial institutions for meeting the growing credit needs of poor and marginalized people. However, these funds need to be made easily accessible to FIs especially cooperatives based in rural areas.

The key factors contributing to the overall level of access to finance for the poor and other marginalized groups in the community in any market system could be grouped in the following three factors:

1. Legal and Regulatory actors: such as the Nepal Rastra Bank and the Ministry of Finance;

2. Supply side actors: Commercial banks, Development Banks, MFIs and Cooperatives; and

3. Demand side actors: Individuals, households, businesses and enterprises as well as other groups seeking financial services and products for economic activity and growth.

The interrelation between the three factors is evident. However, the relationship between the demand and supply side in the market for providing financial services is where the role and responsibility of the legal and regulatory factors may come to play. In a market economy where products and services are offered based on the market demand, it is critical to understand the demand and also examine how it drives the FSPs to design and expand certain services and products. As the AFP Programme’s objective is to work with the FSPs toward meeting the untapped demand of the rural poor with focus on select districts, this assessment is geared towards identifying, analysing and understanding the household and enterprise demands in those areas. The findings and observations from this study will then can be used as a guidance to plan targeted intervention tools and work with the existing FSPs to expand or improve their offering to meet the demand and ultimately enhance the access to finance.

III. Major findings and discussions

As noted in the methodology, while assessing different indicators for demand, we grouped the assessment into four broad categories as follows and analysed the indicators for each:

1. Existing financial ability

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2. Demand for financial services 3. Demand for financial products 4. Financial capability and education

A. Existing Financial Ability

Before assessing the demand for services and products, it is important that we understand households’ current source of income, level of food security, and savings patterns. We found the following:

Sources of households Income (detail will be available on Deliverable A3.1) Out of the 10 FGDs, the majority of the members (correspondents) in eight groups stated that agriculture was their main source of income followed by business (7 groups) and labour wage (2 groups). Only a limited number of members in three of the FGDs mentioned that they also earn income from remittances. Other sources of income include making traditional tools such as sickle, spade, and goat rearing. The survey found that goat rearing is very common in Salyan District but only one group indicated that this is their main source of income. This also shows that most people are overlooking goat rearing as a potential source of income.

Food Security: (detail will be available on Deliverable A3.1) Regarding food security2, 80% of the FGDs (eight groups) mentioned that they can provide their household members the necessary three meals per day for an entire year. One group (Dalit) indicated that it could hardly meet 25% of its necessary daily meals requirement from its current income sources, largely from agriculture. Another group, which is basically landless, said that it had met up to 70% of its daily meals from its income source. The data from the survey show that food security of vulnerable communities, especially in the Dalit community, is still poor.

Status of Savings Regarding knowledge and use of savings products offered by the FIs in their areas, all groups surveyed for this assessment reported that they knew about mandatory savings with the provider with which they received other service or product. However, most groups reported little knowledge of or use of voluntary savings schemes including education savings, pension savings, savings for children’s education, and festival savings. These types of products are offered by a few organizations but uptake by members is limited. Illustratively, only members of one group (members of GMUK) reported they were saving for a pension fund offered by the FINGO operating in their geographic area. Under this pension fund, if a member saves a certain fixed amount regularly for 15 years, the individual will be entitled to get double the amount deposited at the end of 15 years- this statement has not been verified against the specific FINGO offering the product in terms of the return of savings. The nature of this scheme is voluntary but GMUK requests all members to participate. With the exception of this group, many of the members of the FGDs were not fully aware of the dynamics of voluntary savings programmes and were largely only saving because it was mandatory. High percentage of respondents (around 80%) stated they could not afford to 2 Here we considered only how many number of meals not the nutrition value of meals

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save more than what they were already required to save. Only small number of the members who indicated they could afford to save more were saving at home (rather than in a formal institution) or using the additional income for consumption.

B. Demand for Financial Services We also recognised that while assessing the demand for financial services, it is important that people have adequate knowledge on FSPs in the areas and their products and services including technology and client protection. Therefore, we analysed the same and found the following:

Knowledge of Financial Service Providers and Use of Technology for Financial Transactions Before seeking out and using financial products and services, individuals must also be familiar with the types of financial organizations working in the area and their services. All male members of the FGDs were able to recite the names of all the financial institutions that are available in their locality compared to 30% of women. However, both groups were unable to tell the kind of services being offered by those institutions.

Most of the members (80%) of in all of the FGDs do not believe that they can also obtain financial services from commercial banks. They think they can be member of either an MFDB or cooperative only. But around 20% (17 people) mostly male, were aware that they could receive financial services from commercial banks and also had accounts at commercial banks. Of them, only 12 people had an ATM card but most of them needed help to use that card in ATM machine to withdraw cash.

None of the members were aware that financial transactions can be done using mobile technology although 62 members (71%) in all FGDs had mobile phones (more details will be discussed in Deliverable A3.1).

Remittance Services Out of the total 87 members interviewed, only 14 (16%) said one of their family members was abroad working. Of them, only 9 were sending remittances home regularly. However, the FGD members think that between 20-40% of the households in their villages have at least one of their family members working abroad who is regularly sending remittances home. While all members we interviewed mentioned that the remittances they are currently receiving are from formal sources (a remittance company or banks), most of the other people who are living in remote areas are still relying on informal sources to receive their remittance.

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Client Protection During both field visits, we asked questions around client protection and addressing grievances. With the exception of two cooperatives, none of the institutions had a system in place to manage grievances. The two cooperatives were in Rukum and used a complaint box but they had not received any complaints so far. However, all interviewees said that if they receive grievances or complaints from their members, they take it seriously and address it. GMUK said they place the phone numbers of their branch office and head office in the members’ passbooks so that members can directly complain if they have any grievances. However, they have not received any complaints to date through this mechanism. It seems that neither the complaint box nor the accessible phone numbers are enough to make clients feel comfortable reporting their concerns. It could also be that clients do not feel that their grievances will be addressed. Thus, a better system and associated policies are needed. (More details on client protection will be found in Deliverable A2.1 and A3.1)

Perception of Current Loan Services Most clients reported that they were satisfied with the loan products they are currently obtaining from the FSPs and its meets their loan demand. However, this could be largely attributed to a lack of knowledge of the other service providers, their products, and the associated terms and conditions. Illustratively, the majority of the members in all FGDs could not recite the exact cost of their loans. Without this understanding, they could be limited to make the necessary comparisons among financial institutions. Similarly, while looking at the demand of loan, understanding of interest rate is very important. None of the members were aware of the types of interest rates that can be charged on loans. Issues with high interest rates were only raised by female cooperatives and a FINGO, and both of them only work with women.

C. Demands for Financial Products While assessing the demand for financial products, we analysed borrowers’ current loan products and the associated collateral requirements. We also looked at some special loans products that are relevant to the programme areas such as agricultural loans and value chain financing. Following is the findings on those products.

Loan products and Collateral Requirements Most of the loan products offered by the majority of cooperatives are related to small businesses, and all MFDBs and FINGOs working in those areas offer standard loan products developed in urban areas and requiring little administrative oversight. In contract, these rural areas have very scattered populated areas where the same approach cannot be used to serve such a large number of clients by one loan officer. Similarly, people in these areas need new products such as remittance loan products, agriculture loan products, and micro insurance etc. The MFDBs and FINGOs in these areas are not aware of or are not prioritizing this issue.

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People from vulnerable communities such as Dalit also do not have easy access to loan products. For example, one Dalit community of 46 households in Salyan said it is looking for around NPR 10,000 for each household to rear goats for which they have identified a market to sell the fatten goats. They believe that access to such loans would change their lives financially, but they have not found any financial organization that will offer them such loans. The size of loans that members are obtaining varies significantly in these districts: between NPR 10,000—500,000. However, the average loan size is around NPR 50,000 –60,000. The duration of loan cycle also varies from 4 months to 7 years and the average loan duration is one year.

Regarding the repayment system, apart from a few, most of the organizations are focusing more on overtime repayment for loan principal3. As long as the loan principals are paid within the loan duration, borrowers are considered good borrowers. However, interest is still being collected on a regular basis (mostly monthly). The interest rate of the loan also varies. The average interest rate is between 16-18% pa on a declining balance. A few cooperatives are charging as low as 10% pa where as one FINGO is charging 25% pa. In both cases, they are charging interest on the declining balance.

Regarding collateral requirements, most of the cooperatives require physical collateral for obtaining loans whereas FINGOs, MFDBs. and women cooperatives following group methodologies use group guarantee mechanisms as collateral substitutes. Most of the women’s cooperatives following group methodologies are cooperatives promoted by GoN offices focused on women and children (Department/Ministry of Women, Children and Social Welfare). However, even FINGOs and MFDBs ask for physical collateral if borrowers are interested in microenterprise loans of NPR 500,000. In general, those who have physical assets that can be used for collateral to obtain loans have higher incomes. As a result, it can be argued that most of the cooperatives, particularly SACCOs, are not serving low-income clients.

Demand for Agricultural Financing The survey shows that agriculture is one of the main sources of income of a majority of the households in these areas, but no appropriate loan products for agriculture are being offered. Due to lack of access to capital, most of the households are doing subsistence farming, and they have no plans (or ability) to modernize their farming practices in order to increase productivity. Under agricultural financing, several kinds of loans products need to be developed (see Annex 2 for detailed demand on agricultural finance). However, none of the FSPs are able to develop such products suitable for the farmers due to lack of their capacity as well as their perception that launching new products is both expensive and risky.

3Overtime repayment is a system where principal is not required to be paid in regular installment. The organization collects total principal amount during the loan cycle as per repayment capacity of the borrowers

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To be effective, agricultural financing must be coupled with crop or livestock insurance for which the GoN is offering a 75% subsidy on the premium. However, none of the farmers in these areas are able to take advantage of this benefit as they do not have access to this product.

Demand for Foreign Employment Loans As noted earlier, up to 40% of the households in most of the Village Development Committees (VDCs) in these districts have family members abroad, but none of the members we interviewed in the FGDs had obtained loans to send their family members abroad for employment. Only one cooperative has designed a loan product for foreign employment and disbursed loans to a few of its members. Several members also mentioned that they had borrowed loans for business purposes but then used that money to send their family members abroad. Thus, it seems that this type of loan is demanded but currently not supplied. As long as the loans are being paid on time, most of the cooperatives normally do not look into the utilization of loans. As access to financial services is limited in VDCs, people are bound to obtain loans from informal sources, in most cases money lenders. Most of the money lenders in these areas charge between 3-5% interest per month (most of the formal sources are charging between 1-2% per month), with the highest interest rate on loans obtained for foreign employment.

Demand for Value Chain Financing In all three districts where we conducted the survey and FGDs, we found that there are several potential value chain activities including dairy products and vegetables in Salyan (see Figure 3) and ginger, goat rearing and vegetable seed production in Dang, Salyan and Rukum. However, there is currently no value chain financing products available for these activities. As a result, people are not able to harness the benefits of these potential markets.

Figure 3. Examples of Salyan for potential value chain financing

D. Financial Education Financial education, particularly among low-income groups and vulnerable populations, is important to ensuring increased access to financial services, but it is currently extremely limited or non-existent (see Figure 4). With proper financial education, people regularly make household budgets to use their incomes optimally, and they also take the necessary preparations prior to obtaining loans so that they can use the loan(s) effectively. Similarly, financial education makes people more aware of the risks of borrowing from multiple institutions and more likely to use products like micro insurance to reduce their vulnerability. Following are the findings of those indicators:

Ginger-production, processing, marketing and product diversification such as Ginger Candy -Potential VDCs: -Dandagaun (Currently Municipality), Jimali, Kavra, Karagithi, Falawang -Other VDCs for Ginger: Damachaur, Kotmoula, Syanikhal,

Vegetables (off seasons and organic vegetables) with main centre in Kapurkot Salyan

-Potential VDCs: Dhanwang, SarpaniGarpa, Rim, Falawang, Sinwang, Dairy production, processing and other dairy products

-Potential VDCs: Dhakadam, Kotbara, Bafukhola, Kotmoula, Shibarat, Tharmare

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Figure 4. Lack of financial education among the poor and vulnerable community-a case of a Dalit community in Salyan

Households Budget Preparation: (detail will be available in Deliverable #A3.1) None of the members of FGD we conducted mentioned that they prepare a budget for their households. Only a few mentioned that they informally discuss a household budget in situations where they have unexpected income or expenditures.

Preparation of Borrowers to Obtain Loan It is essential that all borrowers make necessary preparations prior to asking for loans. One of the most important steps in preparing for a loan is to make a business plan to ensure that the income generating activity (IGA) that s/he is undertaking from loan can make adequate profit. The assessment found that none of the households had prepared proper business plans before borrowing loans from financial institutions. They only prepared the application needed to meet the requirement(s) of the institutions to obtain the loan.

Micro Insurance Service and its Awareness Micro-Insurance can help low-income and vulnerable groups better manage economic shocks. However, only three of the FGDs were aware of this type of insurance. Many of the male members had heard about life insurance, but only a few had purchased life insurance schemes. Among the women, only three said they had heard about it, but none of them had purchased the scheme. This could be because most of the schemes require substantial cash to pay premium which many Nepalese women lack.

Multiple Borrowing Borrowing multiple loans from different institutions has become a critical issue in microfinance services due to the lack of proper coordination and accountability among FSPs. In the districts we visited several people were members of more than one financial institution and had at least one loan from one institution. Most of the FGDs members were the members of either cooperatives or MFIs or both. Around 40% of the members in two FGDs conducted in Salyan mentioned that they were members of at least two MFIs and/or cooperatives. They also said they had the opportunity to obtain loans from both sources thereby increasing their risk of over indebtedness. Interestingly, to avoid this problem, four cooperatives in Salyan verify borrowers with one another before extending new loans to ensure that borrowers are not borrowing from other cooperatives. In addition, the Divisional Cooperatives Office also issued a notice recently

A group called HariyaliSamuha at Simkhark village-10 KM away from Khalanga Salyan district was formed two years ago by Dalit SewaSangh (DSS)-an organization working in Nepal for the welfare of Dalit. Representative of all 46 Dalit households in this community are members of this group and they initiated collecting monthly savings two years ago. This informal savings scheme was introduced collecting NPR 10 per month per households without cultivating proper vision for this Most of the 10 members in the meeting did not have adequate knowledge on financial services including benefits of their own savings scheme. They told that they are saving because their organization-DSS asked them to save. None of them were aware about other financial products such as remittance, insurance etc. They are also not confident on borrowing interest bearing loans.

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that a member of one cooperative cannot be a member of another cooperative. This has reduced the number of people joining and borrowing from two different cooperatives, but it has not stopped cooperative members to also join an MFI.

IV. Summary of Findings

From the above analysis, the following summarizes the findings on the demand for financial products and services in the AFP Programme districts: General access to and uptake of finance is poor in the programme’s prioritized districts.

Despite the fact that GoN has started several initiatives to improve financial access to low-income groups, this has been effective only in economically-active areas. In most of the AFP Programme districts, access to finance is relatively strong in urban areas, municipal areas, and sub-urban areas, but in VDCs and rural areas, a significant percentage of population does not have such access.

Mandatory physical collateral requirements to obtain individual loans are another obstacle for most of the low-income and marginalized groups in urban centres and towns. Apart from FINGOs and MFDBs, all other financial institutions including cooperatives ask for proof of physical collateral prior to disburse the loans.

Appropriate loans for agriculture are missing in all those districts. The majority of the

people in the targeted areas rely on agriculture as a primary source of income, but none of the FSPs have products related to agriculture (for example, designing loan repayments based on cash flow of clients considering harvest.)

Loans for foreign employment and their link to remittance services are largely missing in

most of those districts. This is despite the fact that up to 40% of the households have one or more family member working abroad. Without this type of loan product, people borrow loans from money lenders to send their family members abroad, paying up to 5% interest per month.

In most cases, those who borrow money from informal sources also send their remittances through informal sources. Therefore, there is an opportunity to bring more people into the formal financial sector by offering them products and services to conduct these transactions more affordably. A few banks including Triveni Bikas Bank in Chitwan and Sangrila Bikas Bank in Kathmandu recently introduced foreign employment loans but only in urban areas. They also offer both foreign employment loans and remittance services, but no link has been established between the two.

Value chain financing and infrastructure such as warehouse/cold storage are not available

in those areas. There are a number of opportunities for prompting several value chain activities in the priority districts such as ginger, goat rearing, dairy products, and vegetable production, but none of the FSPs are offering loans focused on specific value chains.

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Since the financial service needs vary by value chain and value chain actors, a coordinated effort among MFIs, commercial banks, and cooperatives would ensure that the needs of all actors are met.

Micro insurance is another important product that is missing in the areas. Most of the

members of FSPs are unaware of micro insurance. Few members know about life insurance and only some have procured life insurance schemes.

Not only are the members unaware of these products, most of the FSPs are also unaware of these types of products. Many of the FSP managers in the districts have not even heard of the word micro insurance.

Using alternative approaches to expand outreach is absent in the districts. Most of the

MFDBs and FINGOs are using the same lending approach, whether it is in densely-populated areas of the Tarai or in scattered populated areas like Salyan/Bajura. Due to the variation in economic and social contexts, the same approach may not fit into all situations.

The MFDBs Nirdhan and Chemek have initiated a Self-Reliance Group (SRG) approach and member agent approach respectively as alternative approaches that help reach out to the poor in scattered populated areas. However, they have not initiated these approaches in the majority of AFP Programme districts. One of the reasons has been because it has not been that effective due of lack of confidence of loan officers.

Financial education is another area that is essential in the districts. Most of the people

including those who are currently associated with MFIs lack adequate financial knowledge.

V. Recommended Areas of Interventions

There are several areas where the AFP Programme’s support can improve access to financial services among low-income and vulnerable groups in Nepal. The following are a few key areas where the programme can focus:

Financial products to meet the demand Financial services to improve the effectiveness Financial education to empower the members

A. Financial Products to Meet the Demand

Following are some of the loan products that are important and feasible for the AFP Programme and its partners to promote in the programme areas:

Promoting Agricultural Loan Products

Demand for agricultural loan products is a derived demand and depends basically on investment and working capital needs of the farming activities under consideration. Farmers

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demand credit to invest in implements, livestock, and infrastructure. There is also a huge need for the financing of warehouse infrastructure, local feeder roads and irrigation systems. Different actors are engaged in the promotion and development of agricultural enterprises, and each of them requires access to finance but in different types of products. The AFP Programme can help FSPs to design appropriate loan products for agricultural-related activities (refer to Annex 2 for details of demand for agricultural loan products.) In addition to loan products, other services and products for the agricultural sector like savings and insurance products are missing in the programme priority districts. Farmers are routinely confronted with high performance risks like crop failure and market risks such as few clients and low and/or volatile prices. These risks can be mitigated through a combination of access to saving and micro insurance services and access to short-term credit. Furthermore, access to credit and savings products is essential to optimize the agricultural and financial cycles. For example, they need to purchase inputs when these are cheap and sell produce when it is expensive. Poverty often forces farmers to sell crops when the time is not right. Without access to finance, farmers remain in low-investment/low-productivity agricultural operations.

Promoting Foreign Employment and Remittance Products

As discussed, designing remittance-related loan products is particularly important to these programme areas. This loan product would be designed in such a way that the workers who are willing to go abroad for work can obtain a loan from a formal source to pay pre-departure fees and also send their remittances through the same institution. In addition, the product can also help build the assets of the migrant workers so that s/he can use them for productive purposes when s/he returns. For example, if a mandatory condition is imposed to all migrant workers to remit from the same organization from which they borrowed loans for foreign employment, the remitted money will be then allocated for three purposes: 1) repaying the loan instalment, 2) depositing savings and 3) remitting money to his/her household. Then when the worker comes back s/he will have savings deposited into his/her account that can be used for some productive investment. Due to credible remittance management, the financial institution will have also built a relationship with the migrant worker and will be able to extend a loan on top of his/her savings so that s/he can initiate local income-generating activities that might prevent him/her from needed to go abroad again to work.

Promoting value chain financing products such as Warehouse Receipts Financing

As noted earlier, several value chain financing products such as warehouse receipt financing are feasible but none of the FSPs offer these products. In India (see Figure 5) for example, several banks offer these kind of financing facilities for farmers and traders. Therefore, designing products related to value chain financing such as warehouse receipt financing is important for the farmer so that s/he can store the agriculture products during the time of harvest and sell it when they can get a high price.

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As farmers need cash to manage their households, under this value chain/ware house receipt financing scheme, they get a certain percentage (up to 75% in India) of the current price of the total agricultural product s/he deposited into the warehouse through financial institutions.

Figure 5. An example from India of warehouse/cold storage loan

Developing and Promoting Micro Insurance Products

Micro insurance is a new initiative in Nepal, and this service is not available for most low-income or vulnerable groups in the MFWR. While crop and livestock insurance schemes are available in these areas, these products have not yet reached the programme’s prioritized mountainous districts. A comprehensive micro insurance scheme that also includes endowment is also a very new concept in Nepal but has been successfully implemented in other countries such as the Philippines. Therefore, along with promoting crop and livestock insurance, the AFP Programme can also pilot a comprehensive micro insurance scheme in collaboration with insurance companies and test it in the programme districts.

Designing Appropriate Wholesale Loan Products for Cooperatives

Most of the cooperatives in the AFP Programme districts have limited wholesale credit available for lending to meet their members’ growing credit demand. Due to their remoteness, wholesale financial institutions such as RMDC, SFDB, and First Microfinance Bank have very limited access to these cooperatives. Therefore, the AFP Programme can also work with these wholesale financial institutions to expand their outreach to these potential cooperatives. Similarly, few commercial banks such as Bank of Kathmandu and NMB banks are doing wholesale lending to cooperatives under their deprived sector lending portfolio. The programme can also work to increase this facility to other cooperatives.

B. Financial Services and Technology to Improve the Efficiency

Not only is the unavailability of appropriate financial products missing in the AFP Programme districts but the service delivery systems of FSPs are also not effective. The programme will need to work in the following areas to improve the efficiency of the FSPs:

Enhance Capacity of FSPs (more detail discussed in Deliverable A2.1)

Enhancing the capacity of financial institutions to manage their financial services in a professional way is important to improve efficiency and outreach. Most of the cooperatives are managing their savings and credit activities on an ad-hoc basis. Their MIS is weak, and

Loan against receipt of warehouse/cold storage is available in Union Bank of India to provide liquidity to the farmers and prevent them from resorting to distress sale of their produce at the time of harvest. Under this scheme, the farmer can get up to 75% of the market value or value as per minimum support price of agricultural commodity as declared by the Government whichever is lower, subject to a maximum of Indian Rs. 5 million. This loan can be granted to a farmer against produce stored in Central, State Warehouses, NBHC warehouses or Approved Warehouses/Cold Storages. The loan is up to 12 months of period with reasonable interest.

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they do not have adequate capacity to develop new loan and savings products. The capacity of FINGOs is also limited in terms of an advanced MIS system and developing appropriate financial products to the local context. For MFDBs, the majority have strong capacity but they still lack capacity in innovative product development and online MIS. A comprehensive capacity building package that includes training; on-the-spot technical assistance; system development such as developing necessary manuals, incentive systems for loan officers and other staff; networking where necessary; and, other demand-led support can be provided to ensure sustainability and improve efficiency and outreach of the partner institutions.

Facilitate Expansion of FSP Branches

The programme should also encourage financial institutions to expand their outreach to rural/ VDC areas, if necessary, by meeting initial operating losses. Opening up a new branch requires initial investment that may not be affordable for small organizations such as FINGOs and small MFDBs. Similarly, making one branch operationally sustainable requires an outreach of around 3,000 clients which might require at least 2-3 years to achieve in these scattered areas. Therefore, allowing them to meet these initial operational losses in a 2-3 year period is more likely to motivate them to expand their branches quickly. While doing so, the programme also needs to make sure that branches are not expanding only for the purposes of getting operational losses. Expansion of branches will require coupling with new product innovation or other technological improvements where the members benefit. Facilitate Expansion of Branchless Banking Using POS

Due to the remoteness of the majority of AFP Programme target districts, opening physical branches may not be feasible for many of the FSPs due to high upfront operational costs. Therefore, opening branchless banking outlets using a Point of Service (POS) could be a good alternative to expanding outreach. The programme can support commercial banks to expand their branchless banking outlets in AFP Programme districts by partially sharing, if necessary, the initial operational losses for a limited period. AFP Programme can also lobby to make it easier for MFDBs to open branchless banking outlets. While opening branchless banking outlets, the bank must also plan for other innovations in terms of products and technology to be offered such as loan services. Most of the branchless banking outlets opened so far in Nepal do not entertain loan applications. However, as the agents are close to the physical branch of the bank, a system of collecting loan applications, verifying application in terms of necessary documents to be submitted, and sending the selected applications to the bank branches could be done by the branchless agent.

In terms of using technology, once the loan is approved, the information could be sent to the borrower’s mobile phone through SMS and then release loans from the unit. Similarly, the repayment of both interest and principal amounts on the loan could also be done

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branchless banking outlet. This would significantly reduce time and costs for the FSP and the borrower.

Strengthening FSP’s Management Information System (MIS)

Without an effective MIS, FSPs cannot improve their efficiency and outreach. Current MIS used by FSPs do not disaggregate information and most of them require manual entry. Therefore, the programme could also support FSPs to move to an online system. An online MIS is very common among MFIs in several Asian countries, but in Nepal only some such as Nirdhan and Laxmi Laghubitta have started migrating data to make its MIS online. Most of the other MFIs have not even considered it.

Facilitate the Promotion of Technology-Supported Products

Mobile technology has been very effective in several developing countries including Pakistan (see Figure 6) and Kenya. In Nepal, it remains in the primitive stages. In the AFP Programme districts, mobile technology is still a relatively new concept and none of the MFDBs, FINGOs, and cooperatives have a current vision to introduce mobile banking in the immediate future. A few commercial banks such as Laxmi Bank recently introduced mobile banking services but only to urban areas. They do not have a clear plan to expand this service to AFP Programme districts. However, there are several mobile technologies such as M-Pesa and EasyPaisa that have been successfully used in several countries, and these technologies could easily be used in the prioritized districts with the assistance of the AFP Programme. Similarly, as noted earlier, we can also promote branchless banking technology. Lobbying for Regulatory Changes

Lobbying for regulatory changes that motivate the MFIs to open up branches in remote and unreached areas is important to improving outreach. Although the NRB relaxed the mandatory condition to obtain approval from the NRB to open up branches in the majority of AFP Programme districts, the number of branches remains limited in these areas. Similarly, till now only commercial banks are active in opening branchless banking outlets while MFDBs have a large potential to also offer such services in remote areas. Therefore, the AFP Programme can also lobby for further support such as a tax waiver for banks and MFIs to open branches in remote areas. The programme can also lobby to change the rule to make it easier for MFDBs to open branchless banking. There is also some room to expand the incentives for wholesale microfinance institutions to extend wholesale loans to potential cooperatives located in remote areas (details are provided in Deliverable #A1.1).

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EasyPaisa, a mobile money services started in Pakistan in 2009 through a unique corporate structure where Telenor Pakistan-an MNO and its bank-Tameer Bank-microfinance bank (51% share owned by Talenor) are managing the service. Until 2012, it had processed 100 million transactions with throughput of USD 1.2 billion. Easy Paisa has been considered as 2012 mobile Money sprinter- one of the 14 most successful mobile money services in the World.

During initial phase of EasyPaisa, the mobile money sector in Pakistan was dominated by the mobile account-an electronic wallet on the customer’s mobile phone usually run on USSD or STK. But due to regulatory condition, Electronic wallet is possible only with mobile account holders in the banks and approval of KYC is mandatory from the government Bureau-NADRA before people can use electronic wallet. For KYC, all count holders must have photos, Government IDs and account opening forms to be approved by NADRA for which an electronic copies of these documents to be emailed to NADRA for approval.

Due to this requirement, EasyPaisa realised that all these requirements would be too costly for business proposition. Similarly they also realized that with these regulatory hurdles, they cannot expand this service to non Talenor subscribers-around 40 million and also to all people who have not yet subscribed mobiles. To overcome this, Easypaisa decided to launch as an over-the-counter (OTC) service where all transactions were agent assisted and no registration required. This model would make it possible to serve all mobile phone subscribers instead of only Telenor Pakistan and also for the people who have not subscribed mobile.

The plan was to start with OTC and as the customer came to understand the benefit of mobile money, active users would then migrate to the electronic wallet. The OTC model also ensured buy-in from the agent since it provides them with more transactional revenues.

Figure 6. Managing regulatory hurdles to enhance outreach of Mobile banking service-Lessons from Pakistan

Harnessing the Potential Value Chains by Promoting Value Chain Infrastructure

Most of the AFP Programme districts have tremendous potential for cultivating additional value chains. This is important to improving the economic situation of the poor people in those areas. In order to harness these value chains, financial and technical support to selected value chain infrastructure such as a chilling plant for dairy or a processing plant for ginger, cold storage/warehouse for farmers’ product are important. Similarly, technical support for promoting the marketing chain (branding, packaging, processing, linking with market), can be organized with relevant stakeholders such as financial institutions and private companies. With this, several of thousands of farmers can benefit from these value chain sub-sectors.

Improve the Use of the Deprived Sector Lending Programme of the NRB

The Deprived Sector Lending Programme of the NRB has proven to be a crucial intervention that has made available adequate on-lending funds to MFDBs, Cooperatives, and FINGOs in Nepal. This has been used exclusively for lending purposes. However, on-lending funds to MFIs are now in abundance in the market due to the mandatory conditions for all commercial banks to use a portion of their portfolio for the deprived sector lending programme. Therefore, it is time to review this programme and evaluate whether or not we still need this programme for on-lending purposes or if we can find an alternative use of these funds to improve access to finance in these particular areas. The AFP Programme can lead this review in collaboration with the NRB.

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Enlarging Microfinance Frontiers Through Alternative Approaches

As noted earlier, most of the MFDBs and FINGOs are not thinking of how to use different lending approaches in different contexts. The AFP Programme can also play a major role in adapting the traditional lending methodologies of MFDBs and FINGOs to better meet the needs of low-income and disadvantaged groups. The AFP Programme can also a play role in encouraging the SRG approach of Nirdhan and the member-agent approach of Chhimek to the AFP Programme districts.

Improving Processes to Redress Grievances and Protect Clients

Mechanisms to effectively redress grievances are missing in FSPs in the AFP Programme districts. Therefore, the AFP Programme can also support partner FSPs to develop a complaint response mechanism(s) by establishing a proper system to manage the grievances that ensure client protection. (Further details of this will be discussed further in Deliverable A3.1.)

C. Financial Education to Empowering the Poor

The AFP Programme can also help introduce financial literacy in a simple, user-friendly manner so that the maximum number of low-income people will understand the features of financial services available in their areas as well as how they can better manage their limited income. Appropriately-designed materials and effective message delivery channels can help address the four major issues discussed in the findings (Chapter 4.3): household budgeting, preparation before obtaining loans, awareness of micro insurance and multiple borrowing. Designing appropriate materials for financial education, developing appropriate messages and their delivery mechanisms for all kind of members (illiterate, semi-literate, literate including GESI target group) and effectively launching financial education is important to empower the population we are going to serve in the AFP Programme areas.(Further details of this will be discussed in Deliverable A3.1.)

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VI. Work Plan for Recommended Implementation Areas

Recommended Areas

Recommended major activities

Proposed date and duration of this activities during implementation phase

Year 1 Year 2 Year 3 Year 4 Year 5

Q2 Q3 Q4 1. Financial

Products to meet the demand

Promoting agricultural loan products

Promoting foreign employment and link to remittance products

Promoting value chain and warehouse financing products Developing and promoting micro insurance products including crops and livestock insurance where GON is offering 75% premium subsidy for farmers

2. Financial Services to

improve the effectiveness of

FSP

Enhancing the capacities of FSPs to manage financial services in a professional way Facilitate expansion of branches of FSPs

Facilitating expansion of branchless banking of financial institutions using POS

Strengthening FSPs' Management Information System (MIS)

Facilitating promotion of technology-supported products such as mobile banking

Lobbying for regulatory amendments

Harnessing potential value chains through improved value chain infrastructure

Facilitating the effective use of the deprived sector lending program of NRB Enlarging microfinance frontiers through alternative lending approaches

Improving processes to handle grievances and protect clients

3. Financial Education to

empowers members

Design appropriate materials for FE

Design appropriate delivery mechanisms to educate members of all kinds (Literate, semi-literate and illiterate) Launching financial education programmes

Figure 7. Tentative work plan to implement recommended activities for AFP

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VII. Conclusion and Way Forward

Despite several efforts from the GoN to improve access to financial services to mountainous areas of Nepal particularly for women, low-income and disadvantaged groups, the impact has been limited. While improving access to financial services, we need to consider three major factors: 1) financial products to meet the demand of the areas, 2) financial services to improve efficiency and supply of FSPs and 3) financial education to inform and empower the people. In most of the AFP Programme districts; these factors are either non-existent or extremely weak. During the Inception Phase, it was found that most of the financial organizations are concentrating on urban areas. As a result, several clients are borrowing from more than one institution. In contrast, most of the people in the VDCs and rural areas, where the majority of low-income and disadvantaged groups live, do not have access to these financial products and services largely due to a lack of branches in these areas. As a result, many of the people in rural areas do not even know the kind of services the banks and other financial organisations are offering. Therefore, in order to improve access to finance in the AFP Programme areas, the AFP Programme needs to work on both the supply and the demand side. For the supply side, expansion of more branches of financial institutions is essential along with innovation in products and services that better meet the demand by these targeted groups. For the demand side, the programme will need to better educate people on financial services and products so that they can obtain them and use them productively. Among less developed districts, financial education will be the key to empowering marginalized and vulnerable communities including women, ethnic people such as Dalit, Tharu etc. In addition, special loan products appropriate to the local context such as agricultural financing, remittance-related loans, value chain/warehouse financing are also important. Many of the microfinance methodologies will also need to be adapted to the local context in order to improve their outreach in these areas. For example, Grameen approaches developed in highly densely populated areas may not fit well in AFP Programme areas where settlements are very scattered. The use of technology in financial services and alternative delivery mechanism is still beyond the vision of most managers of the financial organizations in these districts, but in order to expand access to financial services, the use of technology such as mobile banking, branchless banking, POS and e-sewa services are important. The AFP Programme can be a catalyst in promoting this kind of technology. With these things in mind, the AFP Programme now needs to identify potential partners committed to addressing these issues to help minimize the demand and supply gaps. To find and vet these partners, the programme will develop and widely distribute a comprehensive Terms of Reference (TOR) for a Request for Proposal (RFP) or concept note among potential organisations.

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Similarly, all of the above recommended areas and activities will be implemented as per the work plan so that the AFP Programme can make an impact in improving access to financial services in those areas thereby improving the livelihoods of poor and vulnerable communities.

Annexes Annex I: Name of Organizations Visited Annex II: Demand for Agricultural Finance

Annex I: Name of Organizations Visited

Name Address Contact person Contact no.

Cooperatives Grameen Savings and credit cooperatives (member of NEFSCUN)

Khalanga 5, Saradha Municipality

Keshav Singh Shrestha (chairman)

9841662934

Jagrit Savings and Credit cooperatives

Sejwatakura 1, Salyan Krishna Bahadur Shrestha (Chairman)

9847844344

Sirjansil Savings and Credit Cooperatives

Khalanga 6, Salyan Santosh Kumar Shrestha (Chairman)

088520082

Sarada Savings and Credit cooperatives

Sri Nagar Salyan KeshavBudhathoki (Chairman)

9847843228

Barala Agricultural multipurpose cooperative

Barala Salyan Shesh Kant Sharma

SaubhagyaLaxm Savings and Credit cooperatives

Barala Salyan Top Bahadu KC 9847844372

Mahila aayaaarjan Savings and loan cooperatives

Khalanga 6, Salyan Deepa Shrestha (Chairperson)

9847844788

FINGOs Grameen Mahila Uthan Kendra, Salyan branch

Khalanga Salyan JibsaraGharti 9844996658

Grameen Mahila Uthan Kendra, Head Office

Ghorahi Dang Asmani Chaudhary

9857830383

Development Banks SwabalambanlaghubittaBikas Bank branch

Shree Nagar Salyan 088- 400046

Nepal Grameen Bikas Bank branch

Shree Nagar, Salyan MukundaAdhikari, Branch manager

088 620147

Nepal Grameen Bikas Bank branch

Kalanga, Salyan 088-520241

Commercial Bank Nepal Bank Limited Branch Khalanga Salyan 088-520073 Additional Organisations Dalit SewaSangh Yagya Bi Ka,

Chairman Salyan Santosh Bi Ka, Central Member

9843183647

District micro entrepreneurs group association

Ramesh Kumar Wali

9847843313

Government office met District Development committee

District headquarter Salyan

Mr. HariPrasah Dahal (LDO)

088 520072

District small and cottage industries association

District HQ Salyan Sunil Sharma

Annex II: Demand for Agricultural Finance

Key Actors Key Roles Demand for finance

Input suppliers

Provide seeds, fertilizers, chemicals, fuels, equipment, and sometimes-technical knowledge.

• Working capital to buy and stock inputs in adequate amounts and at the right time.

• Provide these on credit to farmers.

Day workers Provide seasonal labour. • Want to be paid by day’s end. Farmers Grow crops and raise

animals.

May take part in some postharvest processing and marketing.

• Working capital to buy inputs and pay seasonal labour,

• Capital or term loans for investment in equipment, storage, animals and land, including clearing hitherto unused land,

• Payment services, saving products, various types of insurance including crop insurance.

Farmers’ organizations

Bulking inputs and/or farmer outputs to gain economies of scale and better prices. Advocacy, access to technology.

• Working capital to buy farm inputs for distribution to farmers,

• Working capital to buy produce from farmers for delivery to traders or other off-takers,

• Capital or term loans for investment in storage, transport and (pre) processing facilities.

Rural traders

Collection centres

Buy agricultural produce and bulk-sell it. Sometimes testing and quality certification.

• Working capital to buy agricultural produce. • Capital or term loans for investment in storage

facilities, transportation equipment or testing / certification,

• Equipment Insurance. Processors

Transform the product into a marketable commodity or consumer product.

• Working capital to buy agricultural produce. • Capital or term loans for investment in

production facilities. • Insurance (calamities, theft, loss).

Distributors, wholesalers

Sell to local retailers, supermarkets.

• Working capital to buy processed agricultural products.

• Working capital to provide stock finance to retailers.

• Capital or term loans for investment in storage facilities and transportation equipment

Exporters, importers

Sell to international buyers (commodities or processed products).

• Working capital to buy processed agricultural products or unprocessed agricultural commodities.

• Factoring/forfeiting services (on behalf of suppliers).

• International trade finance (e.g. L/C). • Insurance (calamities, theft, loss).