According to the Nepal Rastra Bank (NRB)’s new set of directives for Micro Finance Institutions (MFIs), borrowers can now avail loans from up to two MFIs without exceeding the credit limit stipulated by the NRB.
The threshold for getting group-based loans under deprived communities and low-income category for new borrowers remains unchanged at Rs 500,000 while existing borrowers with good track records in the past two years can avail microloans up to Rs 700,000 (which also remains unchanged).
A household however can now get collateral-free loans up to Rs 25,000 from the MFIs under the guarantee of their family members.
The recently released set of directives focuses on the protection of borrowers, transparent loan practices, financial literacy, and operational standards for MFIs.
Other provisions in the new directives are as follows:
→ Borrowers having previous loans from A (commercial banks), B (development banks), or C (financial institutions) category banks are ineligible for microfinance loans.
→ Any borrower should declare if they have any loans from other financial institutions. MFIs must validate the borrower’s loan details with other financial institutions.
→ The maximum limit for service fees on loans is reduced to 1.3% from 1.5%. No other surcharges shall be deducted from the borrower’s account.
→ MFIs are barred from using abusive or severe debt recovery practices, ensuring that borrowers are treated fairly.
→ For borrowers who are blacklisted for defaulting on the loan, BFIs under their discretion can give such borrowers a chance to repay their loan and remove them from the blacklist for six months.
→ For circumstantial defaulters of loans below Rs 100,000, MFIs can refrain from blacklisting them.
→ MFIs should use simple and clear language about their service offering to their clients, including depositors and borrowers.
→ MFIs must set up a procedure to handle client concerns, including running hotlines for grievance handling. They must also keep records of complaints and actions taken.
→ MFIs should maintain the privacy of their clients and refrain from sharing any of their financial details with irrelevant and unauthorised individuals.
→ MFIs should compulsorily include financial literacy as a part of their programs and make arrangements to inform about their financial services to the public.
