Case Study

Microfinance in Nepal: Experiences of RMDC as an Apex Microfinance Organization

Proceedings from the "Microfinance in Pakistan: Innovating and Mainstreaming Conference", Pakistan
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This paper discusses the varied experiences of the Rural Microfinance Development Centre Ltd. (RMDC) - an apex microfinance organization set up by the government of Nepal for the development of microfinance. The objectives of RMDC were to:

  • Reduce poverty by providing quality microfinance services to poor women through viable microfinance institutions (MFIs);
  • Provide feedback to the government and the central bank in order to develop a conducive policy and legal environment for microfinance in the country.

The RMDC's responsibilities towards MFIs include:

  • Providing loan funds;
  • Providing institutional capacity building support;
  • Developing best practices and sustainable MFIs;
  • Market development.

The paper argues that the RMDC was successful in fulfilling its aims and responsibilities. However, it had to encounter challenges, such as:

  • Unfavorable policy environment;
  • Poor governance and management of Grameen Bikash Banks (GBBs);
  • Fragile security situation;
  • Weak institutional capacity of MFIs;
  • Inadequate financial infrastructure.

Further, the paper lists the lessons drawn from RMDC's experiences stating that MFIs:

  • Should be autonomous and free from political interference;
  • Should concentrate on viability and sustainability;
  • Need good governance and professional management for sustainability.

The paper concludes that wholesale funds can be very effective in the development and establishment of microfinance if they are supported by internal and external monitoring, along with assistance from the international community.

About this Publication

By Shrestha, S.M.