October 11: The trend of taking multiple loans from different microfinance companies (duplication) has started to decrease. This trend of duplication has decreased after Nepal Rastra Bank (NRB) made a provision to blacklist the non-performing borrowers at the Credit Information Center.

Dr Prakash Kumar Shrestha, executive director of the Department of Microfinance Supervision at Nepal Rastra Bank, says that cases of duplication has decreased by about 66,000 as compared to the previous year due to this arrangement. According to him, the names of all of the debtors of all microfinance companies are yet to be included in the system. After all the debtors are listed in the system, it will become very easy to find out the names of debtors along with the details of their creditor microfinance as well as the loan amount. 

“On this basis, the information of all indebted members can be taken from the credit information center,”  Dr Shrestha told New Business Age, adding, "It is easy to find out whether the borrower has taken a loan from other microfinance institutions and if so, the information about the amount of the loan, the name of the microfinance institutions and if they’ve been blacklisted can also be easily found out. The institutions will be able to give loans without repeating the debtors in this way.”

Microfinance companies say that it has become easy to identify the debt history of the debtors from the credit information center due to this arrangement.

The amendment made on Nepal Rastra Bank’s directive for all ‘D’ class institutions, 2076 recommends the microfinance institutions to enlist any debtors in the blacklist if they have a loan of Rs 500,000 or more and are in a condition of turning into a non-performing loan.

The directive has also made a provision directing the concerned microfinance companies to make a recommendation to the credit information center to blacklist the borrowers, who have not paid their loans intentionally. Another provision was made through the monetary policy to blacklist those borrowers, who have fallen into a debt trap by borrowing from more than one microfinance institution.

There were no provisions for the removal of the names of the debtors from the blacklist after they had repaid their loans. The directive of the current fiscal year, has however made an arrangement for this.

The revised and amended directive for the ‘D’ class institutions issued by the central bank states, "If the debtors, who have been blacklisted for not paying their loans, pay back their loan along with the interest amount, the concerned microfinance institutions should recommend the credit information center to remove the debtors’ names from the blacklist." 

Chairman of the Nepal Microfinance Bankers' Association, Basanta Raj Lamsal, says that the provision for removing the blacklisted name has brought a sense of completion to the blacklisting procedure. “Earlier, there was no provision to remove the name of a debtor from the blacklist even after he/she had repaid their loans," he said. Debtors are deprived of any government benefits until they get their names removed from the blacklist.

There are 84 microfinance institutions across the country. There are about 3,900 branches of these companies. There are about 4,600,000 members of these microfinances. Among them, about 2,800,000 members are debtors. In previous years, a maximum of Rs 500,000 to Rs 1,000,000 could be taken as a loan from a microfinance. Since last year, the maximum amount of loan that can be taken has increased to Rs 1,500,000. The central bank says that risk and abuse of loans may increase with the increase of the maximum limit, which may lead to an increase in the number of blacklisted debtors.