Only one in four Nepal adults has bank account: Study

Despite the rising number of banks and financial institutions, some 75 per cent of adults are still unbanked in the country as only one in every four adult Nepalis has an account at a formal financial institution, according to new data released by the World Bank yesterday.

"Only 25.3 per cent of adults have an account at a formal financial institution, not only because of poverty, but due to the cost, travel distance and amount of paper work involved in opening an account," according to the 2011 survey.

"The per cent is higher than in Afghanistan and Pakistan but lower than the South Asian regional average," it said, adding that about 50.6 per cent of adults living in urban areas have a bank account. The data loosely supplements the central bank's data that has revealed that only 27 per cent of the rural households have access to financial services within a 30-minute walking distance. "But there are some 89 per cent of urban households who have access to financial services within a 30-minute walking distance.”

There are 32 commercial banks, 88 development banks and 76 finance companies with 2,265 branches, which are often blamed for serving only the urban populace. Kathmandu valley has more than 60 per cent of the total business of the financial institutions, according to a report published by the central bank. “Of the total of 2,265 branches — one branch catering to 11,760 people in an average — in operation till the first half of the current fiscal year 2011-12, there are 626 branches of commercial banks, development banks and finance companies in Kathmandu alone that houses only 9.4 per cent of the total population,” the central bank said, adding, “one branch in the capital caters to 4,011 people while in the Hills and Tarai region one branch caters to 14,744 and 14,279 people, respectively,” and that too, on a collateral basis.
The proportion of Nepali adults with an outstanding mortgage is the second highest in the South Asian region — the first is Afghanistan with eight per cent, revealed the World Bank survey that is based on face-to-face interviews with 1,000 adults of over 15 years, which constitutes around 60 per cent of the total population.

Similarly, only 11.8 per cent of adults with bank accounts use the ATM as the main mode of withdrawal, which is again lower than the South Asian average and the low income group average. "Only 5.7 per cent of adults have debit cards. It is also lower than the South Asian average of 7.2 per cent and the low income group average of 7.4 per cent," the report of the financial behaviour in the last 12 months revealed, adding that the use of mobile technology for financial access is in an infant stage.

"Only 0.3 per cent of adults use mobile phones to pay bills, 0.4 per cent use mobile phones to send money, and 0.3 per cent use mobile phones to receive money," it said, adding that the numbers are far lower than the regional average. "For saving, credit and insurance, only 9.9 per cent of adults used a formal account. It is the third lowest in the region as Afghanistan has three per cent and Pakistan has one per cent.

However, remittance payment via formal accounts is one of the highest in the region.

The use of formal accounts to receive payments from work or selling goods, and payments from government is very low in Nepal as compared to regional counterparts, added the report which claimed that three quarters of the world’s poor don’t have a bank account.

About 25 per cent of adults earning less than $2-a-day have saved at a formal financial institution, according to the 2011 survey of about 150,000 people in 148 countries.

The problem of being 'unbanked' is also linked to income inequality: the richest 20 per cent of adults in developing countries are more than twice as likely to have a formal account than the poorest 20 per cent, according to the data collected by Gallup, Inc for the World Bank’s Global Financial Inclusion Database. The bank’s Development Research Group is building the database with a 10-year grant from the Bill & Melinda Gates Foundation.