Microfinance Institutions should focus on poor: Dr Khatiwada

Microfinance institutions (MFIs) should focus on uplifting the living standards of people below the poverty line, according to the central bank governor.

Inaugurating a seminar on 'Regulation and Supervision of Microfinance Institutions in SAARC Region' organised by Nepal Rastra Bank (NRB) here in the valley today, NRB governor Dr Yubaraj Khatiwada said that the regulator has directed microfinance institutions to support in uplifting the people who live below the poverty line.

"The central bank has stressed on easy loan and investment promotion in poverty reduction-oriented programmes," he said, adding that the government has also prioritised women empowerment, human development, capital mobilisation and expansion of financial services in rural areas. "A separate Act on microfinance institutions is also a must for their smooth operation."

"Microfinance institutions that target backward people in Bangladesh have been running different income-generating programmes in collaboration with non-government organisations," informed governor of Bangladesh Bank Atiur Rahman, on the occasion.

"Such programmes have been fruitful in reducing poverty," he added.

"Banks — either government or private or joint investment — in Bangladesh must lend 2.5 per cent of the total capital to agriculture," he said, stressing on the need to maintain a high level of institutional good governance.

Due to lack of good governance, most of the microfinance institutions in the South Asian region have witnessed mission drift.

Pakistan, Afghanistan, Maldives and Sri Lanka are taking part in the three-day SAARC Microfinance Seminar supported by SAARC Finance, a regional network of SAARC Central Bank governors and finance secretaries.

Set up in 1998 — as a permanent body — SAARC Finance aims at promoting regional cooperation among central banks and finance ministries in SAARC member countries through staff visits and regular exchange of information, considering and proposing harmonisation of banking legislations and practices within the region, and working towards a more efficient payment system mechanism within the SAARC region and strive for higher monetary and exchange cooperation.

The SAARC Finance was formally recognised — by the 11th SAARC summit held in Kathmandu, in 2002 — as a regional platform that meets twice a year, concurrently with the International Monetary Fund/World Bank annual and spring meetings. Its chair rotates along with the change of the SAARC chair.