Microfinance Gateway>Microfinance and Armed Conflict in Nepal: The Adverse Effects of the Insurgency on the Small Farmer Cooperatives Ltd. (SFCLs) (Working Paper No. 03)

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Library » Microfinance and Armed Conflict in Nepal: The Adverse Effects of the Insurgency on the Small Farmer Cooperatives Ltd. (SFCLs) (Working Paper No. 03)

Microfinance and Armed Conflict in Nepal: The Adverse Effects of the Insurgency on the Small Farmer Cooperatives Ltd. (SFCLs) (Working Paper No. 03)
Jan 2003, Wehnert, U. & Rosham, S.

Can microfinance institutions in Nepal emerge successfully from the effects of the armed conflict?

The paper states that escalation of armed conflict in Nepal has resulted in very high economic costs:

For the last fiscal year, Nepal registered its first negative growth rate (8% of the GDP) in more than a decade.
Due to the high conflict costs, the government resources are being reallocated from development portfolio to the conflict portfolio.

As per the authors, the result of the conflict on rural finance sector is that financial institutions and grassroots microfinance providers are consolidating rather than expanding and this is adding to the already existing huge gap between the demand and supply for micro financial services in the remote areas.

The paper highlights the major findings related to the small farmers cooperatives limited (SFCLs), as:

These could expand their share in the rural financial market to more than 10%.
The conflict has interrupted the path of SFCL towards profitability. Six SFCLs have lost their offices through fires in which important documents were destroyed.
Maoists are hostile towards SFCLs.

The SFCLs, are trying to cope with the conflict in the following ways.

Information campaign at local, district and national levels.
Indirect dialogue with Maoists at local level.
Special security arrangements for cash and file management.
Temporary transfer of operations to district headquarters.
Immediate reconstruction, rehabilitation and relaunching of activities.

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Publisher(s):
Deutsche Gesellschaft für Technische Zusammenarbeit