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By Nobuhiro Tsuboi


Microfinance in the Context of Rural Nepal


It is said that the involvement in a microfinance programme has enabled to increase their savings.


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In rural Nepal, microfinance has more than 20 years’ history with Cooperative Act 1992 and people’s expectation to reduce rural poverty. It is said that the involvement in a microfinance programme has enabled to increase their savings.* This report introduced real achievement on the clients’ saving data deposited at SFCL Manahari in Makwanpur District.**


Facts on the Ground

First of all, I show the changes of 484, all continuous shareholder families’ financial assets for the period of July 2006-July 2011. Its growth ratio is 140.3 per cent as shown in Table 1. ‘Family financial assets’ consist of all financial assets deposited at the SFCL and belong to individual families i.e. shares, compulsory group savings, each voluntary individual savings and family members’ individual savings. ‘Continuous shareholder’ means those who were shareholders continuously at least from 2006 to 2011. Incidentally, the number of shareholders was 771 in 2006 and 1,155 in 2011, of which 484 shareholders have been continuous shareholders for the period.

As the price index of 2011 is estimated as 155 for 2006=100, two groups of ‘65 per cent and more’ and ’55-65 per cent’ i.e. 79.3 per cent of continuous shareholders realized growth in real price terms. I watched the group of ‘65 per cent and more’ i.e. 75.6 per cent of the total increased their assets by 10 per cent and more in real price terms, and further from that, their average growth ratio is 308.2 per cent.

Investment by their Own Assets

In spite of neglecting investment by their own financial assets for this period, 3/4th of the total continuous shareholders realized 10 per cent and more growth in real price terms. If we consider their investments by using their own financial assets, the situation of the changes will be different. Especially, as to the ‘Less than 0 per cent’ group with 40 shareholders, their average amount of initial assets was biggest of all groups and they would have enough chance to invest. Their negative growth seems to be partially because of these investments.

Improvement in Distribution of Assets

The distribution of assets improved significantly as shown in Table 2 and Figure 1. I classified all the 484 continuous shareholders into three classes: the Top of 10 per cent of the total (48 shareholders), the Middle of 30 per cent (144) and the Low of 60 per cent (292). The class of ‘Top’ consists of members having largest financial assets among all. The assets accumulation of ‘Top’ decreased from 42.5 per cent in 2006 to 37.1 per cent in 2011. On the contrary, assets accumulation of ‘Low’ increased from 20.2 per cent to 27.5 per cent.

I confirmed the improvement of assets accumulation by Gini coefficient as shown in Figure 1. It improved by 0.104 point from 0.576 in 2006 to 0.472 in 2011. From the view of asset equity, the above change is desirable.



Character of the study

This study has the following three characteristics: Analysis of the change in financial assets belonging to individual families for five years from 2006 to 2011, Analysis using SFCL share and saving data, and Abstract of 484 ‘continuous families’ from among all shareholders.

I analyzed continuous shareholders because there are big differences in amount of assets among shareholders with different passage years as shareholders of SFCL as shown in Table 3. It means that we had to exclude new beneficiaries whose involvement years are relatively shorter. In this study, I excluded shareholders with less than five years passage.


(This survey was conducted with the cooperation of Nepal National Agricultural Cooperative Central Federation Ltd and JICA Nepal Office in February-July 2012.)

Further Subjects

I cannot say whether we can observe same trends in the achievement of other SFCLs and rural microfinance institutions. I hope this kind of study will be conducted in the future as well and at least 2-3 institutions in each microfinance group.



Tsuboi is a Retired Professor of University of Tsukuba, Japan. He can be reached via email at tsuboin43@nifty.com.




* Nara Hari Dhakal, “Impact of Microfinance Services on Poverty Reduction in Nepal”, INAFI, SAP-Nepal, 2005, p.46.


** SFCL: Small farmer agricultural cooperative ltd. SFCL Manahari has a history of ‘small famer development

programme’ of ADB/N in 1980, and it was converted to SFCL in 1998. The number of shareholders is 1,155 at July 2011.




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