MFIs are instructed to create Client Protection Fund

Kathmandu November 16-  Nepal Rastra Bank has instructed micro-finance institutions (MFIs) to create a separate Client Protection Fund for the welfare of borrowers. Under the directive, MFIs are required to allocate 1 percent of their net profits to the fund. Likewise, they have to allocate another 25 percent of the dividends if the dividend distribution exceeds 20 percent of their profit.

 

 The fund will be used for the collective well-being of clients. It will also help borrowers facing problems in their businesses. NRB spokesperson Trilochan Pangeni said that the move had been taken as MFI clients were financially vulnerable people and a small shock could affect their businesses. “As MFIs provide loans without collateral, such a fund has become necessary for the protection of MFIs and their clients,” he said. Source: TKP