The number of women entrepreneurs taking out bank loans has increased after the pandemic, which the central bank attributed to low interest rates. But analysts say the reported figure is too high to be credible.
There were only a few women entrepreneurs who were borrowing capital to start or expand their business before the coronavirus hit the country. But after Covid-19, women started rushing to banks to collect the concessional loans they were offering.
According to the Nepal Rastra Bank, a record number of 80,061 female entrepreneurs borrowed Rs 73.85 billion in concessional loans from banks and financial institutions in the first six months of the current financial year.
The sharp increase in the number of women taking out loans, which are available at 5% interest per annum, is due to the mandatory provision imposed on banks to issue concessional loans to at least 10 women entrepreneurs from each of their branches. , the central bank said. .
The move was aimed at involving women in entrepreneurship, the bank said.
“The new central bank policy has encouraged female entrepreneurs to take out loans to start or expand their business,” said Gunakar Bhatta, spokesperson for Nepal Rastra Bank.
“There has been a huge promotion of concessional lending lately at the local level as well,” Bhatta said.
“Most of the loans taken by women entrepreneurs were for cottage and small-scale industry, including agriculture and animal husbandry,” Bhatta said.
But some women entrepreneurs say the figure is too high and the report is misleading or something unusual is going on.
“It is suspicious. Considering the number of women entrepreneurs who take out such large loans, we believe that men are taking advantage of these concessional loan programs granted to women,” said Reeta Simha, outgoing president of the Federation of Associations of women entrepreneurs in Nepal.
A World Bank report published in 2020 indicates that in Nepal, many businesses are registered in the names of women specifically to obtain the government grants given to them.
“It is difficult for women to get a loan from banks because they have to meet many criteria, due to which many women entrepreneurs we know have not been able to borrow from banks,” said Simha.
According to the Financial Access Report 2021 published by Nepal Rastra Bank, there are almost twice as many male account holders as female ones. Among the 29.92 million account holders in banks and financial institutions, 19.11 million are men and 10.61 million are women.
Due to the Covid-19 pandemic and the prolonged confinement imposed for a year and a half, companies led by women entrepreneurs were struggling to stay afloat.
Lack of capital to buy raw materials, pay workers, pay rent and other expenses, and repay loans due to slowing demand for their products caused immense distress to the women, eventually forcing them to resign.
“Hotel businesses are still in decline and demand for craftsmanship is still weak with tourist arrivals slowed to a minimum and few orders from international markets. As a result, entrepreneurs do not want to take the risk of contracting ready,” Simha said.
According to an analytical report entitled “Women in Business” published by the Central Bureau of Statistics, women owned 29% of the country’s 922,356 establishments.
“Most female entrepreneurs are from the informal sector as they also have other responsibilities while others are from cottage and small-scale industries, and the amount of loans granted is too high according to the data,” said Simha.
“Female start-up entrepreneurs may have taken refinance loans, but the number of women taking out loans is still high according to the data,” Simha said.
According to “Women, Business and the Law 2021”, a report launched by the World Bank, Covid-19 has directly and disproportionately jeopardized the social and economic capacities of women.
The central bank has introduced the unified interest subsidy procedure for concessional loans 2019. Concessional loans are granted to targeted groups for a specific period.
“The government’s concessional loan program cannot last forever, so it should be targeted where multidimensional poverty is high, such as districts in Far West Region or Madhes Province and low-index districts. of human development,” Bhatta said.
“It will be difficult to continue the program for a long time from a global perspective,” he said.
The government has earmarked Rs 13 billion in the budget for the financial year 2021-22 to provide concessional loans at 5% interest to micro, small and medium enterprises, commercial agriculture, youth enterprises, businesses women and people returning from employment abroad.
“In the next fiscal year, the government will expand the limit and scope of concessional loans,” Bhatta said.
The government had allocated 50 billion rupees in the 2020-21 budget to provide loans at 5% interest to small and medium enterprises and tourist businesses affected by Covid-19 to pay salaries of their staff. The fund was managed through the Nepal Rastra Bank and the money was made available by the government, public companies and donor agencies.
Provisions have also been made in the 2020-21 budget to provide a refinancing facility of about Rs 100 billion through the Nepal Rastra Bank at a concessional interest rate of up to 5% to agriculture, to handicrafts, small and medium industries, businesses, factories and tourism businesses affected by Covid19.
According to the Federation of Women Entrepreneurs Association of Nepal, there were 5,000 businesses run by women entrepreneurs providing 50,000 jobs before the pandemic. Likewise, there were 500,000 self-employed women entrepreneurs in different professions and services across the country.