Friday, April 20, 2012

Access to finance in Nepal

A latest WB report based on survey of about 150,000 people in 148 countries argues that 75 percent of adults earning less than US$2 a day do not have bank account because of poverty, cost, travel distance, and amount of paper work involved in opening one. Interestingly, the report argues that inequality also has got something to do with so many people being “unbanked” as the richest 20 percent of adults in developing countries are more than twice as likely to have a formal account as the poorest 20 percent.

Whats more? The “unbanked” 2.5 billion folks are forced to rely on money lenders who charge high fees and are also less likely to start their own business or insure themselves against unexpected events.

Interesting stats:

  • The relative gender gap in formal account ownership is highest in South Asia: 41 percent of men and 25 percent women have an account. 73% of savers in South Asia report saving for an expense in the future such as an education or a wedding. 33% of adults have an account at a formal financial institution in South Asia (24% in SSA, 18% in MENA, 39% in LAC, and 55% in EAP)
  • Only 37% of women in developing countries have an account, whereas 46% of men do. Women living below $2 a day are 28% less likely than men to have a bank account.
  • Worldwide, 22% of adults report having saved at a formal financial institution in the past 12 months.
  • Even among those who do have a formal bank account, only 43% of adults use their account to save. Yet 61% of account holders worldwide use their account to receive payments from an employer, the government or family members living elsewhere. About 7% and 3% adults use a formal account to receive payments from work/selling goods and from government respectively.
  • More than 11% of adults in developing countries have an outstanding loan for emergencies or health-care needs, but more than 80% of these adults use only informal sources of credit.
  • Of adults in developing countries working in farming, forestry or fishing, only 6% of them have crop, rainfall or livestock insurance.
  • Mobile banking, which allows account holders to pay bills, make deposits or conduct other transactions via text messaging, has expanded to16% of the market in Sub-Saharan Africa, where traditional banking has been hampered by transportation and other infrastructure problems. Kenya, where 68% of adults report using a mobile phone for money transactions, has seen particularly impressive growth in this market.
  • Nearly two-thirds of the unbanked cite poverty as the obstacle to financial access, but about a third also blame the cost of opening and maintaining an account or the banks being too far away, which means long bus rides for many.


  • In Nepal, face-to-face interviews were taken with 1000 adults (15+) between May 21 and June 4, 2011.
  • About 25.3 percent of adults have an account at a formal financial institution. This is higher than in Afghanistan and Pakistan in the region, but lower than South Asian average. About 50.6 percent of adults living in urban areas have bank account.
  • Only 11.8 percent of adults with bank account use ATM as the main mode of withdrawal. It is lower than the South Asian and low income group average.
  • Only 5.7 percent of adults have debit card. It is again lower than South Asian average (7.2 percent) and low income group average (7.4 percent).
  • The use of formal account to receive payments from work or selling goods, payments from government is very low in Nepal compared to regional counterparts. Meanwhile, remittances payments via formal account is one of the highest in the region.
  • Only 0.3 percent of adults use mobile phone to pay bills, 0.4 percent use mobile phone to send money, and 0.3 percent use mobile phone to receive money. These numbers are far lower than the regional average.
  • For saving, credit and insurance, only 9.9 percent of adults used formal account. This is the third lowest in the region (Afghanistan 3 percent and Pakistan 1 percent).
  • The proportion of Nepalese adults with an outstanding mortgage is the second highest in the region (first one is Afghanistan with 8 percent).
Access to finance (%, age 15+) Nepal South
Low income
All adults (%, age 15+) 25.3 33 23.7
Adults living in a rural area  (%, age 15+) 22.3 30.8 22
Adults living in an urban area (%, age 15+) 50.6 39.2 35.8
ATM is the main mode  of withdrawal (% with an account) 11.8 18 23
Has debit card 3.7 7.2 7.4
Use an account  for business purposes 3 4 4.6
Use an account to receive wages 3.6 7.4 5.9
Use an account to receive government payments 1.2 3.5 2.5
Use an account to receive remittances 4.6 2 4.7
Use an account to send remittances 1.2 1.6 2.8
Use a mobile phone to pay bills 0.3 2 2.6
Saved any money in the past  year 18.4 21.3 29.9
Saved at a formal financial institution in the past  year 9.9 11.1 11.5
Loan from a formal financial institution in the past  year 10.8 8.7 11.4
Loan from family or friends in the past  year 33.2 19.5 30.2
Outstanding loan for home construction 13 4.4 6.3
Outstanding loan for health or emergencies 23.9 14.1 16.1
Outstanding loan for funerals or weddings 5.7 3.9 5.4

FYI, the NLSS III showed that 20 percent of households received loans from banks, 15.1 percent from money lenders and 51.1 percent from relatives. The table from NLSS III related to access to finance is below:
Nepal Living Standard Surveys
Survey year 1995/96 2003/04 2010/11
Loans (% of total household)
Borrowing loans 61.3 68.8 65
Having standing loans 58.4 66.7 62.6
Loans from banks 16.2 15.1 20
Loans from money lenders 39.7 26 15.1
Loans from relatives 40.8 54.5 51.1
Loans from cooperatives, NGO, etc 3.3 4.4 13.8
Purpose of household loans  
Farm work 28.7 24.2 26.2
Consumption 49.4 46.5 30.7
Other personal uses 21.9 29.3 43.1
Loans with land/house as collateral 16.8 14.1 12.4
Loans with others as collateral 8.5 10.8 7.7
Loans without collateral 74.7 75.1 79.9