Microfinance companies dividends to be 15 % limit

Nov Tue 2023 03:18:49

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Microfinance companies dividends to be 15 % limit

Kathmandu. All microfinance financial institutions have been suggested to keep a limit of 15 percent on dividend distribution. This suggestion has been made in the study report prepared by the high level study committee formed by Nepal Rastra Bank to study the current problems of microfinance financial institutions and their solutions. It has been suggested to the Rashtra Bank to implement a system that allows microfinance financial institutions to maintain an additional interest rate of 8 percent on the cost of funds by keeping a 15 percent limit on the distribution of dividends.

In the public report, as an interest rate limit, it has been suggested that the maximum interest rate should be up to 1.75 times the base rate of commercial banks. Thus, the committee suggested that it would be appropriate for microfinance institutions to take 8 percent interest rate spread or 1.75 times the monthly base rate of commercial banks as the interest rate limit on the cost of funds.

The report also suggested that such interest rate policy should be periodically reviewed every year and after sufficient competitive conditions in the microfinance sector, numerical reduction, transparency, and clean commercialization with social responsibility, the interest rate limit should be completely removed and the interest rate determined by adding a premium to the base rate.