KATHMANDU: The cooperatives sector is considered one of the three major pillars of the country’s economy but its investment in the productive sector is a mere 0.85 percent.
The 35,000 cooperative institutions in the country have savings totaling around Rs 700 billion.
However, there is the stark reality that this saving is found not contributing to import substitution as it is not mobilized in the production sector.
Compared to the size of the country’s budget, the portion of savings with the cooperatives is significant.
The size of the budget unveiled by the government for the fiscal year 2019/20 is Rs 1 trillion 532 billion 967 million 100 thousand. In relation to the size of the budget, the savings with the cooperatives Rs 700 billion comes to be about 46 percent of the budget.
Although President of National Cooperatives Federation of Nepal, Meen Raj Kandel claims that the contribution of the cooperatives sector to the GDP is 5 percent, only 300 cooperatives are found involved in the productive sector.
These cooperatives are confined to agriculture and agricultural products and handicraft goods.
Based on the data shared by Kandel, only 0.85 percent of the total cooperatives are involved in the productive sector, which means the cooperatives’ contribution to the national economy said to be a socialism-oriented economy is nominal.
Sixty-three thousand persons are directly employed in cooperatives.
This number is 0.24 percent of the total population of the country as per the census of 2011. Nepal’s population as per this census is 26 million 494 thousand 504.
Parliament’s Agriculture, Cooperative and Natural Resources Committee member Ghanashyam Khatiwada critiqued that most of the cooperative institutions in the country were involved only in capital lending and not lending in the productive sectors. They were also not implementing timely interest rate and working as per the objectives.
Expert of cooperatives, Paritosh Poudyal underscored the need of amending the existing Cooperatives Act to maintain fiscal discipline in the cooperatives sector as most of the cooperatives were found not operating in line with the conditions stipulated in the Act.
The regulatory body of the financial institutions, Nepal Rastra Bank (NRB), has said it was not authorized to fix the interest rate of the cooperatives, citing the country has adopted open market economic policy.
However, the central bank can determine the spread rate.
Accordingly, it has fixed the spread rate for cooperatives at 6 percent on the recommendation of the National Cooperatives Board. The spread rate for banks is 4.4 percent.
Out of 35,000 cooperatives institutions in Nepal, 22,000 carry out financial transactions.
The 22,000 cooperatives that have been mobilizing savings and credit are found collecting interest at the rate of 12 percent at minimum to 18 percent at maximum. However, the policy states that cooperatives cannot charge an interest rate of more than 16 percent.
The government has the policy of providing various subsidies and facilities like interest cut, customs exemption etc to the cooperatives when they invest in the productive sectors.
The government has allocated Rs 7.697 billion for conducting various promotional programs of the cooperatives in fiscal year 2019/20, focusing on increasing production, job creation and export.
This amount is 91.045 percent more than the amount allocated to the cooperatives sector in the budget for fiscal year 2018/19.
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