“I had almost gone abroad in search of a job,” says Radha Krishna Shrestha, a 28 year old farmer from Banepa, “until I learnt of Laxmi Bank’s small loans scheme to farmers.”

Shrestha then availed the Rs. 125,000 Peer Guaranteed Loan from Laxmi Bank one year ago. With this money, he leased two ropanis of land, grew high-value seasonal vegetables, and built a fishpond for rearing catfish commercially, selling up to 4,500 kgs a year.

“The loan reinstated hope and courage in me to stay back and work in my own country. I now see ample opportunities right here in Banepa,” says Shrestha. He has no plans of going abroad in search of employment and hopes to expand business to raise pigs in his place.

As one of the poorest nations in the world, Nepal has 55% of its people living on less than Rs 100 a day. There is a large population typically deprived of access to financial services: resources that could enable initiation and expansion of many micro-enterprises and agriculture-based activities, improving the livelihoods and wellbeing of many Nepalis.

According to Nepal Rastra Bank’s Microfinance Industry Report of 2009, only 28% of Nepali households have a bank account; 28% are dependent on the informal financial channels; and 20% have no access to financial services. As per the report, the total rural credit requirement stands at Rs. 23.30 billion while the total supply is only Rs. 9.60 billion.

It is clear that there is a huge need that remains to be filled. Laxmi Bank, with its microfinance products, is working to turn that need into an opportunity. The Bank has introduced a number of easy-to-access, demand-driven, and innovative microfinance products targeted at low-income clients, including consumers and the self-employed, who have traditionally lacked access to banking services.

With more than a year’s experience in extending direct microfinance, Laxmi Bank is helping the low-income group harness the resources they need to participate meaningfully in markets and create social and economic changes from below. Over the last year, the Bank has directly disbursed close to 600 micro loans. This is in addition to over 5,000 families who have benefited from loans provided by Laxmi Bank to Class D financial institutions for on-lending. The size of Laxmi Bank’s microfinance portfolio is about Rs 500 million.

One such microfinance client is Ramji Prasad Poudel, a commercial cattle farmer from Bhalam in Kaski. He used Laxmi Bank’s livestock finance facility to expand his business. He initially began cattle farming with two cows seven years ago, and has now increased the number to 33. His success as a micro entrepreneur continues to inspire many others in his village to dream and make it big.

“With the loan from the Bank, new possibilities have opened up for my family and me,” he says. His friend Bishnu came home recently on holiday from a difficult job he landed in the Gulf last year but now does not wish to go back. He compared his own earnings with that of Ramji’s, and is convinced that similar amount of hard work will yield him more in Nepal. He has a return ticket and a valid visa but he does not intend to use.

Another client is Mithila Ghimire, a medical store owner. She first heard of Laxmi Bank from her landlord who told her about their microfinance loans to aspiring small business owners.

“It was already (the month of) Asar, and I needed Rs. 200,000 to stock medicines for the season. The loan helped me achieve that target,” she remembers.

A certified medical assistant, Ghimire’s medical store also provides first-aid treatment for seasonal diseases. Visit her store, and she proudly boasts of her latest acquisition – a refrigerator she bought to store injections.

Encouraged by numerous success stories like these, the Bank now aims to extend its reach and introduce new products to further improve rural access to credits. Laxmi Bank plans to take this business to the next level by setting up a microfinance subsidiary in order to bring about a sharper focus and greater effectiveness. Nepal Rastra Bank is currently processing the Bank’s request to set up the subsidiary. As in many other services, the Bank will rely on modern technology to deliver the goods.

For banks, given the size of the Nepal’s non-banking population, addressing the financial needs of the low-income population offers a wide range of opportunities, from deposits and insurance to loans and remittances.

“For us, it’s an opportunity to offer a complete retail banking suite to the bottom of the pyramid while also helping unleash people’s potential to do good for themselves and others around them,” says Suman Joshi, CEO of Laxmi Bank. “In our own little ways, we shall continue to empower hard working god-loving citizens of Nepal.”

source:Prasanna KC(2010),"Innovative microfinance empowering: The Laxmi Bank way",republica,16 July 2010