The growth in formal savings has also been driven by other policy initiatives. The Nepal Rastra Bank (NRB) has directed banks and financial institutions (BFIs) under its purview to increase access points to financial services across the country. Similarly, the mandatory requirement of bank accounts for migrant workers to get foreign employment permits, and the additional one percent interest on remittance deposit accounts have encouraged many migrant workers and remittance-receiving households to use formal channels to remit money and for savings.
The government's recent move to allow Nepali migrant workers abroad to participate in primary market Initial Public Offerings (IPOs) is expected to drive both formal remittances and bank savings. The report says the usage of formal savings mechanisms is higher among women, with 66 percent of them saving using formal channels (banks – 33 percent and other formal financial service providers – 32 percent ) while men are trailing lower at 59 percent (banks – 38 percent and other formal financial service providers – 21 percent). Urban adults have higher usage of formal savings channels at 64 percent, while rural adults have usage at 58 percent. The growth has largely been aided by attractive returns on long-term deposit accounts resulting in a rise in formal savings. The role of NRB has also been instrumental in driving long-term deposits, as the share of total fixed deposit accounts has surpassed savings accounts. "As of mid-July 2022, fixed deposits accounted for 55 percent, savings deposits – for 27.2 percent, demand deposits – for 9 percent, and other deposits – for 8.8 percent of the total deposits," reads the report. There has been tremendous growth in the usage of formal credit in the past decade as the number of adults having credit access has increased to 47 percent in 2022 from 14 percent in 2014. Of this 47 percent, 34 percent used banks while 13 percent used other formal financial channels. The use of informal credit has decreased from 23 percent in 2014 to 8 percent in 2022, largely due to increased reach and expansion of formal channels across the country. "The increased usage of credit from the formal sector is an outcome of strong structural market development in the financial sector," says the report. Bank credit usage has grown across urban and rural areas and reached 45 percent of the rural and 49 percent of the urban population. It was only 17 percent and 21 percent respectively in 2014. With the increase in uptake of formal credit, the usage of informal channels has come down drastically in both rural at 9 percent and in urban areas at 6 percent, which stood at 26 percent and 11 percent, respectively, in 2014. Contrary to the situation where 46 percent of women have higher usage of formal savings mechanisms, men have slightly higher usage of formal credit at 49 percent. The credit distribution through BFIs has been gradually increasing over the years. Of the total credit distribution by BFIs, 57 percent has been disbursed in metropolitan areas, 29 percent in sub-metropolitan areas, 11 percent in municipalities, and 3 percent in rural municipalities. As of mid-July 2022, BFIs had 1.83 million loan accounts, up 77 percent from 1.03 million in 2015. The report says
- The number of adults who have their savings in formal financial institutions has increased from 40 percent in 2014 to 63 percent in 2022.
- 36 percent of Nepali adults have savings in banks, while 27 percent have their savings in other formal financial institutions
- The usage of formal savings mechanisms is higher among women, with 66 percent of them saving using formal channels while men are trailing lower at 59 percent
- The number of adults having credit access has increased to 47 percent in 2022 from 14 percent in 2014.
- Bank credit usage has grown across urban and rural areas and reached 45 percent of the rural and 49 percent of the urban population.
- Of the total credit distribution by BFIs, 57 percent has been disbursed in metropolitan areas, 29 percent in sub-metropolitan areas, 11 percent in municipalities, and 3 percent in rural municipalities
