Cooperative, microfinance and loan shark victims complain of govt neglect

Victims of cooperatives, microcredit institutions, and loan sharks have not been able to get justice despite organizing repeated protests.

When the victims launch protests, the government agrees to meet their demands. However, these agreements are not implemented. This series of neglect has been going on for years, the victims say. 

Cooperative, microfinance and landshark victims are presently in Kathmandu to draw the attention of the government to implement past agreements.

Cooperative victims have been participating in a sit-in protest on the premises of the Department of Cooperatives for the past 10 days. Earlier, they launched the protest in the first week of August. The government reached a seven-point agreement with the victims on the same day. “But since the government didn’t implement the agreement reached seven months ago, we were forced to take to the streets again,” Harish Chandra Shrestha, coordinator of Cooperative Depositors Protection National Campaign, said.

Although the government had formed a task force to study the agreement and make suggestions for its implementation, the victims say the task force's report has been gathering dust at the Office of the Prime Minister.

The government had agreed with the cooperatives to immediately initiate the process of setting up a Deposit and Credit Protection Fund. It had also agreed to work in coordination with the Troubled Cooperatives Management Committee to prepare a work plan to return deposits parked in troubled cooperatives like Oriental Cooperatives. Likewise, the government had agreed to establish a Credit Information Center and a Credit Recovery Tribunal.

There are more than 32,000 cooperatives in the country with more than 7.3m members. Out of these cooperatives, around 500 are in trouble. Of them, 17 have been declared as troubled.

According to the Troubled Cooperatives Management Committee, deposits worth Rs 13.14bn of 28,272 are parked in 15 out of these 17 troubled cooperatives.

“Declaring cooperatives as troubled alone is insufficient. The government should return common people’s deposits and interest. The government can recover that amount from the cooperative promoters later on,” Shrestha added.

Over 1.4m victims have already become members of the national campaign, Shrestha said. These victims have deposits ranging from a few thousand rupees to Rs 320m in these cooperatives. The total liability of these cooperatives is around Rs 65bn. Each of these cooperatives has a minimum of 5,000 members.

A study conducted recently by the Nepal Rastra Bank (NRB) showed cooperatives may have been used for money laundering. Coordinator Shrestha also doesn’t rule this out. “But the number could be very low,” he added.

Shrestha, who sold four anas of land to deposit money in Oriental Cooperatives, said the government had agreed to return 40 percent of depositors’ money from its funds and make the promoters pay the remaining 60 percent. “But not a single agreement was implemented. That is why we had to relaunch the protest,” Shrestha added.

Creditors of microfinance institutions have also been protesting against the government. Over 180,000 creditors of microfinance institutions have joined the Struggle Committee against Microcredit Institutions. About 8,000 of them have taken to the streets, according to Maniram Gyawali, chairman of the campaign.

Microfinance creditors first took to the streets in Gulmi two years ago. Some of the victims even launched a fast-unto-death protest in Kathmandu in August last year. The government had then formed a talks team under Bhupal Baral, the joint secretary of the finance ministry, to hold talks with the microfinance creditors. The committee also formed its talks team under Ramesh Tamang. The two sides held four rounds of meetings. However, the talks failed after the victims complained that the central bank was not sending its representatives to the meeting.

This time, they marched all the way to Kathmandu from Mugling of Chitwan and continued their street protest at Siphal grounds. They even managed to enter the federal parliament premises a few days ago.

Committee chairman Gyawali said they have taken to the streets because microcredit institutions were flouting the central bank’s regulations and levying high-interest rates. “Since microcredit institutions have become unsuccessful in Nepal, we want the government to scrap them,” he added. Gyawali said while microcredit institutions are becoming successful elsewhere, they have failed in Nepal. “70 percent of the total creditors of microfinance institutions in Nepal are not in a position to repay their loans,” he added.

Loan waiver and unfreezing of property pledged as collateral are among the nine-point demands placed by the microcredit creditors.

According to the central bank, three out of 57 microcredit institutions in the country are wholesale lenders.  These microcredit institutions have mobilized Rs 167.64bn in deposits and invested Rs 175.83bn in loans. About 7.49 percent of total lending, or Rs 28.89bn, is non-performing loans.

Minister for Finance Dr Prakash Sharan Mahat has said that the government is serious about the demands of microfinance victims. Mahat also said that all those who have abused microfinance should be brought under the ambit of legal action and the borrowers should also fulfill their obligations.

It has been eight years since loan shark victims first started their protest. The problem, however, still remains unsolved.

The inquiry commission that the government formed last year failed to settle all the problems of the victims. As a result, thousands of victims from all over the country walked all the way to Kathmandu earlier this week for their protest.

Victims said the commission that the government formed earlier has failed to provide justice to all the victims.

The commission collected over 28,000 complaints from the victims. It settled 5,188 of the complaints. Remaining 22,812 are still awaiting decisions on their complaints. Likewise, victims say complaints of over 70,000 victims have yet to be registered.

Avadesh Kushbaha, chairman of a struggle committee formed by the victims, said 92,812 loan shark victims across the country are still awaiting justice.

Loan shark victims have termed the work of the commission as ritualistic. “It collected complaints of about 28,000 victims only. People in rural areas couldn’t register complaints because they didn’t get information,” Jha said. “Only around 5,000 applicants got justice. Others are still awaiting justice.”

After studying the complaints, the commission calculated that the transactions between loan sharks and victims were worth around Rs 5.57bn. The loan sharks have been claiming that they are still to recover Rs 7.62bn extended as loans.

The commission succeeded in unfreezing 218 bigha, 10 kattha, and 7 dhur of land pledged as collateral to loan sharks by the lenders. The commission said in its report that 793 land plots have been returned to victims.

The commission submitted its report to Prime Minister Pushpa Kamal Dahal on Nov 12. Dahal subsequently handed over the report for implementation to the Deputy Prime Minister and Minister for Home Affairs. The commission has said in its report that its implementation could be done by district administration offices by forming a dedicated unit. But the report has been gathering dust at the home ministry.

Home ministry spokesperson Narayan Prasad Bhattarai said the ministry has handed over the commission’s report to the police for implementation by preparing a new work procedure. “There are rooms for discussions and reconciliations. Works are underway in different districts,” he claimed.