Kathmandu. In the last few years, the term microfinance victim has become a major topic of public debate in Nepal. From street protests, to parliament, to political speeches, to social media, the same word has been repeated over and over again. It seems as if the microfinance institutions are the victims and all the borrowers who take loans from them are automatically victims. If someone has been wronged, it is their constitutional right to get justice. If any microfinance institution has violated the law, behaved improperly or exceeded the regulatory limit, then strict action should be taken against it. There is no dispute about it. But another equally important question is, are all the microfinance institutions operating under the law really the victims? Or are they also becoming victims of recent events?

Microfinance institutions are not institutions that operate according to the wishes of any individual or group, they are financial institutions licensed by Nepal Rastra Bank, regularly regulated, inspected and evaluated. Issues ranging from interest rates to fiscal discipline, capital adequacy, loan flow and recovery and financial statements are under the direct supervision of the regulator. Therefore, if there is a problem, the first door to the solution should be the law, not the streets and the crowd.

Unfortunately, in recent years, the debate over microfinance seems to be guided by emotion rather than facts. Speeches to the effect that not repaying a loan is also a right are being heard publicly. There are protests in the hope of loan waiver, but no one seems to want to ask a simple question: How will the financial system run if everyone does not repay the loan? No loan is given out of kindness to the member, but out of faith in him. On the basis of that belief, one person’s savings are invested in another person’s business. Today’s borrower is using other savers’ money. Therefore, regulating debt repayment is not only a personal obligation but also a financial morality.

Not all the people involved in the agitation against microfinance financial institutions are of the same situation and purpose, some may be in real financial crisis, their problems should be addressed sensitively by the state, regulatory bodies and related institutions. But trying to undermine the entire credit culture on the basis of the real problems of a few people will not be in the country’s interest in the long run. In recent times, microfinance offices have been vandalized, employees have been beaten up, black soot has been smeared, threatened, socially humiliated and people have to feel unsafe while going to recover loans regularly. In such a situation, who is the victim here? Not only the debtor, or the organization and employees who are trying to fulfill their regular work and responsibilities?

There are also allegations that some interest groups have continued the agitation by assuring that the loan will be waived. If such activities have taken place, there should be an impartial investigation. Because selling illusions does not solve the problems of the people, rather the problem becomes more complicated. It is the responsibility of the state to provide justice to the real victims, but it is also fatal for the state to encourage the tendency to incite the violation of the law through false assurances. In many poor countries of the world, microfinance has been used as an effective means of poverty alleviation. Despite the financial shortage, a culture has been developed to use credit as an opportunity for production and income generation. In Nepal too, the main objective of microfinance is to provide opportunities for self-employment and entrepreneurship to the poor citizens by liberating them from the high interest rates of moneylenders. If there are any shortcomings, it should be corrected, but it is not fair to declare the whole concept a failure.

The government should provide justice to the real victims. The regulator should take action against the erring institutions. Financial institutions should also make their services more transparent, accountable and service-oriented. But at the same time, the state should also send another clear message that it is the responsibility of every borrower to repay the loan taken according to the law. Today’s discussion is that microfinance institutions should not be made enemies and borrowers who do not repay loans should not be made heroes. What is needed now is fact-based debate, fair enforcement of the law and protection of fiscal discipline, because if the financial system is weakened, the damage will be borne not by any one institution or a few creditors, but by the entire nation.

Therefore, the time has come for the government, intellectuals, civic leaders, regulatory bodies and all stakeholders to look at this issue on the basis of reality, without any prejudice. The discussion should not be limited to the one-sided commentary of the microfinance victims, but should focus on whether the microfinance institutions are really victims or whether the recent developments are also making them suffer. The need of the hour is to find a just and sustainable solution in time by understanding the problem as a sensitive issue linked to the nation’s financial system and not making it a political slogan.

-Shankar Bhattarai