Bring Cooperatives Swindlers To Book


After all, the government has struck separate deals with the victims of cooperatives, loan-sharking and microfinance institutions (MFIs) in order to find a permanent solution to these lingering issues. With the consent of the cooperative victims, the government has lately formed a high-powered committee to deal with their problems. Just before constituting the inquiry panel, the government had forged an eight-point agreement, assuring cooperatives’ depositors of returning their funds as soon as possible. With this arrangement, the cooperative victims have put off all of their protest programmes. As per the agreement, the committee will audit the accounts of the troubled cooperatives and recommend necessary measures to settle the obstacles facing the depositors. 

An estimated 500 savings and credit cooperatives around the nation are believed to have been going through one crisis or another. The number of such cooperatives has been on the rise even in the Kathmandu Valley. Most of the troubled cooperatives are now incapable of giving money back to depositors. With the emergence of such a distressing situation, depositors started staging protests, drawing the relevant authorities’ serious attention towards their problem. When more and more cooperatives were found failing to return money to depositors, they have formed a group called ‘National Campaign for the Protection of Cooperative Depositors’ to put pressure on the authorities for seeking a prompt solution to the problem. 


The group has projected that cooperative operators throughout the country have misused as much as Rs. 65 billion deposited by hundreds of thousands of depositors. The amount could be much higher as additional cooperatives, especially saving and credit ones, have now been unable to return the fund to depositors. Because of this, cooperatives have lost their social image. With the emergence of an economic crisis after the COVID-19 pandemic, various businesses, including the real estate and share market, have been in the doldrums.    

There are well over 32,000 cooperatives nationwide. The date maintained by the Department of Cooperatives show that those organisations have so far mobilised deposits from more than 7 million members. The cooperatives have mobilised about Rs. 478 billion while they have invested nearly Rs. 426 billion in loans. Inactive members, weak governance and management, absence of business plans and qualified manpower and poor portfolio management are some of the key issues associated with cooperatives in Nepal. It is difficult for cooperatives to grow when there is no proper balance between their investment and credit pattern. 

However, the government and the victims of cooperatives have even agreed to immediately implement the recommendations made by the Cooperative Sector Reforms Recommendation Taskforce- 2080 in order to enhance the institutional capacity of cooperatives. Once the recommendations are enforced, a myriad of issues like a shortage of trained human resources, resource allocation, effective management of assets and liabilities will be settled. Necessary legal action will also be taken against those cooperative managers, operators and employees who have committed offenses. Besides, the Savings and Loan Security Fund, Loan Information Centre, and Loan Recovery Tribunal will be set up for a prompt enforcement of the recommendations.

Based on complaints filed by depositors, the police have arrested many cooperative operators while numerous others have been at large. This is a clear indication that the money deposited by members of cooperatives is at higher risk of being embezzled. This sort of horrible situation has appeared in the cooperatives sector owing to a lack of effective monitoring. Many of the troubled cooperatives are also found to have invested a large chunk of money in unproductive sectors like real estate. Likewise, most cooperatives seem to have been deviated from their principles. Instead of helping their needy members by providing loans at a reasonable interest rate, cooperatives are found working as a kind of loan-shark. Despite being hyped as one of the three pillars of the national economy, cooperatives have now become a tool to abuse the ordinary people’s money. 

Gaps in the existing laws regulating cooperatives seem to have eased ill-intended groups and individuals to set up cooperatives in areas where they can collect deposits in large amount in no time. Political protection given to such lots has also been responsible, to a great extent, for the exacerbation of this problem. Some political leaders, their supports and relatives are often blamed for misusing the common people’s hard-earned money through cooperatives. The government must intensify its investigations into such cases and bring the guilty to justice at the earliest. If fraudulent activities continue under the guise of politics, the government’s commitment to address problems facing the cooperatives sector is unlikely to be fulfilled. 

Meanwhile, the government has also formed a three-member inquiry commission to seek a solution to cases concerning loan-sharking. The commission will submit its report with necessary suggestions to the government within three months. It is notable that the previous government had also formed a commission under the coordination of former chairman of the Special Court Gauri Bahadur Karki in April 2023. The commission was able to settle many complaints before submitting its report to the government. 

A sigh of relief

Despite this, many usury victims arrived in Kathmandu from different parts of the country one month ago to give continuity to their protests demanding justice. Many poor people, especially those living in the Terai region, have suffered from this for years due to a lack of financial literacy and access to an easy institutional loans. Under this form of exploitation, loans sharks charge exorbitant interest rates on loans from borrowers. This practice pushes people into poverty as they may become homeless and landless. 

The protracted agitation called by the victims of MFIs has also been called off after the government forged a six-point deal with them. The microfinance victims were dissatisfied with higher interest rates imposed on them. The two sides have been unanimous to implement the rules and directives issued by the Nepal Rastra Bank (NRB) in an effective manner to resolve the problems of microfinance victims. They were in agitation as microfinance institutions charged an additional 1.5 per cent in the name of service fee despite the NRB’s ceiling of 15 per cent. With these moves taken by the government, the victims of MFIs, cooperatives and usury have heaved a great sigh of relief. 

(The author is a deputy executive editor of this daily.)

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