Enhancing Access to Financial Services (EAFS)

What was the project about

 Enhancing Access to Financial Services project supported the micro-finance institutions through technical assistance and grant support to provide rural women with access to formal savings and credit services in the many areas of rural Nepal where access to such services was non-existent or limited. “Enhancing Assess to Financial Services” project, was a joint initiative of UNDCF and UNDP, implemented by the Nepal Rastra Bank (NRB).

In Nepal, only about 26% of households have a bank account and 38% have outstanding loans exclusively from the informal sector (World Bank, 2006). Access to financial services is particularly difficult for people living in the remote hills and mountains, and interior parts of the Tarai as well, and many people here totally lack access to financial services. Many small businesses and low-income households in these areas find it difficult to access formal financial services to manage their savings and remittance receipts and their credit and insurance needs. Such households turn to their friends and family, and small businesses to their suppliers for credit. Very few of the poorest Nepalis use bank accounts with only about 12% of the least economically well-off half of the population having an account. 

Due to the promotion of microfinance, the sector has rapidly expanded in Nepal. Today, there are a number of financial service providers operating at different levels and at different regions. Despite the growth of financial services, many poor people in Nepal still remain excluded from formal financial services access. Reasons for exclusion are numerous such as lack of financial service providers or lack of appropriate products and services to meet growing needs of clients. A rating assessment was conducted by NRB – EAFS project showed that most microfinance institutions offer similar products under similar terms and conditions to a largely diversified client group. Additionally there is a growing trend among Nepalese MFIs to focus on serving better end of the poor clients, thus neglecting the financial needs of the very poor clients. 

It is poor people in remote areas that find it most difficult to access financial services. This seriously constrains them from developing their livelihoods as it means, for example, that poor farmers are unable to buy the inputs and access the technology to make their farms more productive. The poor also need access to financial services to help them weather untoward events such as crop failures and low points in seasonal cash flows. Also, the targeting of state-owned financial institutions by the insurgents during the conflict seriously undermined these institutions' ability to reach out to poorer rural people.

The Enhancing Access to Financial Services (EAFS) project was extending access to formal financial services for micro and small enterprises and low income households in line with the Government of Nepal's banking and microfinance sectors- the Nepal Rastra Bank with support from UNDP and UNCDF.

The project's objective was to expand microfinance services to 330,000 additional new clients and establish linkages between 10,000 SCGs with MFIs duration 2008-2012.

It was working to:

  • Extend the reach of financial service providers to an additional 330,000 people (mostly poor women) in Nepal's remoter areas;
  • Strengthen Nepal's micro-finance institutions to enable them to lead the growth of inclusive finance across the whole of Nepal; and
  • Bring about an enabling policy environment for micro-finance in Nepal.

The overall aim was to give poor rural people the means to develop their livelihoods and improve their incomes. The project was providing performance based grants and capacity building support to make the provision of financial services to the rural poor into a sustainable proposition for financial service providers. It was also helping link formal banking and community banking to deepen financial inclusion.

The intervention logic was that improvements in the enabling environment for inclusive finance, supported by catalytic investments in Financial Service Providers (FSPs) and supporting industry infrastructure, will strengthen selected FSPs, thus improving their ability to provide appropriate products and services to previously unbanked and marginalized populations.

The project adopted mainly two strategies for outreach expansion particularly in remote areas of Nepal by forging partnership with 10 selected prominent micro-finance institutions (MFIs) of the country as Strategic Partners and 8 MFIs for the innovations proposed to increase outreach as Innovative Partners. Innovations included new innovative ideas like real time monitoring, biometry adoption, categorization of  clients, agent banking etc. These 18 FSPs had signed grant agreements (called “performance-based agreements, or PBAs).

What had we accomplished so far

The 17 partners had expanded 97 new branches reaching additional 15 unreached districts. They had achieved 214,900 additional new clients by mid January 2012. 

During the project period, the project also supported to change the knowledge, perceptions, attitudes and behavior patterns of the concerned in the partner organization(s) to some extent.  The project  organized a number of interactive meetings among FSPs and other development agencies with an objective to look at the potential to develop linkages between the community saving and credit groups (SCGs) and the MFIs. These kind of events has helped the stakeholders, mainly the development partner agencies, to reflect and realize the importance and possibility of linkages between the SCGs and the MFIs.  As of January 2012, 2748 SCGs have been reported  to have linked with MFIs benefiting 62,537 clients.

Other achievements  include:

  • Completed the rating of 10 partner MFIs by international rating agency (i.e. M-Cril),
  • Provided on-site and off-site technical assistance (TA) through field visit, facilitation and training,
  • Organized quarterly review workshops among the partner FSPs, which has provided a good platform for sharing experiences/lesson,
  • Oriented the FSPS on SCG linkage model, and organized interactive workshops with MFIs and other development partners,
  • Developed and shared SCGs rating tools with partner MFIs,
  • Provided exposure visit to MFIs on SCG linkage model;
  • Provided Technical Assistance in organizing market research and product development training to the partner FSPs,
  • provided training on MIX market reporting system and arranged to send information to MIX market through Central of Micro-finance.  All partners update at the Mix market platform at http://www.mixmarket.org/mfi/country/Nepal
  • Established regular monitoring and reporting system including quarterly reporting, quarterly review and sharing among the partner MFIs and field level monitoring.

Who Financed it?

Amount contributed
UNDP $1.5m
Total budget
$3 million

Delivery in previous fiscal year




EAFS's importance to achieving the MDGs

Access to affordable credit is crucial for enabling poor people to break out of the vicious cycle of poverty and to bring the number of Nepalis living below the poverty line down to Nepal's MDG 1 target of 21% by 2015. Access to formal sources of credit decreased during the conflict due to the security situation. Increasing access is a key to building prosperous communities that denotes need to fight for their rights.

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