DFSO Focus Note: DFS in Nepal

November 15, 2018
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Nepal is near the Himalayan mountain range between India and China and is one of the world’s poorest nations. The effect of a decade-long insurgency that ended in 2006 and a massive earthquake in 2015 has set back the country’s development.

Its financial infrastructure is slowly improving, with the government and the central bank moving from a bank-centric environment for financial provision to a more enabling environment where non-banks can participate, providing licenses to non-bank payment service providers and microfinance institutions for digital payment-related services. The ecosystem is in transition though, with a mix of restrictive and nonrestrictive regulations still in effect, particularly around the use of agents. While there are new non-bank participants, the financial ecosystem still remains focused around ‘mobile-banking’ and recently, mobile wallets limited to payment activities.

This Focus Note reviews the status of the financial ecosystem and the shift from a restrictive to an enabling environment, primarily focusing on current supporting policies, laws, regulations and governmental initiatives. It tracks its evolution from bank-centricity to an open enabling environment which embraces digital financial services in Nepal. A scan of laws, regulations, policies as well as interviews with ecosystem participants and aid agencies illustrates that challenges exist which hamper successful implementation of DFS for financial inclusion.

To achieve goals of financial inclusion though, there is further need for scalable services and proper infrastructure and coordination among ecosystem participants, which can be encouraged through proper policies and regulations.

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Publication Year: 
2018

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