A National Reconstruction Authority Publication
The NRA’s private housing initiatives of transferring the cash grant through the banks and financial institutions (BFIs) have contributed in enhancing access to financial services.
The National Reconstruction Authority (NRA) was established as an independent entity on December 25, 2015 to manage multi-sector recovery and reconstruction program after the April 2015 earthquake. The NRA Act, 2015 made it fully responsible to manage all the support system (cash, kind, technical support etc.) to the earthquake-affected people in all the 32 districts of mid-Nepal. The NRA’s policy provisions of cash transfer to the earthquake beneficiaries through the banks and financial institutions (BFIs) and providing concessional loan to them has supported in enriching and enhancing the access to the financial services, especially to unbanked segments of the marginalized population. The grant disbursement is targeted to route the cash transfer to a large number of people residing in the rural/ remote areas with limited or no formal access to financial services. The momentum of transferring funds direct to their bank accounts provided the BFIs great opportunities to tap the unbanked segment of the population. At the initial stages of grant disbursement process in earthquake-affected districts in absence of physical bank branches, the provision of providing the funds through the branchless banking (BLB) agent was also introduced to further support the beneficiaries with on time cash grant payment. The NRA’s private housing reconstruction initiatives in enhancing access to financial services to 834,911 eligible beneficiaries (as of September 30, 2020) has greatly contributed in the substantial growth of the new customers to the BFIs, creating awareness and financial literacy. As per the data till the end of September, out of a total 791,334 beneficiaries who have signed an agreement, 784,535 (99%) have received the first tranche. To further support the beneficiaries, the NRA has a toll-free helpline phone services that has facilitated almost 40,000 people in resolving procedural issues. Besides, the NRA-led awareness programs were held on grant payment and concessional loans in various districts in coordination with NRA district offices and with participation from various stakeholders like beneficiaries, development partners, I/NGOs, BFIs and the local government representatives.
Cash transfer program
Access to financial services for all has always been one of the top priorities of the government and the Nepal Rastra Bank (NRB). Thus, the NRA entered into a Memorandum of Understanding (MoU) along with Standard Operating Procedures (SOP) with various BFIs and their Associations to disburse cash grants directly in the bank accounts of the beneficiaries. As per the ‘Grant Disbursement Procedures for Private Houses 2015’, grant is provided for the reconstruction and/or retrofitting. A uniform subsidy of grant of Rs. 300,000 for reconstruction and Rs. 100,000 for retrofitting is provided in different tranches after verifying the construction progress. This grant disbursement process has ascertained the BFIs’ outreach to beneficiaries in 32 affected districts, significantly increasing the banks’ branch network. The trend of BFIs outreach and NRA’s private housing initiatives of transferring the cash grant through BFIs has contributed in enhancing access to financial services.
Concessional loans for beneficiaries
The NRB issued refinance policies in the aftermath of the April 2015 earthquake to facilitate the reconstruction of private houses. The outstanding refinance extended to BFIs for providing concessional housing loan under previous loan provision (Rs. 1.5 million and Rs. 2.5 million) at two percent were 1,596 beneficiaries. Only 221 people received loan of up to Rs. 300,000 as of mid-July 2020 under the ‘Unified Procedure of Interest Subsidy on Concessional Loans, 2075.’ Under this policy, a beneficiary can avail loan under nine different categories from any banks and financial institutions at a subsidized rate for a maximum period of five years. A beneficiary can avail the loan on one of the headings of livelihood in addition to the other loan for reconstructing a house. In this scheme, the BFIs provide loan at only two percent interest above their base rates while almost five percent above the rate is borne by the government as subsidy. In order to facilitate and extend required support to the beneficiaries, the NRA approved ‘Housing Reconstruction Project’ Sakchyam Access to Finance, an UKAid-funded program (DfID), in partnership with local and international institutions through the piloted project rolled out in six local units of Dhading and Gorkha.
No. of BFIs and bank branches network status in 32 districts (as of mid-Jan 2015 to mid-September
Case study of Gorkha, Dhading and Okhaldhunga The survey was conducted in three districts – Gorkha, Dhading and Okhaldhunga – to explore the government’s initiative to enhance access to finance. The case study was conducted in nine different local units (urban/rural municipalities) of the three districts and 152 samples were collected, out of which 137 were beneficiaries and 15 were local representatives of the concerned local units. Due to the restrictions caused by Covid-19 pandemic, samples were collected via phone. Judgmental sampling was used to select municipalities and random sampling was used to select the respondents and the data were analyzed accordingly. Regarding the government grant, research data showed that six percent of surveyed beneficiaries are able to save money whereas 28 percent have established access to financial services. So, the government’s policy has been successful to bank the unbanked segment of the society. Similarly, 38 percent beneficiaries have received the concessional loan facility. These activities have proved enhanced access to finance, especially in remote rural areas of the country. The access to financial services outreach has increased in these districts from 62 BFIs branches to 145 BFIs branch access points, branch less banking access point (Class A): 49 and ATM Access point (Class A,B,C): 62. The key results indicate that the success rate of recipient of the concessional loan facility is much higher in Gorkha and Dhading than in Okhaldhunga.
The government should take necessary policy actions, so that the beneficiaries or any disaster victims in the future can receive immediate dedicated services and support.
The NRA’s private housing reconstruction initiatives have been extraordinary towards rebuilding Nepal from the rubble with the adopted principle of ‘Build Back Better’. In particular, the growth of the large number of unbanked segment in the formal channel within the short span of time has been quite exemplary. The grant payment mechanism adopted by the NRA to transfer grant amount in tranches has been a major breakthrough in enhancing financial inclusion in the post-disaster scenario. This has also contributed in the government’s initiatives towards making a digital Nepal and mitigating various financial/fiduciary risks.
● The post-disaster grant payment mechanism procedure should be further developed and be applied in future disasters to route the cash transfers through BFIs with robust integrated data-based system through a centralized system of debit/ATM cards. This not only helps develop citizen identification database, it also provides opportunity to adopt one-window approach to maintain transparency and mitigate financial/fiduciary risks.
● Formation of the dedicated program is needed in order to support and monitor the implementation of the government endorsed policy provisions, along with the appropriate policy level interventions taking into consideration the synchronization of both Bottom to Top and Top to Bottom approaches.
● A strong team collaboration is needed among the various stakeholders – government agencies, local governments, development partners, I/NGOs and BFIs–as they are key in realizing the set goals and objectives to continue the momentum towards the socio-economic recovery program.
● The government and the NRB should take necessary policy actions to BFIs, so that the beneficiaries or any disaster victims in the future can receive immediate dedicated services and support.
(Poudel is Banking Specialist at the National Reconstruction Authority; Aryal is Lead-Housing Reconstruction Project of UKAid Sakshyam; and Lamsal is Officiating Project Chief of the NRA’s District Level Project Implementation Unit – Grant Management and Local Infrastructure, Okhaldhunga).