This is a presentation based on an article by Dr Meena Acharya which has been developed based on economic review by Nepal Rastra Bank. It tries to identify whether financial reform has been able to cater to the problem of poverty in Nepal.

1. Article By: Dr. Meena Acharya
Development of the Financial
System and Its Impact on
Poverty Alleviation in Nepal

2. Title:
Development of the Financial System
and Its Impact on Poverty Alleviation
in Nepal
Author:
Dr. Meena Acharya
Published in:
Economic Review: Occasional Paper
(Vol 15. pp 134-164)
Date:
2003
About

3. Presented By:
Mr. Nitesh Khatiwada
Ms. Soni Sahani
Mr. Sunam Shrestha
Mr. Roshan Panta
Presented in:
Seminar in Financial System in Nepal
Masters of Business Management
Nepal Commerce Campus
Date:
26 April, 2016
Review

4. Introduction
1. Rapid growth in the financial sector of the Nepalese Economy
2. Lack of forward and backward linkages
3. Main focus towards poverty alleviation
4. Unable to penetrate in the rural areas; main focus in the urban
sectors

5. Purpose of the Study
1. To know about the functioning of the Nepalese Financial
Sectors
2. To relate the development of the financial sectors and its
impact on poverty alleviation
3. To identify the impact of targeted credit program for Poverty
Alleviation

6. Uniqueness
1. Concerned to analyze the impact of interest rate and income
in savings and time deposits
2. Analyzes various data to explain the inability of the financial
system to make impact on poverty alleviation

7. Hypothesis
1. Real income has significant impact on saving
2. Interest rate has significant impact on saving
3. Interest rate is determinant of time deposit
4. Interest rate has significant impact on deposit collection

8. Objectives
1. To study the development of financial system and its
relationship with poverty
2. To identify the impact of financial development in rural credit
market
3. To find the reason of the dominance of informal sector in rural
and urban financial system

9. The Model
 Use of regression
equation to determine the
overall saving rate
 The dependent and
independent variables are
as under

10. Variables
Independent Dependent
Real Gross Domestic
Saving
Real Interest Rate
Real Domestic
Saving

11. Variables
Independent Dependent
Real Gross Domestic
Saving
Real Interest Rate
Real Time Deposit

12. Data Sources and Sample
1. Secondary data published by Nepal Rastra Bank
2. Articles of Acharya and Khatiwada (2003) and Directory of
Institutions under study.
3. The data from 1960 -2000 has been evaluated

13. 1. Development of Nepalese
Financial Sectors
 Emerging Financial
Structure
 Financial Deepening
Findings

14. 2. Development of the
financial sectors and its
impact on poverty
alleviation
 Savings Facilitation
 Lending Portfolio
 Rural Banking
Findings

15. Findings
3. Impact of targeted credit
program for Poverty
Alleviation
 Priority Sector Lending
and Financial Products
 Dualistic Financial
System
 Establishment of Micro
Credit Institutions and
Co-operatives

16. Conclusion
1. Failure of financial development to inspire wider level
development of real sector
• No backward and forward linkages
• Nexus between political elite and international financial capital
market
• Casino Economy

17. Conclusion
2. Limited impact of interest rate and monetary policy on the
price level
• Open small economy
• Pegged Exchange Rate
• Domestic prices a function of Indian market
• Money and monetary policy become dependent variables

18. Conclusion
3. Inefficiencies of non-government sector
• Concentrated in urban areas
• 80% depend on informal sector
• Contribution of cooperative

19. Conclusion
4. Impact on Poverty
• Not visible
• Financial sector focused in trade, export and middle class
• Urban poor detached; lack of resources and knowledge
• Bottom 20% - immediate employment program

20. 1. Lack of proper availability of
information
2. Availability of complete
information on financial
sector employment
3. Cooperatives are emerging
as the major source of
funding for rural credit
Comments and
Limitations

21. 4. Data on financial sector are
not amendable to analysis of
urban funds flow and
linkages
5. Data on the monetary and
financial sectors though
gathered regularly are
amendable to only macro-
level monetary analysis
Comments and
Limitations

22. Thank You