Approaches and design of microfinance programmes for the ultra-poor in Nepal

Microfinance programmes have emerged to serve the poor who are excluded by conventional banks and financial institutions. However, in the context of Nepal, accessible and sustainable financial services are still limited. Only 40 per cent of Nepalese are served by formal financial institutions. Experience has shown that people living in extreme poverty need several forms of support, such as grants for livelihoods and for purchasing productive assets, business development training, and financial literacy. This paper discusses barriers surrounding supply and demand side of financial systems for promoting financial inclusion. It argues that reaching the ultra-poor is only possible if appropriate strategies are devised to address the existing barriers that prevent inclusion of the unserved and under-served. The paper presents lessons learned from several initiatives to enhance financial inclusion in Nepal, and suggests approaches for serving the ultra-poor in the future.