A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.Suze Orman


Nepal is a landlocked country lying between China and India in the foothills of the Himalaya. It is about two thirds the size of Victoria, but with 27m people is densely populated. The north is dominated by the Himalayas, the country’s major tourist attraction. But other visitors make their way to the southern city of Lumbini, the birthplace of the Lord Buddha. As one of the world’s holiest places, it has been a pilgrim destination since 400 BC. As a curious aside,  Nepal’s is the world’s only national flag that is not rectangular in shape.

At a Glance

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  • People

  • Economy

  • Poverty

  • Literacy

  • Microfinance

  • Financial Inclusion
The Nepalese are the descendants of past waves of migration from India, Tibet, Burma, and southern China. This has left a mixed legacy of caste and  ethnicity that fragments civil society. In recent times, instability has been a feature of Nepali politics and there have been 20 governments since becoming a democracy in 1990. After a long history as a monarchy, a communist insurgency provoked a decade long civil war that ended in 2008  with the creation of  a multiparty democratic state.
Nepal’s spectacular landscape and exotic cultures might attract tourists, but its economy is constrained by difficult geography and poor transport infrastructure. A third of its people live a two hour walk from the nearest all-season road. Agriculture is the mainstay, employing 76% of the workforce but contributing only a third of GDP. Main industries are carpets and clothing, and processing agri products like jute, sugarcane, ginger and cardamom. It is estimated 46% of the population is under or unemployed - and is the main cause for high migration. With so many men now working abroad, say in the Gulf or India, their remittances represent 25% of GDP.
Few realise quite how poor a country is Nepal. Its terrain means only 16% of the land is arable. Per capita GDP (PPP) is $1,500 less than $3 a day and about a quarter of the population live below the $1.25 a day poverty line. There has been some progress here - in 2004 this ratio was 53%. But other indicators are less encouraging. Malnutrition remains high: 3.5m people are food insecure, and Nepal ranks 49 out of 78 countries for food scarcity. Child labour is widespread: a 2008 survey estimated 34% of children between 5 and 17 were at work. UN Human Development Index (HDI) measures national income, longevity and health, and access to education. In 2014 Nepal ranked 145 out of 187 countries - just above Pakistan and Kenya.
Nepal has a poor record in literacy, with the overall rate rising from a low 54% in 2001 to 66% in 2011. Gender inequality between men and women is a major issue, with male literacy at 75% compared to females at 57%. The Nepal government provides free education for ten years. But parents must buy books and pay some school fees, which makes it unaffordable for the poor. More than 50% of primary school students do not go on to secondary schools, and only 50% complete secondary education.
Reflecting its geography, Nepal’s microfinance sector is highly fragmented. They are well represented in the fertile Terai region along the border with India and along the country’s main highways, but thinly spread or absent in more remote areas. Nepal’s central bank regulates microfinance development banks (MFDBs).and gives priority to those willing to offer services in remote areas. By 2013, there were 60 NGOs providing microfinance services. Although there are no formal interest rate restrictions, government policy has kept lending rates low at 18-24%. A EIU survey of the microfinance environment ranked Nepal at 47 or in the middle range of countries.
Financial inclusion means vulnerable and low-income people have access to responsible financial services at an affordable cost. In Nepal, 75% of adults, primarily in rural areas, remain unbanked with scarce access to financial services, Of the 25% that have an account, only 10% save with it, and only 4% receive wages or remittances in it. While the idea of a more client centric focus is still quite new, eight institutions have endorsed the Smart Campaign, the global campaign committed to embedding client protection practices.