Cooperatives go rogue for lack of supervision

- RAJESH KHANAL, Kathmandu

May 13, 2019-

Depositors with cooperatives risk losing their savings as many of these institutions are on shaky ground due to vague government policies, lack of monitoring by local units and slow implementation of the Copomis software designed to keep track of their financial dealings.

So far, the Ministry of Land Management, Cooperatives and Poverty Alleviation has declared 11 savings and credit cooperatives in the Kathmandu Valley problematic after they failed to pay back their depositors’ money. The Problematic Cooperatives Asset Management Committee has been working to liquidate their assets to raise cash to pay off creditors.

Committee spokesperson Rewati Raman Pokharel said the number of problematic cooperatives could rise sharply as many of them were not properly regulated. “The task of regulating cooperatives has been handed over to the sub-national governments, but many of them are yet to devise a regulatory framework for lack of competent manpower,” said Pokharel.

According to the Department of Cooperatives, 34,512 cooperatives have received operating licences. Among them, 13,578 are savings and credit cooperatives and 4,371 are multipurpose cooperatives which are licensed to carry out banking functions. These cooperatives hold deposits totalling more than Rs300 billion.

Two decades ago, the directors of more than 110 cooperatives fled with the depositors’ money. In 2014, a probe commission formed under the chairmanship of Special Court Judge Gauri Bahadur Karki identified 130 cooperatives as troubled and urged the government to enforce stern laws and regulatory system to control wayward cooperatives. In 2011, a high-level task force formed under Nepal Rastra Bank outlined the need for a separate cooperatives bank law due to the huge amount of financial transactions conducted by cooperatives. However, none of these recommendations have been implemented.

Recently, a newly issued regulation requires cooperatives with annual transactions of more than Rs500 million to be supervised jointly by Nepal Rastra Bank, the Department of Cooperatives and the central or sub-national government. In the past too, the department was required to keep tabs on large cooperatives in coordination with the central bank. “Most of the time the central bank was unwilling to inspect cooperatives,” said a department official who asked to remain unnamed.

Deepak Khadka, under-secretary of the Cooperatives Ministry, said the problems in cooperative businesses would be largely resolved once a monitoring mechanism is developed at the local level. According to him, the ministry is also working to ensure effective implementation of Copomis to keep cooperatives in line. The government introduced Copomis two years ago and instructed cooperatives to install the software. As per department sources, most cooperatives have installed the programme but only a few of them are using it regularly. Khadka said the ministry was making all cooperatives enter their data instantly into the system.

Keshab Prasad Badal, chairman of the National Cooperatives Federation, said the problem had worsened after the government handed over charge of the cooperatives to the local governments without making proper preparations. “A monitoring mechanism and related laws should be implemented as soon as possible to keep financial cooperatives in line and protect the interest of depositors,” said Badal.

Published: 13-05-2019 08:43

Next Story

User's Feedback

Click here for your comments

Comment via Facebook

Don't have facebook account? Use this form to comment