Importance of Banking in Developing Countries like Nepal

August 19, 2019 | DWAIPAYAN REGMI

Banking Industry in Nepal does not have a long history. The history in the banking field dates back after the Establishment of Nepal Bank back in 1937 AD. It was initially established as the semi-government bank with Metallic Coins with around 10 million of authorized capitals. Banknotes started only after 1945. It took the next years for the formulation of the Nepal Rastra Bank Act and then. Gradually, the number of Banks and Financial Institutions started rising. Facing all the political changes, today Nepalese people have banking access in a wide number of regions – almost every local level. Banks in Nepal have undergone huge struggles as well – from maintaining a minimum level of capital to 8 Arab.

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One important aspect that undeveloped nations look after is economic growth. Banks along with other financial institutions like Insurance, Stock Market, Cooperatives and Non-Depositary Institutions (Employee Provident Fund/ Citizen Investment Trust) have been major key players. Banks have been playing a major role in boosting up the economy of least developed countries. The following are the major points on how Banks have been acting as a major player. The importance of banking in countries like Nepal is highlighted in 7 major points.

1. Financial Literacy

One important thing that Banks in Nepal have been doing is promoting financial literacy. Although, not vividly noticed – but with the expansion of branches, people are gradually turning out to be aware of financial dealings. People have realized the importance of deposits, learned about interest and have started identifying their financial plans.

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2. Financial Access

Reaching almost every local level (732/752) by now, banks have ensured financial access in remote regions of Taplejung to remote regions of Humla. This financial access is a key role that banks have been playing. Reaching local levels, they have ensured other facilities – mobile banking, ATM centers, internet banking, with several features. Lending and borrowing have been possible from the local level itself. People should no longer carry the huge sum of cash during travel either and can get entire facilities of banking from their nearby Gaupalika/Nagarpalika itself.

3. Economy Promotion

Banking has been acting as a key role player in the promotion of the economy. Be that through their facilities like Guarantee, or Letter of Credit – Banks and Financial Institutions have been promoting the economy as one big whole. They have been facilitating various industries and business houses for the promotion process at one point. Besides, they have also been playing the major player in the promotion of productive sector lending – from agriculture, low-cost housing, solar equipment promotions, electronic vehicles, etc.

4. Financial Transparency

How much did an individual earn in one specific year? Or, what is the income that an individual makes? Financial transparency shows it all. Financial transparency is a key tool to portray how much an individual makes on an annual basis or what is earning capacity is. How much did any firm earn or where did some Gaupalika spend their capital expenditure for this year? The financial statement speaks it all – which ensures financial transparency. Meanwhile, it also helps in standing with anti-money laundering to prove credibility across the globe.

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5. Facilitate Entrepreneurship

Banks and Financial Institutions have been key supporters in facilitating entrepreneurship of any nation. Through different titles be that through Mahila Udhyamshilata Karja, or Youth-focused loan, banks have been facilitating entrepreneurship. It has been promoting businesses at a larger scale providing various loans over hypothecation or overdrafts.

6. Facilitates Government Transactions

Banks have been acting as one key player staying as a mediator of Government transactions. It is banks, who have been supporting Pension schemes, or revenue collection schemes (via RMIS). No longer should anyone walk long distances for tax payment, as they can easily do it from their nearby banks. Government transactions can easily be traced out in the meantime from their banking activities.

7. Coping with Global Trend

Banks have been a medium to cope up with the global world – be that through remittance services or money movement. They are authorized for foreign exchange and again. Meanwhile, banks have been supporting the global movement of the cashless economy as well.

With all operation expenses, losses and risks; banks have been doing an impressive job across the nation facilitating people. Apart from supporting fiscal and monetary policies, they have been involved in various Corporate Social Responsibilities as well. They are one important hub for youths to strike down for jobs and careers as well. For developing nations like Nepal, banks have been one significant element who is acting as a booster for the economy as a whole.

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