Reclaiming the "Means": Financial Inclusion as a Catalyst for Holistic Empowerment in Rural Nepal – A Practice Case Study
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Handing over QRs to Riksaw Owners of Biratnagar. All city Riksaws are financed by SBL to promote micro,small & mediums scale entreprises (MSME), poor and economically marginalized peoples to upscale their economic life, to generate employment and we are trying to create access to finance to needy society
Socioeconomic Impacts of Financial Inclusion: A Grassroots Perspective
Our project, initiated by Siddhartha Bank Ltd., Biratnagar Branch, in partnership with Kesaribhawarlal Group (importers and suppliers of electric and normal city rickshaws), directly engaged over 200 ultra-poor village men and women across 8 Village Development Committees (VDCs) and villages in the Morang district, including Sansari Area, Chitaha, Katahari, Jatuwa, and Rangeli. These individuals, previously facing significant joblessness and economic precarity, received loans ranging from NPR 200,000 to NPR 550,000 to acquire auto-rickshaws, predominantly electric vehicles.
With an average loan ticket of NPR 350,000, the total loan size for the 200 beneficiaries amounted to NPR 70,000,000 (NPR 350,000 x 200). This substantial injection of capital into a previously underserved rural economy catalyzed remarkable change. The impact on these over 1,000 household members has been profound and far-reaching. Within six years of the project's inception in 2019/20, almost all 200 auto-rickshaw loan customers have successfully repaid their entire loans. This remarkable repayment rate, despite occasional delays, demonstrates the viability and sustainability of empowering individuals through productive asset financing. Crucially, none of the rickshaws financed through this program were seized for loan recovery, highlighting the success of the collaborative approach between the bank, the supplier, and the borrowers.
Beyond loan repayment, the project has served as a direct pathway to employment and self-sufficiency. If a single auto-rickshaw earns an average daily income of NPR 800, the collective daily income for all 200 rickshaws amounts to NPR 160,000 (NPR 800 x 200). This consistent income stream has allowed many borrowers to continue plying their auto-rickshaws, establishing stable livelihoods. Others have leveraged their improved financial standing to upgrade their livelihoods, with some even purchasing agricultural tractors or diversifying into other entrepreneurial ventures. This initiative has directly fostered economic prosperity and a tangible change in lifestyle, mitigating the societal threat of joblessness. Many beneficiaries have been able to purchase or construct their own homes, significantly improving their living conditions.
Financial Literacy and Education: Building Capacity from Within
A core component of our initiative was a comprehensive financial literacy program. We didn't just provide loans; we empowered borrowers with the knowledge and tools to manage their finances effectively. Before sanctioning any credit limits, we facilitated tripartite agreements involving the borrower, the bank, and the supplier. This foundational step was followed by extensive financial literacy campaigns and the immediate opening of savings and current accounts, along with the activation of mobile banking and QR code functionalities. Notably, this was among the earliest and most widespread adoptions of QR code payment systems for auto-rickshaw operators in Biratnagar.
This emphasis on financial education has yielded significant long-term benefits. Based on the daily income, if an average of NPR 400 per rickshaw is consumed daily and NPR 400 is saved daily, the collective financial activity is substantial:
* Total Daily Consumption: NPR 400/rickshaw * 200 rickshaws = NPR 80,000
* Total Daily Savings: NPR 400/rickshaw * 200 rickshaws = NPR 80,000
* Total Annual Consumption (365 days): NPR 80,000/day * 365 days = NPR 29,200,000
* Total Annual Savings (365 days): NPR 80,000/day * 365 days = NPR 29,200,000
This demonstrates the immense potential for forced saving mechanisms, where a portion of daily earnings could directly go to the bank, ensuring funds were set aside for children's education, general well-being, health, and socio-cultural functions. This transition from basic financial inclusion to deeper financial integration and independence is a powerful testament to the impact of sustained financial literacy. When income started generating, beneficiaries began to save, invest, and engage in the trade of rural products, creating new supply chains. This also helped create industrial markets for large-scale industrial supply and delivery chain industries, facilitating the movement of raw materials to production and finished goods to consumption points, covering both selling and distribution across villages and households.
Gender and Financial Empowerment: Breaking Barriers for Women
A significant number of our beneficiaries were women, often facing substantial obstacles in accessing traditional financial services due to societal norms and lack of collateral. Our project directly addressed these obstacles to women's access to financial services by structuring loans with personal guarantees, which enabled many rural women entrepreneurs to participate alongside their partners. The financial autonomy gained through their earnings has been a critical factor in promoting women's financial autonomy within their households and communities, contributing to broader gender equality. The visible pride and empowerment on the faces of these women, now with their own savings directly managed through the bank, served as a powerful testament to the project's success.
Digital Finance, Technology Access, and Vulnerable Populations: Bridging the Divide
Our project strategically integrated digital financial tools such as QR codes and mobile banking to enhance convenience and efficiency for underserved populations. While acknowledging the potential for digital exclusion, our approach prioritized hands-on training and continuous support to overcome barriers to digital literacy and infrastructure. By making these tools accessible and understandable, we effectively leveraged technology as an enabler, rather than a barrier, to financial inclusion. The early adoption of QR codes among auto-rickshaw operators, a first for many in Biratnagar, laid the groundwork for broader digital transformation in the local economy.
Policy Frameworks and Regulatory Challenges: The Role of Prioritized Sector Lending
The success of this initiative was significantly bolstered by Nepal Government's prioritized sector deprived sector lending policy, under which these loans below NPR 500,000 were financed. This policy framework proved crucial in enabling financial institutions like ours to extend credit to marginalized groups with reduced risk profiles, underscoring the vital role of governments in fostering inclusion through supportive regulatory environments. Our experience suggests that such targeted national financial inclusion strategies, when effectively implemented, can unlock substantial socio-economic development and create a pathway for financial institutions to contribute meaningfully to national development goals.
Broader Societal and SDG Impacts: A Web of Interconnected Progress
The ripple effects of this project extend far beyond individual financial gains, contributing significantly to several Sustainable Development Goals (SDGs):
* No Poverty (SDG 1) and Zero Hunger (SDG 2): By enabling self-employment and income generation, the project directly alleviated poverty and improved food security for beneficiary households. The generation of significant annual consumption and savings demonstrates a tangible uplift from subsistence living.
* Good Health and Well-being (SDG 3): Improved economic stability and access to savings directly translated into better health outcomes and the ability to afford necessary medical care.
* Quality Education (SDG 4): A notable impact has been the ability of families to finance their children's education, especially daughters, who previously lacked access. Many daughters started attending school due to this increased financial stability.
* Gender Equality (SDG 5): The empowerment of women through financial autonomy and participation in entrepreneurship contributes directly to gender equality.
* Decent Work and Economic Growth (SDG 8): The project created immediate and sustainable employment opportunities, fostering economic progress and upscaling lifestyles. It also significantly reduced crime rates by providing productive engagement.
* Industry, Innovation, and Infrastructure (SDG 9): The use of electric rickshaws contributes to sustainable transportation infrastructure and fosters a new class of rural entrepreneurs.
* Reduced Inequalities (SDG 10): By targeting marginalized groups, the project directly addressed economic and social inequalities, providing a ladder out of deprivation.
* Sustainable Cities and Communities (SDG 11): Improved transportation services in rural areas, facilitated by these auto-rickshaws, contribute to better connected and more sustainable communities.
* Responsible Consumption and Production (SDG 12): Encouraging savings, investment, and the trade of rural products through newly established supply chains demonstrates responsible economic behavior.
* Climate Action (SDG 13): The widespread adoption of electric vehicles (EVs) significantly reduced the use of fossil fuels, directly contributing to environmental protection and climate-friendly transportation solutions.
Furthermore, the auto-rickshaws did not only serve the needs of the owners but also facilitated access to markets for other villagers' agricultural products, strengthening rural-urban linkages and enhancing overall community development. This created new supply chains, where rural products could be transported and sold in main cities like Biratnagar, Karsiya, and Rangeli. Additionally, the initiative spurred the growth of village-level grocery businesses, with rickshaw partners buying goods from city markets and establishing their own selling points in villages, thereby creating efficient market channeling from industries and wholesalers to individual households. This dual movement – from village to city and city to village – fundamentally transformed the distribution and consumption landscape. The initiative fostered social harmony by reducing unemployment and promoting widespread economic participation.
The Power of a Small Step Towards Sustainability
This project profoundly illustrates how a small step towards sustainability counts at each doorstep of rural poor society. The provision of a relatively modest loan, coupled with comprehensive financial literacy and strategic partnerships, has not only transformed individual livelihoods but has also generated substantial aggregate economic activity. The collective daily income of NPR 160,000 and annual consumption of NPR 29.2 million, alongside annual savings of NPR 29.2 million, represent a significant boost to the local economy, previously characterized by severe financial exclusion. This "small step" empowered individuals to move from hand-to-mouth existence to active economic participation, enabling them to make conscious choices about consumption, saving, and investment. It reduced vulnerability, improved well-being, and fostered a sense of dignity and ownership within the community. The shift to electric vehicles further reinforces this commitment to long-term environmental sustainability, ensuring that economic growth is not at the expense of the planet. This integrated approach demonstrates that even seemingly localized interventions can create a powerful ripple effect, driving holistic development and building resilient, self-sufficient rural communities.
Submitted by:
Surya Prasad Sharma Upadhya
Bank Manager
Siddhartha Bank Ltd., Biratnagar Branch
Biratnagar, Koshi Province, Nepal
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