08/08/06

MF/MED SERVICES FOR VERY POOR PEOPLE

PROMISING APPROACHES IN
CASE STUDY
Nirdhan Utthan Bank, Nepal

Funded by
Save the Children

Written by
John Berry

June 2006
 TABLE OF CONTENTS

Executive Summary.............................................................................................................i
1. Context ............................................................................................................................1
1.1. Country Socioeconomic and Poverty Data ..............................................................1
1.2. Local Context – Target Area.....................................................................................2
2. Organizational Framework .............................................................................................7
2.1. International Organization........................................................................................7
2.2. Local Organization....................................................................................................9
3. Description of “Very Poor” Target Group.....................................................................17
3.1. Individual and Household Conditions....................................................................17
3.2. Socioeconomic conditions......................................................................................18
4. Poverty Targeting and Assessment................................................................................20
4.1. Poverty Assessment ...............................................................................................20
4.2. Poverty Targeting:..................................................................................................21
5. Products and Services....................................................................................................23
5.1. Financial Products...................................................................................................23
5.2. Microenterprise Development Services..................................................................25
5.3. Non-financial Services............................................................................................26
5.4. Design and Product Development: ........................................................................26
5.5. Implementation Process .........................................................................................32
6. Results............................................................................................................................33
6.1. Method of Measuring Results.................................................................................33
6.2. Impact.....................................................................................................................34
6.3. Cost Effectiveness and Sustainability ....................................................................34
7. Conclusions....................................................................................................................39
7.1. Challenges and Pitfalls/Lessons Learned................................................................39
Appendix 1....................................................................................................................43
Contacts and Sources of Information............................................................................43
Appendix 2....................................................................................................................45
Socioeconomic and Poverty Indicators: definitions, explanations and sources...........45

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Executive Summary

Save the Children and Nirdhan Utthan Bank have worked together since 1997 to increase
access to financial services for poor women and other vulnerable groups in rural Nepal.
With institutional capacity building and technical assistance from Save the Children,
Nirdhan has successfully re-engineered its methodology and introduced flexible new
products to reach those in remote areas with little or no assets. These innovations have
driven Nirdhan’s growth from 3,000 clients to over 70,000 clients, making it Nepal’s
leading women-focused microfinance institution.

Nirdhan Utthan Bank is headquartered in Bahairawa, with branch offices in ten districts
in the southern lowland and central hilly areas of Nepal. Nirdhan was founded as an
NGO in 1991 and began offering financial services in 1993. In 1998 Nirdhan Utthan
Bank (“the bank for the uplifting of the poor”) was registered. A year later, Nirdhan
Bank received a license from the Nepalese Central Bank and began operations as a
microfinance bank.

Nirdhan’s mission is to offer financial services and to improve the social awareness of
underserved poor people in Nepal. The leadership of the organization is fully committed
to serving the poor through sustainable activities. Nirdhan’s Chief Executive Officer is
a visionary former central banker who has been a major force in the development of the
microfinance industry in Nepal. The General Manager is a pragmatic former commercial
banker with a firm grasp on the finances of the organization. The work culture that
pervades the organization is a reflection of this leadership. While serving the poor is the
paramount value of Nirdhan’s organizational culture, there is an equally strong awareness
that without a healthy loan portfolio that generates sufficient revenue to cover costs,
Nirdhan will cease operations. New staff members are trained on these principles from
their first days with the organization.

Nirdhan Bank targets the poor in underserved areas of Nepal. As of May 2006, Nirdhan
serves 74,000 clients, including 58,000 borrowers. A recent external poverty impact
study estimated that 37%, or approximately 27,000 of Nirdhan clients, are poor and 26%,
or approximately 19,000 of Nirdhan clients, are very poor.

To ensure that its services are reaching the poor, Nirdhan has developed a number of
poverty targeting methods. One very simple method of targeting the poor has been to
open branch offices in areas where poverty is endemic. Poverty levels in Nepal are
highest in the rural hills and mountains, where Nirdhan has recently opened several new
branches. Once Nirdhan identifies a potential area for expansion, they implement a rapid
rural appraisal survey and speak with local leaders to determine areas which could
support a branch office. After choosing a new branch location, Nirdhan staff organize
household surveys to identify potential clients. Once potential clients have been selected,
Nirdhan’s main targeting tool is a means test which is implemented by loan officers at the
household level and intended to select only those who qualify as poor to become group

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members. Another relatively simple method of targeting the very poor has been to work
with socially marginalized women, such as untouchables and ex-bonded laborers.

Although Nirdhan’s primary financial service methodology remains Grameen Bank

group lending, they have recently experimented with modifications to increase its
flexibility and to offer additional non-credit services. These have included the creation of
self-reliance group village banks, changes to repayment schedules and terms, and
offering individual and other specialized loans. Additional financial services offered by
Nirdhan include life and livestock insurance and remittances. Nirdhan has also
developed products for very poor clients which combine financial and non-financial
services in order to first bring clients out of destitution and build their business and life
skills, then offer them small loans for income generating activities.

In order to measure the impact of its programs over time, Nirdhan has periodically hired
local consulting firms to assess changes in assets and empowerment among its clients.
Indicators used in these assessments include economic assets, educational assets, social
assets and health assets. Findings from a recent study indicate that Nirdhan has had an
impact on a range of poverty indicators. For example, 30% of Nirdhan clients had
increased their income and 30% also increased savings. Of all clients surveyed, 28%
improved their nutritional status and 74% improved food security. Finally, 86% reported
an increase in their empowerment to make decisions regarding loans and savings use.

In both absolute and relative terms, Nirdhan is a cost-effective and sustainable

organization. Nirdhan’s efficiency is demonstrated by its operating expense to loan
portfolio ratio of 13.5%, which compares favorably to the regional benchmark of 22%.
In addition, Nirdhan’s cost per borrower is $15, with an average loan balance per
borrower of $113. These figures also compare well to the Asian benchmark cost per
borrower of $25. It is Nirdhan’s stated goal to cover costs, but not to maximize profits.
The impact of this policy is demonstrated in Nirdhan’s sustainability ratios, which are
100.7% operational self-sufficiency and 100.6% financial sustainability. (Benchmark
ratios for medium-sized Asian Micro Finance Institutions are 113% and 110%
respectively.) One area for concern with Nirdhan’s portfolio is their very high portfolio
at risk ratio, which as of June 2006 stood at 14.25%.

While there is room for debate regarding whether there is room for improvement in
Nirdhan’s outreach to poor clients, this discussion must take into consideration the
challenges of the context in which Nirdhan is working. Nepal is one of the poorest
countries in the world, and Nirdhan has been serving poor clients in remote rural regions
during an active political insurgency that has already killed 13,000 civilians. While this
does not necessarily mean Nirdhan should be given leeway for basic issues such as their
high portfolio at risk ratio, they should be given credit for overcoming fundamental
challenges that have daunted less dedicated institutions. Through these challenges they
have continued to actively target and serve poor women.

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1. Context

1.1. Country Socioeconomic and Poverty Data

Table 1
Country Statistics
Country Nepal
Currency Rupee
Amount Year
Population (millions) 27.6 million 2005
Population density per square kilometer 157.3/ha 2001
Percentage urban / rural population 14%/86% 2001
Inflation 4.3% 2004/05
Nominal Exchange Rate (current, X Currency per US$1) 72.1 2006
HDI value 0.526 2004
HDI ranking 136 2003
PPP Exchange rate
GDP/Capita (PPP US$) $1,400 2005
Population below national poverty line (%) 42% 2003
Population living below $1 a day (%) 38% 2003
Population living below $2 a day (%) 83% 2003
Population growth rate 2.16% 2002
Life expectancy 60 years 2002
HIV prevalence (% ages 15-49) 0.3% 2003
Malaria cases (per 100,000 people) 33 2000
Population undernourished 17% 2002
Children underweight 48% 2000
Aver. 53%
Adult literacy (male, female) Male 65% 2002
Female 43%
Male 79%
Net primary enrolment ratio (male, female) 2002
Female 64%
Male 36%
Net secondary enrolment ratio (male, female) 2002
Female 25%
Physicians per 100,000 people 5 2002
Health expenditures per capita $65 2002
Gender-related development index (GDI) rank 106 2002
Gender-related development index (GDI) value 0.511 2002
Sources:
“Nepal Human Development Report 2004: Empowerment and Poverty Reduction” UNDP,
Kathmandu, Nepal, 2005.
“The CIA World Fact Book” CIA, Washington, DC, 2006.

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1.2. Local Context – Target Area
1.2.1. Briefly describe local socioeconomic conditions

1.2.1.1. Geographic reference of location and size of population

Nepal is one of the poorest countries in the world, with 40% of its population living
below the poverty line. Located in southern Asia, Nepal is landlocked and strategically
wedged between two powerful neighbors, China and India. At close to 150,000 square
kilometers, Nepal is slightly larger than the state of Arkansas. Geographically the
country is divided into three distinct regions, the tarai flat plain of the Ganges River in
south, the central hill region, and the rugged Himalayas in north. Mountains cover 75%
of Nepal, which is home to 8 out of 10 of the world’s tallest mountains, including Mount
Everest. The estimated population of Nepal in 2005 was more than 27.6 million, with a
growth rate of 2.16% and a life expectancy of 60 years.

1.2.1.2. Local population characteristics (detailed information on target group

to follow in later section):

1.2.1.2.1. Ethnic groups

Nepal is home to over 100 ethnicities, speaking more than 12 languages and practicing 9
different religions. Major ethnic groups include: Chhettri 15.5%, Brahman-Hill 12.5%,
Magar 7%, Tharu 6.6%, Tamang 5.5%, Newar 5.4%, Muslim 4.2%, Kami 3.9%, Yadav
3.9%, with other groups making up 35.5%. Major languages include: Nepali, Maithali,
Bhojpuri, Tharu, Tamang, Newar, Magar and Awadhi.

1.2.1.2.2. Most important economic activities

Agriculture is the dominant economic activity in Nepal, employing more than 80% of the
population and counting for close to 40% of GDP. Because only 16% of land in Nepal is
arable and because most agricultural labor is manual, production levels and efficiency in
the sector are both low. Industrial production in Nepal mainly involves agro-processing
of commodities such as jute, sugarcane, tobacco and grain. Tourism was formerly a
major source of foreign exchange, but security concerns have led to a dramatic decrease
in tourism revenues. With a per capita GNP (PPP) of $1,400, Nepal ranks 199th (out of
232 countries) in the world in relative economic prosperity.

1.2.1.2.3. Cultural and religious background

While Hindu culture and religion dominate Nepalese society (Hindus account for 80% of
the population and, until April 2006, Nepal was the world’s only remaining Hindu
monarchy), religious tolerance is the norm. In reality, many Nepalese practice a
combination of Hinduism and Buddhism and Shamanism.

1.2.1.3. Natural resources, economic activities, markets, unemployment

The Nepalese economy is dominated by services (41%) and agriculture (38%), with
industry contributing 21%. Important industries include tourism, carpet, textile, small
rice, jute, sugar, oilseed mills, cigarettes, cement and brick production. Nepal possesses
abundant water resources, with strong potential for hydropower production. Although
Nepal could be an important source of hydropower for its two larger neighbors,

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electricity supply in the country remains erratic and only 15% of the population has
access to the power grid. Mineral resources include quartz, as well as small deposits of
lignite, copper, cobalt, and iron ore. Although Nepal has significant timber resources,
deforestation is a serious concern. Of the country’s 27 million people, 10 million are in
the labor force, 42% of whom are unemployed.

1.2.1.4. For rural areas only: most important crops and livestock activities,
water supply (irrigation, rain fed), seasons and number of harvests, land
ownership and contract patterns
The most important crops in Nepal are rice, wheat, maize, potato, oilseeds, green
vegetables and fruits. Water buffalo meat is also a significant agriculture product. Of
85,122 ha total agricultural land, 44,373 ha are under irrigation and the rest are rainfed.
Rains fall mostly in June, July and August during the monsoon. Seasons vary from cool
summers and severe winters in the mountainous north to subtropical summers and mild
winters in the southern lowlands.

1.2.1.5. Occurrence of droughts, floods, natural disasters or conflicts

Nepal experiences occasional severe thunderstorms, flooding and landslides. The
country also suffers from periodic droughts and famines. However, the most significant
event to negatively affect the country has been the ongoing Maoist insurgency which has
dramatically impacted the socio-economic conditions in Nepal on both the macro and
micro level. The government has effectively lost control of large swaths of rural Nepal
and the Maoists rebels have set up parallel administration and taxation systems in the
areas under their control. Roadblocks and strikes have crippled the economy and military
expenditures have drawn scarce resources away from development activities. Tragically,
more than 13,000 people have lost their lives since the conflict began. Recent
developments have offered a glimmer of hope that the insurgency will end, but until a
long-term solution is found, the country will remain under its shadow.

1.2.2. Describe government policies aimed at the very poor:

1.2.2.1. Social protection schemes by the government

The Nepalese Government is implementing a four pillar poverty reduction strategy
focused on broad-based economic growth, social services and economic infrastructure,
social inclusion, and good governance. The framework for this strategy is founded on
economic, political and socio-cultural empowerment.

1.2.2.2. Policies aimed to integrate the very poor, such as anti-discrimination

and affirmative action laws
Nepal has developed national-level policies focused on empowering women, dalits
(untouchables) and indigenous groups. The government has implemented several
measures to promote gender equality including revising inheritance laws, affirmative
action hiring and promoting women’s education and rights. The Nepalese Constitution of
1990 banned all forms of discrimination, while promoting the elimination of inequality,
supporting diversity and advancing disadvantaged groups. In 2001 the government
passed the Kamaiya Labor (Prohibition) Act which freed all bonded laborers and

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outlawed the practice. Despite the government’s good intentions, the commitment,
resources and implementation of these policies remain weak.

1.2.2.3. Property and land rights

Article 17 of the 1990 Nepal Constitution provides the right to all the Nepalese citizens to
earn, use and buy or sell property. The Land Act of 1964 delineates the amount of
property that any person or family may own by geographic regions. For example, up to
6.8 ha may be owned in the terai, up to 3.5 ha in the hilly regions and 1.25 ha in the
Kathmandu valley. Over and above these amounts, small amounts of land may be owned
for housing purposes.

Currently less than one percent of women in Nepal legally own homes, just over five
percent own property and approximately 17% own other assets such as jewelry.
Historically, Nepal's laws stated property could only be inherited through fathers (in case
of children) or husbands (in case of married women). Intense pressure from women's
groups eventually led to major changes in the country's inheritance laws. These
amendments to the Civil Code recognized daughters’ rights to inheritance on par with
those of sons as well as the rights of widows and women who are divorced (dhakal).

1.2.2.4. Local government and non-governmental development programs

Numerous governmental and non-governmental programs are aimed at combating
poverty in Nepal. Many of these programs are focused on remote rural areas, such as
Western Nepal. Some of the governmental poverty alleviation programs include: the
Western Terai Poverty Alleviation Program, the Western Upland Poverty Alleviation
Program, Remote Area Development Programs, Local Development Funds and Village
Development Programs. In addition, the government implements programs specifically
focused on indigenous populations and disadvantaged groups such as ex-bonded laborers.

There are innumerable numbers of programs initiated by non-government organizations

that support providing economic opportunities to poor including formation and
strengthening of savings and credit groups, agriculture producer's groups, micro
entrepreneur's and other economic
groups in almost all the districts of Nepal.

1.2.3. Brief profile of microfinance environment.

1.2.3.1. List microfinance institutions and other financial institutions/services

accessible by the poor.
The microfinance industry in Nepal is composed of more than 2,300 cooperatives, 47
registered NGO financial intermediaries and 22 development banks. In total, these
institutions serve more than 700,000 clients with $62 million in loans outstanding. Data
on the exact number of MFIs and clients served are hard to measure accurately because
most MFIs are not registered and do not report to the Nepal Rastra Bank (Central Bank).
A recent study by the MixMarket analyzed data from the eight largest registered MFIs

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(Chhimek Bikas Bank, Deprosc Development Bank, Madhyamanchal Grameen Bikas
Bank, Nirdhan Utthan Bank, Chhimek Samaj Sewa Sanstha, Western Region Grameen
Bikas Bank, Swabalamban Bikas Bank, VYCCU Savings and Credit Cooperative) and
found them to be serving 158,124 borrowers with loans worth $17 million and 189,901
savers (2004 data). These eight MFIs represent one third of total microfinance loans in
the country. Nirdhan, with more than 74,000 borrowers, is the largest MFI by far in
Nepal and is currently serving over 10% of all the estimated MFI clients in the country.

1.2.3.2. Describe dominant microfinance models and services

Nepal has three major types of microfinance institutions (MFIs): cooperatives, financial
NGOs (FINGOs) and development banks. Non-financial NGOs are also active in the
creation of self-help group rotating credit and savings schemes, but they do not offer
intermediate financial services. The cooperative model is the oldest in Nepal, dating
from the mid 1950s. However, of the thousands of cooperatives operating in Nepal, only
20 are registered with the Rastra Bank. State-owned development banks became major
actors in microfinance in the mid 1970s when the Rastra Bank directed them to invest 5%
of their portfolio in small loans. The Rastra Bank continues to require all commercial
banks to invest 3% of their total deposits in the deprived sector. This translates into an
important source of debt finance for well-performing MFIs. MFIs in Nepal generally
offer standardized loan products, with mandatory and voluntary savings. The Grameen
bank model is predominant in Nepal, although self-help group lending and individual
lending are increasingly common in remote rural areas.

1.2.3.3. Demand versus supply of microfinance services

The supply of microfinance services in Nepal is currently reaching an estimated 700,000
clients with $62 million in loans. The Asian Development Bank calculates that the
effective demand for financial services in Nepal is 2.1 million households and roughly
$140 million in loans. While demand outstrips supply by 2/3rds, institutional capacity
remains a significant constraint to the growth of the industry. The presence of second
story lending institutions such as the Rural Microfinance Development Centre, plus
Rastra Bank requirements that commercial banks lend to the deprived sector, ensure that
supply of capital is not a major constraint.

1.2.3.4. Breadth and depth of microfinance outreach

MFIs are currently reaching an estimated 700,000 clients. Based on the 8 MFIs analyzed
in the MixMarket study, growth in outreach to borrowers is around 7% per year and
growth in outreach to savers is more than 11%. Depth of outreach as measured by
average loan size ranges from a low of $90 to a high of $305. (These figures represent
35% and 117% of per capita GNI respectively.) Nirdhan’s average loan is $110, which is
42% of per capita GNI. Average savings balance among the 8 MFIs studied ranges
between $3 and $206, with an average of $47 per saver. Nirdhan’s average savings
balance is the lowest at $3.

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 1.2.3.5. MF/MED initiatives (other than case study) aimed at the very poor
Informal microfinance providers have existed for a long time in Nepal, but it was not
until 1956 that cooperatives began to provide savings and microcredit services to their
members. Recognizing the larger need for microfinance services, the government soon
became actively involved in promoting the sector. In 1974, Nepal's central bank, Nepal
Rastra Bank (NRB), directed the two state-owned commercial banks to invest at least five
percent of their total deposits in small scale finance. The Agriculture Development Bank
of Nepal (ADB/N) followed suit with the implementation of the Small Farmers
Development Project, which was the first to introduce the concept of group guarantee as
an alternative to physical collateral in Nepal. The number of microfinance institutions
(MFIs) operating in the country increased dramatically during the 1990s with the
involvement of thousands of local NGOs and the establishment of nine retail
microfinance development banks (MFDBs).

It is estimated that over 2.1 million households in Nepal live near or below the poverty
line and require microfinance services. Over the last decade, microfinance outreach has
grown significantly to nearly 700,000 households (estimate from CMF's Directory of
MFIs of Nepal) but continues to fall short of total demand. Estimates of household credit
needs vary by region and depend on the local availability of economic opportunities.
Overall, household microcredit demand averages $100. Hence, the effective unmet
demand for such services is roughly $140 million.

1.2.4. Poverty

1.2.4.1. Geographic areas of the country where extreme poverty concentrated

The rural hill and mountain regions of Nepal suffer from a heavy concentration of
poverty. Many of these areas are not accessible by road and have little or no
infrastructure. Most of these areas are also under the control of Maoist rebels and
therefore inaccessible to government relief and development programs. This
combination of factors results in chronic food deficits in the hills and mountains. While
extreme poverty has typically been a rural problem in Nepal, with the Maoist insurgency,
many poor people have migrated to cities, thus compounding the problem of urban
poverty.

1.2.4.2. Does the target area fall within these extreme poor regions?
The majority of Nirdhan Bank’s clients live in the tarai lowlands of south central Nepal,
a region which is relatively better off than the western hills or the mountains. However,
Nirdhan has expanded its operations and developed specific poverty focused products for
the rural hill regions of central Nepal. Nirdhan is currently limited by the Rastra Bank to
operating in 10 regions. As soon as they receive authorization, they plan to expand their
area of operations to include more rural hill regions.

1.2.4.3. How many people live in target area?

Nirdhan Bank currently operates in ten districts with a total population of about
6,000,000 people.

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 1.2.4.4. Proportion of population in the target area living below $1-a-day and/or
within bottom 50% of people living below the national poverty line
Government data estimate that 38% of the population of Nepal is living on less than
$1/day and 42% are below the national poverty line. A recent study by the Centre for
Microfinance found that 26% of Nirdhan Bank’s clients are very poor, 37% are poor and
36% are middle poor.

2. Organizational Framework

2.1. International Organization

2.1.1. Name and type of the international organization

Save the Children is a leading independent organization creating lasting change for
children in need in the United States and around the world. For more than 70 years,
Save the Children has been helping children survive and thrive by improving their health,
education and economic opportunities and, in times of acute crisis, mobilizing rapid life-
saving assistance to help children recover from the effects of war, conflict and natural
disasters. Save the Children USA is a member of the International Save the Children
Alliance, a global network of 27 independent Save the Children organizations working to
ensure the well-being and protection of children in more than 110 countries

2.1.2. Organizational background

2.1.2.1. Mission and vision

Save the Children believes in a self-help philosophy with a mission of providing
communities with a hand up, not a handout. SC works with families to define and
address the problems their children and communities face and utilizes a broad array of
intervention strategies to ensure the sustainability and efficacy of all its programs.
Programs seek to make lasting, positive change in institutions, behaviors or policies that
affect human well-being. This is accomplished be enabling individuals, communities, and
institutions to adopt new behaviors and systems that promote change and endure beyond
Save the Children’s involvement. Save the Children recognizes, promotes and supports
sustainability at four levels within its programs: institutional, financial, behavioral and
policy.

2.1.2.2. Brief history

Founded by Eglantyne Jebb, Save the Children began assisting children in the United
States in 1932 in the Appalachia Region. Today, Save the Children works in more than 40
countries, including the United States, and serves more than 33 million children and 32
million others. SC’s mission is to save and improve children’s lives, including parents,
community members, local organizations and government agencies.

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 2.1.2.3. Types of support
Save the Children typically offers strategic, operational, and financial support to improve
the institutional capacity of its local partners to help them better reach families and
children.

2.1.3. Development intervention approach

Save the Children operates both domestic and international programs focused on child
welfare – including emergency response and long-term development. The program
strategy is built around the principles of child-centeredness, empowerment, gender
equity, sustainability and scaling up, and measurable impact. Programs are designed to
increase the capacity of disadvantaged individuals and groups to make choices, and take
actions on their own behalf with self-confidence, from a position of economic, political
and social strength. Participation and empowerment are linked and mutually reinforcing.
Programs in economic opportunities, education, health and humanitarian response
address the rights of girls and boys as well as their physical, intellectual, social and
emotional needs.

2.1.3.1. Primary target group and development sector

SC’s primary target group is children, their families and their communities. SC works in
a range of development sectors, including health, education, HIV/AIDS, emergency
response and food security, in addition to providing economic opportunities.

2.1.3.2. Specialized in MF/MED or multi-sectoral

Save the Children supports both specialized and multi-sectoral partner institutions. SC
and its partners implement best practice microfinance programs and strive for full
financial sustainability within seven years.

2.1.3.3. MF/MED model

SC’s model is to improve the economic security of needy children and their mothers by
building sustainable MFIs that provide access to financial services for poor female
entrepreneurs. Where credible local partners exist, SC works with them to build their
capacity both technically and institutionally. In countries where there is no credible MFI
partner, SC facilitates the creation of one, usually transferring staff to the newly created
institution after several years of direct management. Although Save the Children uses
Group Guaranteed Lending and Savings (GGLS), or poverty lending, as its primary
methodology, it works with partners who use a variety of methodologies, such as
Grameen replicas and village banks. Most SC partner MFIs serve a client base that is
100% women.

2.1.3.4. Other sectors

Save’s multi-sectoral programming focuses on economic opportunities, primary, basic
and adolescent education, emergency relief including disaster response and hunger and
malnutrition, health with a special global program focused on Saving Newborn Lives,
funded by the Bill and Melinda Gates Foundation and HIV/AIDS.

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2.2. Local Organization
Table 2
Institutional Background
Issues Observations
Name of the organization or institution Nirdhan Utthan Bank Ltd.
Geographic area of operation Ten districts (out of 75): Rautahat, Bara,
Parsa, Chitawan, Nawalparasi, Rupandehi,
Palpa, Kapilbastu, Dang and Banke
Legal structure Public Limited Company
Registration status Licensed to operate as per Bank and Financial
Institution Ordinance Act 2006
Regulation status Class D financial institution licensed by
Central Bank of Nepal
Date established Nirdhan NGO was created in 1991
Nirdhan Utthan Bank was created in 1998
Specialized MF or multisectoral Specialized microfinance services
Start of MF activities March 1993
Core business Savings, Loans, Insurance and Money Transfer
Business model Microfinance services through Grameen style
group lending and village banks
Target market 40% of the bottom poor
Number of clients 74,731 (As of June 2006)
Number of staff 276 (As of Mid June 2006)

2.2.1. Organizational development

2.2.1.1. Mission and vision

Nirdhan Bank’s vision is to reduce poverty in Nepal by enabling poor people to
contribute equally to a prosperous, self-reliant rural society through self-employment and
social awareness. The bank’s mission is to extend financial services and to improve the
social awareness of the poor.

2.2.1.2. Brief history

In April 1991, Nirdhan was founded and registered with the Government of Nepal as an
NGO. ("Nirdhan" means the poor in Nepali.) Two years later, in March 1993, Nirdhan
started its microfinance operations near Bhairawa in southern Nepal near the border with
India. Recognizing the limitations of offering financial services as a bank NGO, in
November 1998 registered a separate company – Nirdhan Utthan Bank Limited (NUBL).
In April 1999, Nirdhan Bank received a license from Central Bank as a “Class D
Microfinance Bank” under Development Bank Act of 1996. In July 1999, all
microfinance assets, liabilities, operations and staff were transferred from Nirdhan NGO
to Nirdhan Utthan Bank.

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 2.2.1.3. Objectives
Nirdhan Bank’s goals are to reach a maximum number of poor households, to develop a
well-managed institution and to enhance women's self-respect. Their objectives are: to
focus on bottom 40 percent of population, to maintain simple loan process, to require
compulsory group training and savings, to seek homogeneity of group members, to
promote collective group liability and to integrate financial and non-financial services.

2.2.1.4. Organizational culture, leadership, innovation

Nirdhan’s institutional culture and management are focused on serving the poor. New
loan officers and staff are trained in Nirdhan’s pro-poor approach from their first days as
interns. The leadership of Nirdhan on both management and board levels speak with one
voice in their views regarding Nirdhan’s calling to serve the poor (although there is good
natured debate about how to best serve the poor sustainably). Nirdhan’s founder, Dr.
Harihar Dev Pant, has infused the organization with his vision of poverty reduction and
empowerment. At the same time, Dr. Pant has entrusted day to day management of
Nirdhan to a highly professional team of financial managers who keep a close eye on the
bottom line. Nirdhan has been innovative in its efforts to serve the poor sustainably by
dividing responsibilities between Nirdhan Bank, which offers market rate financial
services, and Nirdhan NGO, which delivers social and training services that would not
otherwise be profitable for the Bank to offer.

2.2.1.5. Organizational structure, roles and responsibilities

Based on Grameen methodology, Nirdhan Bank organizes its clients into groups of five
members. Nirdhan’s smallest operating unit is a loan center, which includes between
eight and ten borrower groups (forty to fifty clients). Loan centers are grouped into
branches. A typical branch office consists of one branch manager, one accountant and
five to seven loan officers. Branches are organized by areas, with area offices
supervising between seven and fifteen branches. An area office has one area manager,
one program officer and two assistants. Nirdhan Bank’s management operates from its
headquarters office in is Bhairawa. Of Nirdhan’s 276 staff members, 237 work at the
branch level, 14 at the area office level and 25 at headquarters. Loan officers represent
166, or 60% of total staff. The General Manager is based in Bhairawa and is responsible
for day to day operations. The unpaid CEO and founder is based in Kathmandu and is
responsible for guiding the organization.

Chart 1
Organizational Chart

Board of Dire ctors

Compa ny Se cre tary Chief Exe cutive Office r

Ge ne ral M anage r

Admin. Training Accounts Inte rnal Pla nning &

De pt. De pt. De pt. BO Audit De pt. M onitoring
De pt

Bhairaha wa Are a Office Bharatpur Are a Office Banke Kalaiya Are a Office
office

15 Branc he s 10
7 Branc he s 7 Branc he s 13 Branc he s
 2.2.1.6. General qualifications of staff
Nirdhan’s staff are generally young, but qualified for their positions. Minimum
educational qualifications for a Field Assistant (loan officer) are completion of 10 years
of schooling with a certificate. Prior work experience is preferred, but not required. The
minimum qualifications for a branch or area manager are a master’s degree and job
experience. All new staff must be between 18-35 years old for men and 18-40 years old
for women. Local languages skills are preferred and Nirdhan often hires staff from the
communities in which they operate. Women and minorities are encouraged to apply.

In order to become a full time Nirdhan staff person, candidates must pass an extensive
written exam, after which they are selected for an in person interview. Successful
candidates must then complete a six month internship and training program before being
hired. Nirdhan has recently developed an affirmative action program for women and
ethnic minorities. Although all job candidates must successfully pass the written exam,
women and minorities are given special consideration in being selected for competitive
interviews. Currently 29 staff members, or 12%, are women.

2.2.1.7. Training/sensitization related to poverty outreach

Staff training at Nirdhan is centralized in the headquarters-level training department.
Having passed through the examination and interview process, recruits spend a week at
headquarters for an introduction to the bank and its operations. They are then posted to a
branch office for six months of on-the-job training. Recruits are partnered with senior
field assistants who guide and monitor them closely. After six months, trainees are either
let go or are promoted to the status of full-time staff. Although the focus of training for
field assistants is practical, there is also important classroom based training on the
Nirdhan lending methodology, policies, and procedures. During these training sessions
new staff are introduced to the goals and mission of Nirdhan and are sensitized to the
importance of serving poor clients.

Nirdhan managers are usually hired from within, so they have already been trained on
Nirdhan’s poverty mission and are experienced in the bank’s operations. Additional
training for managers is provided through regional workshops and seminars organized by
Grameen Trust, CASHPOR and other group lending institutions.

2.2.1.8. Governance
Governance and oversight of Nirdhan’s management is assured by a nine member board
of directors which meets at least twelve times a year. All of the board members are
financial professions and prominent members of the banking and development
communities. Most board members are representatives of shareholder banks. The board
makes policy-level decisions regarding issues such as annual budgets, fund raising,
setting interest rates and approving new products and programs. While the founder of
Nirdhan, Dr. Pant, sits on the board and acts as CEO of the bank, he is not the board chair
and defers leadership of the board to the Chairman and day-to-day management of the
bank to the General Manager.

11
 Table 3
Nirdhan Bank Shareholders
(as of April 2006)
Nirdhan NGO 25.49%
Public shareholders, including staff 19.02%
Himalayan Bank Limited 12.24%
Nabil Bank Limited 12.24%
Everest Bank Limited 12.24%
Grameen Trust, Bangladesh 11.22%
Private sector individuals 7.55%

2.2.2. MF and MED services

2.2.2.1. MF model and products/services

Nirdhan uses three financial services models: group lending and savings (individual
loans with solidarity group guarantee), village bank lending and savings (self-reliance
group) and individual lending and savings. Nirdhan offers a wide range of loan
products including general loans, agricultural loans, business loans, tube well loans,
sanitary loans, housing loans and microenterprise loans. Maximum loan size for these
different products ranges from $43 for an agricultural loan to $1,430 for an individual
loan. Average loan size across the portfolio is $110.

Table 4
Principal Loan Characteristics
Group lending
Group Size 5 members per group; one center consists of 8-10 groups
Loan Size First cycle loan starts at $70-$155 and increases by $70 in each
subsequent cycle; maximum group loan $430
Loan Terms 50 weeks/25 fortnights; equal weekly/fortnightly installments
Interest rate 18-20% declining (15% for self-reliance groups); late penalty 2%
Collateral Group guarantee
Individual lending
Target clients Graduates of solidarity groups
Loan Size Minimum loan $430 and maximum $1,430
Interest rate 18% declining; late penalty 2%
Collateral At least 2 times of requested loan amount

For group loans, each of the five group members is collectively responsible for the
payments of all members. Borrower groups comprise five members and one center is
composed of eight to ten groups. When receiving the loans, group members come to

12
Nirdhan's branch office and collect their cash individually, while repayments are made in
fortnightly meetings in village centers.

Self-reliance group (SRG) loans are a recent product targeted at remote rural borrowers.
SRGs are composed of an average of 30 women, who operate as an autonomous village
bank, setting their own lending and savings terms and conditions. A four person
executive committee is responsible for approving loans and collecting repayments.
Nirdhan offers wholesale loans to village bank at 15% and SRG members set their own
interest rate, which, in many cases is significantly higher than the interest Nirdhan Bank
charges to the group. The margin between Nirdhan’s interest rate and the rate members
charge themselves is accumulated in the group savings account.

In response to client demand, Nirdhan introduced an individual loan product in 2000.

Individual loans are collateral based and the maximum size for this loan is $ 1,430. Loan
term varies from one year to 3 years depending upon the nature of enterprise. Following
growing problems with repayment and changes in Rastra Bank regulations limiting
individual loans to former group loan borrowers, Nirdhan has deemphasized individual
loans.

Nirdhan offers both mandatory and voluntary savings. Mandatory savings are collected
from group members by deducting 5% of the loan amount up-front on selected loan
products and collecting $ 0.03 per meeting per client. The mandatory savings is managed
as a group savings fund, and members can take loans for emergency and consumption
purposes from this fund. The voluntary savings product is a self-managed personal
saving program and funds can be withdrawn at will. In order to encourage members to
save, Nirdhan accepts deposits as low as $ 0.15. Average savings balance is $3 per saver.

In addition to the financial services above, Nirdhan also offers insurance and money
transfer services. Insurance services are provided through a linkage with the National
Life and General Insurance Company and include livestock insurance and life insurance.
Money transfer services are offered in coordination with Nepal Investment Bank and
Nabil Bank.

2.2.2.2. Description of main target group

Nirdhan’s main target group is poor entrepreneurs in underserved areas of Nepal. All of
Nirdhan’s clients are women and are typically among the poorest women in the villages
that the bank serves. The bank’s strategy is to recruit first time clients among the 38% of
the population who are below the poverty line. The vast majority of its clients are unable
to read or write and many work as agricultural field laborers. Average land holding
among its client is 0.3 hectares. The main economic activities of Nirdhan’s clients are
livestock, gardening, petty trading and food processing.

2.2.2.3. Selection and/or eligibility criteria and method

Nirdhan uses a set of simple means testing criteria to select poor clients and to measure
changes in poverty among repeat borrowers. Loan officers visit each potential client
before they receive a loan and fill in a 6 page questionnaire regarding their household and

13
income. When processing applications for repeat loans, loan officers fill in an
abbreviated 2 page questionnaire.

Table 5
Nirdhan Bank Client Selection Criteria

• Irrigated land holding of less than 7.5 Kattha (0.25 Ha.) per household of five family
members
• Non-irrigated land holding of less than 15 Kattha (0.5 Ha.) per household of five
family members
• No member of the family employed permanently in the formal sector
• Currently not borrowing money from any other organized financial service provider
• Per capita income of less than $65
• No pucca (cement fixed and concrete ceiling) house at the time of joining the bank
• Permanently living in the area covered by the bank

2.2.2.4. Use of poverty assessment tool? Which method?

Nirdhan uses several methods to assess the poverty of its clients. Their principle method
is a linked system of client surveys, means tests and client monitoring. Information
gathered by loan officers is fed into a Client Data Monitoring System. The client survey
collects information regarding a potential client’s living standard, type of house, land
ownership, earnings, employment and loan history. The means test form collects similar
information, but is more comprehensive and more detailed. Additional data include the
family history of the client, the educational status of their children, land ownership, food
sufficiency, employment status, annual earnings of the family, type of house the client
lives in, type of roof of the house, source of drinking water, latrine, household goods,
electricity and water access, kitchen gardening, cattle farming and loan history. Client
monitoring forms contain the same basic information regarding client economic status
and are completed at the beginning of each new loan cycle. This combination of
assessment tools helps Nirdhan to select poor clients and to monitor their changes in
socio-economic status.

Nirdhan occasionally uses other more comprehensive tools for measuring poverty
outreach such as in depth impact poverty impact assessments implemented by outside
consulting firms. Nirdhan has funded these assessments an average of every 5 years,
with an initial poverty assessment study implemented in 1996 and follow up studies in
2001 and 2006. Although these types of studies are too expensive to implement more
frequently, they offer a valuable periodic reality check regarding Nirdhan’s progress in
reaching the poor.

2.2.2.5. Job description of loan officer who interact with program participants
related to financial services
Field Agents (loan officers) are Nirdhan’s primary interface with its clients. It is the
Field Agent’s first responsibility to identify potential clients using means test form which

14
assesses housing condition, land holdings, etc. Once the Field Agent has identified a
critical mass of clients in a community, they act as facilitator to form groups of potential
clients. They are then responsible for providing group training which includes
orientation to bank policies, procedures, roles and responsibilities. Because all clients are
required to sign their names on their loan form (rather than using their thumb print) loan
officers must often and teach clients how to sign their names for the first time.

Once a group has gone through six months of training and compulsory savings, it is the
Field Agent’s job to decide whether to recommend the group to their branch manager for
recognition. After the group is recognized, the loan officer recommends each loan for
approval. A month after clients have received their loans, it is the loan officer
responsibility to perform a loan utilization check at the client’s home. Between loan
cycles the loan officer also collects client monitoring information. During the loan cycle,
Field Agents conduct group meetings every two weeks, collecting and documenting
savings and loan payments and delivering the Information, Education and
Communication (IEC) training. Group meetings also offer loan officers the opportunity
to solicit feedback on Bank's product and services.

2.2.2.6. Staff incentive schemes

Nirdhan recently developed a quarterly staff incentive scheme which rewards loan
officers based on the growth and health of their loan portfolio. Under this system
portfolio at risk is the most heavily weighted of the incentive criteria and top performing
loan officers can receive an increase of up to 20% over their base salary. Performance
requirements and incentives are detailed in the table below.

Table 6
Individual Quarterly Incentive Scheme

Criteria Minimum D C B A
Requiremen
t
Portfolio at risk < 5% < 4% < 3% < 2% < 1%
% increase over salary 2.5% 5.0% 7.5% 10.0%

New clients 0 1 to 5 6 to 10 11 to 15 > 16

% increase over salary 1.25% 2.50% 3.75% 5.00%

Existing clients 50 251 to 300 301 to 350 351 to 400 > 400 weekly

100 375 - 425 426 - 475 476 – 525 > 525 fortnightly
% increase over salary 1.25% 2.50% 3.75% 5.00%

Outstanding portfolio $3,571 $21,428 to $24,285 to $27,142 to

$24,285 $27,142 $30,000 >$30,000
% increase over salary 1.25% 2.50% 3.75% 5.00%

15
2.2.3. Resources
Nirdhan maintains a health balance sheet and careful manages its assets and liabilities,
income and expenditures in order to ensure that the bank remains sustainable. As of
December 2005, Nirdhan owned $10.3 million in assets, of which $6.5 million was in
loans outstanding. They owed $9.6 million in liabilities, of which $1.9 million were
client deposits. Finally, Nirdhan had $656,000 in total equity, of which $379,000 was in
paid-in capital (a 171% increase over 2004). From a total financial revenue of $665,000,
Nirdhan posted a net income of $79,700.

2.2.4. External assistance

Nirdhan has received external support from both donors and commercial investors.
Donor support has come in the form of technical assistance, training, office equipment
and management systems, vehicles and lending capital. Nirdhan sources most of its
lending capital from commercial banks. Historically, Nirdhan has leveraged more than
three times more funds through commercial loans than donor grants.

Table 7
Nirdhan Debt and Donated Funding Sources

Source Amount in USD Terms

Loans
NIC Bank $214,286 4%
Everest Bank $578,571 4%
Nabil bank $2,208,554 4%
Nepal Investment Bank $364,286 4%
Himalayan Bank $1,893,571 4%
Machhapuchhre bank $285,714 4%
Central Bank $139,011 4%
RMDC $1,014,286 5%
Total loans $6,698,280
Grants
CGAP $1,300,000 Grant
Plan $122,596 Grant
SC/USAID $514,701 Grant
IRIS/USAID $48,536 Grant
ILO $59,020 Grant
Total grants $2,044,853

2.2.5. Relationships
Nirdhan has long standing relations with Save the Children and Plan International and
both Save and Plan have provided resident technical advisors to Nirdhan. The CEO of
Nirdhan is an active member of Save the Children’s microfinance network. Nirdhan is
currently promoting the creation of a Nepalese association of microfinance development
banks.

16
3. Description of “Very Poor” Target Group

3.1. Individual and Household Conditions

3.1.1. Gender
All of Nirdhan’s clients are women.

3.1.2. Age
The minimum age for a Nirdhan client is 18 and the maximum is 64. The average age for
all clients is 35.

3.1.3. Disability and chronic disease

Nepal has a high level of endemic communicable diseases, the most important ones being
Malaria, TB, Kala-azar, Japanese Encephalitis and Filariasis. HIV/AIDS has
substantially contributed to the increase of this burden, with an HIV prevalence rate of
0.3%. In addition to disease, lack of adequate health care facilities means that life events
such as pregnancy can become serious health issues. For example, only a third of
pregnant women are attended by trained personnel during pregnancy and less than 15%
of deliveries are attended by trained health personnel. This means that 85% of Nepalese
women go through delivery at home without any form of trained assistance.

3.1.4. Culture or religion

The great majority of the population in the districts where Nirdhan operates is Hindu
(90%), with a significant Muslims minority (8%) and a small number of Buddhists
(1.5%). Other religions represent less than 1% of the population.

3.1.5. Ethnicity
Ethnic groups living in the districts served by Nirdhan include Newar, Gurung, and
Thakali.
Among Nirdhan clients, 50% speak Bhojpuri, 37% people speak Nepali, 4% speak Tharu,
1% speak Newari and 7% speak other languages.

3.1.6. Membership to socioeconomic groups, such as caste and class

Nirdhan’s targeting criteria focus on the 40% poorest clients. Nirdhan does not
discriminate with regards to caste and class, and promotes inclusion of groups such as the
dalit untouchables. In recognition of the difficulties faced by groups such as kamaiya ex-
bonded laborers, Nirdhan has developed specific products integrating training, social
outreach and financial services.

3.1.7. Household type, composition, marital status

Client selection criteria focus on women living in traditional houses without cement
floors or tin roofs. In rural areas only 60% of households have access to running water
and only 20% have latrines. Almost none of Nirdhan’s clients them have access to
modern conveniences. The average household size for Nirdhan clients is 6.4 persons and
very few households (5%) are headed by women. Nirdhan works exclusively with
married women.

17
3.1.8. Literacy
Overall literacy rates in Nepal are 40%, while the literacy rate for women drop to 25%.
The vast majority of Nirdhan clients are illiterate. Among self-reliance groups, often
only the members of the executive committee are able to read and write.

3.1.9. Education
Among Nirdhan clients, 71% of their children between 6-10 years old are enrolled in
school. However, girls comprise only 43% of primary school enrollment among clients.
(Nationally 46% of primary school students are girls.) At the secondary school level,
30% of clients’ children attend school; 48% of school-going children are girls. Among
the Nepalese population in general, an average of only 18% completed primary school
and 13% completed secondary school.

3.1.10. Economic or political instability

For the last 10 years Nepal has suffered from political instability and economic
stagnation. Maoist rebels have successfully taken control of most of rural Nepal, and the
government has been unable to restore its authority. The increasingly unpopular King of
Nepal dissolved parliament in 2004, which eventually led to a series of mass protests
which forced him to give up control of the government in April 2006. A recently
announced decision by the Maoist rebels to join parliament has given many hope that the
political situation will stabilize, allowing the country to refocus on economic and social
development.

3.2. Socioeconomic conditions

3.2.1. Refugee or IDP status
In the 10 years since the beginning of the Maoist rebellion, many farmers have fled
instability in rural areas for the protection of the cities. These internally displaced people
have created informal settlements on the edges of urban areas where conditions are
unhealthy and poverty is chronic. In addition, in order to avoid being drafted into the
conflict by one side or the other, many young men have left the country to seek
employment abroad.

3.2.2. Natural disasters: type, frequency, effect

While Nepal experiences occasional severe flooding and landslides, the areas where
Nirdhan operates are not prone to natural disaster.

3.2.3. Economic conditions

3.2.3.1. Employment levels

Unemployment in Nepal is currently 42%. More than 80% of Nepal’s workforce is
involved in agriculture.

18
 3.2.3.2. Income Sources
Poverty levels in Nepal are higher among people dependent on agricultural income than
on income from services. Most Nirdhan clients (61%) are dependent on income from
agriculture. For the majority of women (64%) agriculture is their only source of income.
Livestock and petty commerce represent alternative income sources for many Nirdhan
clients.

3.2.3.3. Land ownership

Land is a major asset in Nepal and land ownership is the major aspiration for most rural
Nepalese. However, among Nirdhan clients 95% own less than 0.5 ha and 4% are
landless. The average client landholding is 0.3 ha. It is important to note that only 6% of
all landholdings are owned by women.

3.2.3.4. Asset ownership

A recent survey of asset ownership among Nirdhan members found that on average of
58% of clients own a radio and 63% own furniture. However only 26% of clients own a
bedset, 17% own a refrigerator and 3% own a bicycle. Additionally, 4% of clients own
motorcycles and 1% own vehicles.

3.2.3.5. Income level

Poverty levels in Nepal are significantly higher in the hilly and mountainous rural areas
where Nirdhan operates (47%) compared with urban areas (18%). Among Nirdhan
clients, a recent study found that 26% are very poor, 37% are poor and 36% are middle
poor. However, these average figures mask important differences in poverty by district.
For example, 50% of clients in the Bara district are very poor, while 4.9% in the
Rupandehi district are very poor and 51.8% are middle poor.

3.2.4. Geographic conditions

3.2.4.1. Rural/urban, remoteness

Nirdhan works in 10 districts out of 75 districts in Nepal. Of the districts where Nirdhan
operates nine are in tarai plain region and one in the hilly region of Palpa. Nirdhan's
headquarter is in the tarai at Bahairawa in the Rupandehi district. With a total population
of 710,000, it is the most densely populated and wealthiest district in which Nirdhan
works. (Population density in the district is 506/people per square kilometer.) In
contrast, the population of the Palpa hilly district is 284,918 people, with a population
density of just 209/people per square kilometer.

3.2.4.2. Access to markets

In the taria plains rural areas, weekly markets are usually found within 2 to 5 kilometers
of client centers. In hilly areas markets are fewer and further between, often 10
kilometers or more from client centers. For items other than daily necessities, clients in
rural hilly areas often have to travel up to 20 kilometers.

3.2.4.3. Access to banks

19
Due to Maoists insurgency, most commercial financial service providers have effectively
abandoned rural areas and relocated to urban ones. Since more than 80% of the
population of Nepal lives in rural areas, this trend has severely constrained already
limited access to commercial banking services. However, for those living in the tarai
plains, microfinance services remain relatively accessible and as there is usually an MFI
within 2 to 15 kilometers of most villages.

3.2.4.4. Access to doctors and clinics

Access to health care in Nepal remains extremely poor. The Government of Nepal has
established a sub-health post for every Village Development Committee, which means
that a very basic level of health care is usually available within 15 kilometers of any
village. While there are more than 3,000 sub-health posts, 700 health posts and 180
primary health clinics, only 40% of these facilities have essential drugs available. In case
of serious health issues, secondary and tertiary care are only available in district capitals,
which can easily be 25 kilometers or more for a village center. In terms of human and
physical resources, Nepal has 1 doctor for every 18,400 people, 1 nurse for every 3,700
people and 1 hospital bed for every 3,500 people.

3.2.5. Major vulnerabilities and risks encountered by target group. What are
common coping mechanisms and how do these related to services/products
offered by the organization?
Major risks encountered by Nirdhan clients include food insecurity, health shocks, loss of
livestock and political risks. Among Nirdhan clients, 20% reported that they did not have
enough food to eat at least one day per month during the past year. Only 32% of clients
reported having personal savings available for emergencies. In order to cope with some
of these risks, Nirdhan offers an emergency loan product, savings services, and livestock
and life insurance.

4. Poverty Targeting and Assessment

As a general poverty targeting method, Nirdhan operates in some of the poorest districts
in Nepal, which is among the poorest countries in the world. Another general targeting
method is pro-poor product development, which makes Nirdhan’s financial products both
useful to the poor and unattractive to the non-poor. Loan officer training and orientation
are also used to reinforce Nirdhan’s poverty focus.

4.1. Poverty Assessment

4.1.1. Definition of “very poor” clients used by local organization

4.1.1.1. How does the organization label its “very poor” clients?
Nirdhan’s primary tool for evaluating the relative poverty of its clients is its means
testing survey. This includes an assessment of landholdings, employment, income and
housing quality. Landholdings are the acid test for relative poverty, with clients
owning between 0 and 0.16 ha of land classified as ultra poor, 0.2 and 0.33 ha of land

20
 classified as very poor and 0.36 – 0.5 ha of land classified as poor. Clients owning
more than 0.5 ha are classified as non-poor.

4.1.1.2. How many clients labeled as “very poor” entered the program during
the last 12 months? What percentage is this of total number of new
clients recruited during same period?
According to a recent external impact assessment, 157 out of 480 new clients waiting
for a loan are classified as very poor. This amounts to 26% of new clients. Among
clients who have been with Nirdhan for five or more years, 25% are classified as very
poor.

4.1.1.3. What type of poverty-related client data are collected when new
client/participant enters the program?
Nirdhan gathers a comprehensive set of poverty data for each new client which is
entered into their Client Data Monitoring System. A means test survey collects
information regarding family history, educational status, land ownership, food
sufficiency, employment status, annual earnings, type of house, type of roof, source of
drinking water, latrine, household goods, electricity and water access, kitchen
gardening, cattle farming and loan history. Changes in client poverty status are
monitored each time they apply for a new loan.

4.2. Poverty Targeting:

4.2.1. Does the organization use a poverty targeting tool?

4.2.1.1. If so, what method is used? Do the methods assess absolute or relative
poverty?
Nirdhan’s poverty targeting tools are described above in the sections 2.2.2.3 on client
selection and eligibility and 2.2.2.4 on poverty assessment. Clients are categorized by
relative poverty levels based on how much land they own.

4.2.1.2. Is the organization satisfied with the targeting tool it uses? Why/why
not?
Nirdhan is satisfied with its targeting tools because housing quality and land holdings
are clear indicators for measuring poverty in the rural sector. However, Nirdhan is
challenged to develop new methods for targeting poor clients in semi-urban and urban
areas as land holdings are less indicative of poverty than in rural areas.

4.2.1.3. Is the poverty assessment tool used for selection? If so, what are the
poverty criteria and indicators?
As described in sections 2.2.2.3. and 2.2.2.4., Nirdhan uses poverty assessment in its
client selection process. Criteria and indicators are described above.

21
4.2.1.4. How was this tool developed? What were the reasons for developing and
using a poverty tool? What has been the result?
Nirdhan’s poverty assessment, selection and monitoring systems were developed in
house, based on Grameen tools, and tailored to local conditions in Nepal. Nirdhan has
also contracted local technical support for development of its information management
systems and Client Data Monitoring System. The development of systems for
measuring poverty outreach was a natural extension of Nirdhan’s mission to reduce
poverty in Nepal. In order to fulfill their mission, Nirdhan had to develop the
analytical, training and information management tools necessary to ensure that
Nirdhan’s services indeed reach the poor.

As Nirdhan’s portfolio has grown, they have been required to develop more
sophisticated systems to capture and analyze poverty data. Although Nirdhan’s
management information systems have evolved from simple spreadsheets to a fully
integrated management and financial information system, the source of all of their
poverty data remains standardized survey, means testing and monitoring forms that are
filled in by loan officers based on first-hand interviews with clients. The quantity of
data created by this system poses a challenge for Nirdhan regarding how to effectively
analyze and efficiently use this information.

4.2.1.5. What type of issues has the organization encountered as a result of using
poverty targeting tool?
Over time Nirdhan has overcome several important challenges in implementing
poverty targeting. One key lesson from this experience was that poverty targeting
must be systematically incorporated into the institution’s management systems. For
example, if the board of directors decides to introduce a new poverty indicator, such as
outreach to excluded social groups, this requires changes along the entire chain of
management systems, from loan officer training, to loan administration, to
management information collection and processing. Another lesson was that
developing products which target the very poor requires an integrated approach
offering both financial and non-financial services. For example, in assessing the needs
of ex-bonded laborers Nirdhan realized that targeting this very poor group would
require not only loans, but also a comprehensive package of financial services,
business and literacy training and social outreach. A final lesson was that poverty
targeting must reflect the context and situation of clients it is trying to reach. For
example, poverty targeting tools that work well in rural areas, such as land ownership,
may be much less effective in urban areas.

4.2.1.6. Are there other factors that lead to serving high numbers of very poor
clients?
While a number of sophisticated systems for accurately measuring poverty outreach
are currently being developed and tested, simple intuitive targeting methods can also
promote poverty outreach. One of the simplest ways to reach large numbers of poor
people is to set up operations in areas with high concentrations of poor people.
Another simple pro-poor targeting mechanism is to develop products and services that
reflect the needs and abilities of poor clients. Linkages with other organizations that

22
 are serving poor clients can also increase the pool of potential clients and help a MFI
to reach larger scale. Finally, in order to avoid mission drift and ensure that an
organization continues to reach poor clients, it is necessary to build an institutional
consensus regarding the importance of serving the poor from the newest loan officer
recruit to the chairman of the board. Equally important, systems must be developed
and put in place to ensure effective targeting, selection and measurement of poor
clients. These systems include not only management information systems, but also
recruitment, training and staff incentive systems.

5. Products and Services

5.1. Financial Products

Table 8
Microfinance Product Details
Product Features and Policies
Microcredit
Individual or group product
Loan terms (maturity, interest rate,
interest type, flexibility)
Loan source
Loan use
Loan size (first loan, average loan,
maximum loan size)
Meeting requirement and frequency
Mandatory savings requirement and
amount
Collateral requirement
Other eligibility requirements
Loan default policy
>Group loans range from 6 months to 6
years, with an interest rate of 10-20%,
depending on the product. Interest collected
on declining balance.
>Individual loan is offered up to 3 years with
an interest rate of 18% on a declining
balance.
>Self reliance group wholesale loans are
offered at 15% declining.
Nirdhan Bank
Income generation, household consumption
and emergency loan products
First loan size: $215
Average loan size: $157
Maximum loan size: $1,430
Bi-weekly
5% of loan disbursement except for
collateralized housing, individual, foreign
employment and educational loan
Required for housing, individual, foreign
employment and educational loans
Good credit history and sufficient collateral
As per Central Bank default directives,
1-90 days overdue: 1% provision
91-180 days overdue: 25% provision
181-365 days overdue: 50% provision
More than 365 days: 100% provision

23
 Product Features and Policies
Loan officer salary increase based on:
PAR- incentive from 2.5% to 10%
Repayment incentives New clients- incentive from 1.25% to 5%
Existing clients- incentive from 1.25% to 5%
Portfolio value- incentive from 1.25% to 5%
Microsavings
Individual or group Both individual and group savings
Group savings fund, personal saving
Savings Type
accounts and center savings fund
Deposit location Centers and branch offices
Deposits at bi-weekly center meetings or at
branch offices.
Deposit frequency, amounts, flexibility Clients deposit $0.14 at every meeting into
group savings.
Group fund saving deposits are mandatory.
Meeting requirement and frequency Bi-weekly
Provided 6% annually and calculate on
declining basis.
Savings terms
Personal saving account can be opened with
$0.70, with deposits as low as $0.14.
Personal saving is voluntary and can be
withdrawn at will.
Withdrawal and savings use policies
Group fund savings can withdrawn up to
50% after 5 years.
Client passbook, group collection sheet,
Record keeping and accounting
branch sub ledger, branch main ledger
Investment of deposits On lending
Microinsurance
Microinsurance Type Micro life insurance
Group or individual product Offered through groups to individuals
Term 1 year
Eligibility requirements Age should be between 16 to 64 years
Renewal requirements Within 15 days of policy maturity
Rejection rate Rarely
Voluntary or compulsory Voluntary
Funeral activity, loan write off, cope the
Product coverage (benefits)
transitional period of death.
Premium of $1 for benefit of $142,
Premium of $20 for benefit of $285,
Pricing – premiums Premium of $4 for benefit of $571.
If death happens due to accident then benefit
is doubled.
Pricing – co-payments and deductibles No co-payments or deductibles
Pricing – other fees No

24
 Product Features and Policies

Microgrants
Individual or group product N/A
Amount (and number of grants) N/A
Eligibility requirements N/A
Grant use and other conditions N/A
Savings requirement or matched savings N/A
arrangement
Straight grant, no interest or partial N/A
repayment

5.2. Microenterprise Development Services

Table 9
MED Service Details
Service Types and Features
Training
Self-reliance group executive committee
Financial literacy
trained in basic numeracy
Business planning and management Provided by Nirdhan NGO only
Marketing Provided by Nirdhan NGO only
Self-reliance group executive committee
Recordkeeping and bookkeeping
trained in record keeping
Skill development Provided by Nirdhan NGO only
Technical assistance Provided by Nirdhan NGO only
Training method Adapted from Grameen and MicroSave
Costs to client Free or cost sharing depending on topic
Business Consultancy and Advisory Services
Individual or group sessions Self-reliance groups
Frequency Bi-weekly
Topics Different business-related issues
Confidence Building Yes
Costs to client Free
Market Linkages
Input supply Livestock feed, piglets and chickens
Marketing Assistance N/A
Market Information N/A
Producer organizations N/A
Business linkage promotion N/A
Quality Control N/A
Costs to client According to value of input supplied
Other
Employment generation N/A
Technology development N/A

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5.3. Non-financial Services
Table 10
Non-financial Services Details
Service Types and Features
Integrated Education Component (IEC)
Health and Nutrition
Health and sanitation
Healthy pregnancy
Free training provided at bi-weekly self-
Safe motherhood
reliance group meetings
Child nutrition
Childhood diseases and vaccinations
Family Education
Gender parity
Equal responsibility for chores
Equal rights in using income Free training provided at bi-weekly self-
Joint decision making reliance group meetings
Family support through income
generating activities
Social Capital Development
Social interaction
Communications skills
Free training provided at bi-weekly self-
Self-expression
reliance group meetings
Management skills
Marketing skills
Basic Literacy:
Basic literacy
Basic accounting Free training provided at bi-weekly self-
Basic legal education reliance group meetings
Basic interest rate calculation

5.4. Design and Product Development:

5.4.1. Program Rationale

5.4.1.1. What is your theory of change?

According to the General Manager of Nirdhan, the Bank operates on the premise that
change is created through promoting positive improvements in the living conditions of
their clients. However, real change requires not only improvement in client household
resources, but also in client attitudes and client empowerment. It is Nirdhan’s hope that
these changes will move their clients from struggling to meet their basic needs to aspiring
to fulfill their higher needs.

26
 5.4.1.2. What did you know about client behavior that led you to this
intervention?
Through regular close contact with its clients, Nirdhan understands that they need both
skills and access to finance in order to improve their livelihoods. While many Nirdhan
clients have by necessity developed the skills to survive in impoverished communities,
they have lacked access to financial services that will help them to grow out of poverty.
For these clients, providing access to financial services is sufficient. However, other
clients need more than financial services alone. For these clients, integrated financial,
social and educational services are required to help them lift themselves out of poverty.

5.4.1.3. What are the intended impacts of your program?

The eventual impact that Nirdhan hopes it will have on its clients is to help them to
improve their living standards sufficiently to move out of poverty. By increasing their
access to financial and other services, Nirdhan hopes to not only increase its clients’
financial resources, but to empower them to better their lives.

5.4.1.4. How are the inputs designed to achieve those intended impacts?
Nirdhan’s products are designed with the intention of meeting the needs of the poorest of
the poor. In order to do so, Nirdhan reduces barriers to access to financial services by
designing simple loan products with an easy application process. Financial products are
also priced affordably and loan terms and conditions tailored to be accessible to the
poorest. Services are delivered in the communities where poor clients live and work and
loan officers are trained to be sensitive to the multiple needs of the poor. Finally,
financial services are often integrated with non-financial services, delivered either by
Nirdhan Bank or Nirdhan NGO.

5.4.2. Concept Development

5.4.2.1. Client demand survey /Needs assessment

To understand the needs of its clients, Nirdhan employs the same tools it uses for poverty
targeting. These include rapid rural assessment and means testing tools which are part of
Nirdhan’s loan process. In addition, during bi-weekly repayment meetings Nirdhan’s
loan officers note issues and ideas from clients and report them to their branch manager.
At the annual center chiefs meetings, clients are specifically asked for feedback on
currently products and on their demand for new products. Focus group and individual
interviews are also carried out periodically in order to design or improve financial
products. In addition, Nirdhan occasionally hires outside consultants to assess client
needs for products which are outside of Nirdhan’s primary expertise, such as the recently
developed Information, Education and Communication training.

For the development of the ex-kamaiya products, a more structured needs assessment
methodology was used which employed a range MicroSave tools. This included using
Venn diagrams to understand the organizations and social structures which are important
to the clients. Chapati diagrams were also used to assess client’s social capital. A

27
number of other tools, including surveys of income seasonality, life cycle profile and
time series of crisis, were used to gather and analyze data regarding the timing and
impact of major events in clients’ lives. In addition, one on one interviews were
conducted to gather more in depth information.

5.4.2.2. Competition analysis

In analyzing its competition, Nirdhan uses a combination of intuitive, but effective
approaches. This includes direct primary and secondary research to analyze its
competitors’ product and pricing strategies. Because the microfinance community in
Nepal is fairly small and close knit, Nirdhan managers can visit with competitors directly
and talk with their management. Due to Nirdhan’s pre-eminence in the sector, they are
also regularly asked to train the staff of other MFIs on tools such as Microfin, which
offers them an up close opportunity to understand how their competition operates. In
addition, Nirdhan has taken the somewhat unusual strategy of buying shares in competing
MFIs in order to gain a seat on their board. Finally, Nirdhan researches competitors’
products and pricing indirectly through secondary sources such as advertisements
published in local newspapers.

5.4.2.3. Self-assessment
In order to assess its own performance Nirdhan relies on a range of mechanisms, some of
which are used monthly, some annually and some only occasionally. On a monthly basis,
Nirdhan performs an internal portfolio review, based on MIS reporting, which includes
portfolio quality, profitability, productivity and efficiency, as well as ratio analysis.
Every year meetings are organized to solicit comments and suggestions from clients and
staff. Client meetings are attended by the chiefs of each borrower center. Annual
regional staff meetings are held, with representatives from headquarters, area and branch
levels. These meetings are not only an occasion to discuss problems and improvements
needed, but also to review policies and procedures.

5.4.3. Product/Service Design

5.4.3.1. What was the process followed in product/service design?

The product design process at Nirdhan uses both intuition based on knowledge of client
needs and systems such as MicroSave’s product development tools. The process follows
on to the steps implemented in the demand assessment, which are means testing, focus
group interviews and discussions with center chiefs. Additional market research and
competition assessment are gathered as part of the product design process. Based on all
this information, the planning department uses MicroSave tools to develop specific
products reflecting the needs and circumstances of its clients. Nirdhan also occasionally
refers to outside consultants to assist with the development products which are outside of
realm of its expertise, such as insurance and remittance services.

New products are typically pilot tested in 2 to 3 branches, feedback is solicited and
modifications are made based on the pilot experience. Once the products are ready, they
are introduced to the staff who are asked for comments. New forms and procedures are
developed for the products and they are submitted to the board for approval. Once

28
approved by the board, the Central Bank is informed and management systems are
modified to include the new products. Finally, branch managers interested in offering the
new product train their staff, who in turn train their clients, and product roll out begins.

The product development process for the ex-kamaiya products used a slightly more
systematic process, following on to the needs assessment described above. Based on the
information gathered by the needs assessment, a prototype product was developed. This
prototype was then refine based a staff workshop and on client focus group discussions.
After each focus group, the product was modified prior to presentation to the next group.
Once Nirdhan was comfortable that the product met the needs of its clients, the product
was finalized and new forms for loan applications, loan contracts, loan disbursements,
client passbooks, and new ledgers for savings, loans, income and expenditures were
developed. A manual on product development documented this approach, which
included training materials for clients and staff on the new product. Once the product
was finalized and all these materials were prepared, the process of product introduction,
approval and roll out followed was similar that described above.

5.4.3.2. Was a new product/service specifically tailored to the needs of the very
poor or was existing product/service tweaked to meet their needs?
In order to respond to client needs, Nirdhan has both modified existing products and
developed new tailored products. Both follow the needs assessment and product
development processes as outlined above, although modification of an existing product is
less exhaustive than development of a new product.

A good example of modifications to an existing product are the changes that Nirdhan
made to the standardized Grameen bank methodology. In response to client requests, and
in order to increase the flexibility and usability of Grameen products, Nirdhan introduced
several recent modifications to its group loans including: allowing clients to reschedule
loans in the case of business slow down or family emergency, introducing of a line of
credit to allow clients to “top off” existing loans before they are fully paid back and
allowing clients to borrow for a 3, 6 or 9 month term in addition to the standard 12 month
loan.

Tailored products developed specifically to serve poor clients include kamaiya ex-bonded
laborers and rural hill country self-reliance groups products. In the case of ex-bonded
laborers, Nirdhan Bank developed an integrated package of financial and non-financial
services to help build their assets. This package typically includes 6 months of training in
literacy, numeracy and entrepreneurship from Nirdhan NGO prior to receiving a very
small loan from Nirdhan Bank. In the case of rural hill country clients, Nirdhan
fundamentally altered its standard Grameen methodology to move from direct lending
through groups to wholesale lending to village banks. This change in methodology has
been costly in the initial start up as it requires significant additional training for village
bank executive committees, but Nirdhan hopes that it will eventually prove a more
effective and efficient way of reaching remote rural communities.

29
 5.4.3.3. What were the cost trade-offs?
Because Nirdhan does not cost individual products, they have no specific data on the cost
trade offs between modifying and tailoring products. Intuitively, it is less expensive to
modify an existing product. For example modifying the Grameen methodology by
moving from weekly to bi-weekly group loan payments, did not require extensive market
research or product development costs. When it develops new products or opens offices
in new areas, it is Nirdhan’s strategy to solicit funding from donors to pay for the start up
costs. In the case of both the ex-kamaiya and hill country self-reliance group village
banks, product development costs were funded by the ILO and USAID.

5.4.3.4. Risk assessment and tool design

Risk assessment tools used by Nirdhan are implemented at two levels, loan risk and
portfolio risk. For group loans, the only form of risk assessment is through the group
formation and recognition process. Prior to forming a group, loan officers visit each
potential client’s home. After groups are formed, they go through training and are
required to save every two weeks for 6 months, during which time their performance is
monitored by the loan officer. When they apply for group recognition, their loan officer
assesses whether the group is ready or not to begin borrowing before submitting their
application the branch manager for approval. Once a group is approved, risk is assessed
by their loan repayment record. For individual loans, risk assessment is more extensive
and systematic and includes analysis of project viability and profitability, client integrity,
credit history, financial resources, collateral, potential market and distribution capacity.

At the portfolio level Nirdhan assesses risk by monitoring loan repayment information.
In the field, loan officers receive a print out of loans due for the week from their branch
manager. After meeting with their borrower groups, they then report back to the branch
office on which loans have not been paid. The branch manager passes this information
on to their area office, which passes it on to the accounting office at headquarters where it
is and is compiled and analyzed by the MIS system and portfolio at risk ratios are
calculated.

5.4.3.5. Prototype development and testing

In most cases, Nirdhan follows the product development process outlined above for
developing and testing prototypes. This includes focus group interviews, product design,
piloting and modification, then roll out. Prototypes are always developed for new
products with which Nirdhan has had no experience, such as life insurance and money
transfers. However, for some modifications to existing products prototypes and pilot
tests are not needed, rather changes are simply introduced and rolled out through the
organization.

5.4.4. Pilot testing

5.4.4.1. Significant changes during pilot testing?

Through the pilot testing process, Nirdhan has learned valuable lessons and made
important modifications to new products, particularly with products which represent new
lines of business to Nirdhan. For example, the new life insurance product that Nirdhan

30
recently pilot tested originally copied the same standard forms and procedures used by
their insurance company partner. However, because Nirdhan’s clients are different than
the insurance company’s regular clients, they discovered significant issues which
rendered the product difficult for their clients to use. For one, the application form was
long, complicated and required numerous signatures. After piloting, Nirdhan adapted the
forms to be simpler and require fewer signatures. Another major change that Nirdhan
made after pilot testing involved the way that death benefits were approved. The
insurance company originally required that clients produce an official death certificate
signed by a local government official. These were difficult and costly for clients to
obtain (or impossible to obtain during general strikes), particularly for rural clients.
Nirdhan modified this policy to permit the deceased client’s former group members to
sign a notification of the client’s death.

Another interesting example of changes that Nirdhan made to a new product after pilot
testing was the costing of their money transfer services. Nirdhan initially negotiated a
deal with two commercial banks to act as an intermediary for remittances to its clients
based on a 50/50 commission split. However, Nirdhan did not do a thorough cost
analysis of whether this product would make or lose money. In testing this product,
Nirdhan quickly began to receive feedback from its branch managers that the telephone,
fax and other related costs to deliver remittances at the branch level were greater than
their income in commissions. Based on this information, Nirdhan is currently
renegotiation with its bank partners for a 60/40 split of the commission fees.

5.4.5. Rollout
As it has introduced new products, Nirdhan has learned valuable lessons from experience.
Prime among them is that any changes to the way the organization does business at one
level require changes to procedures and systems at all levels of the institution, from client
groups in the field to the board of directors in Kathmandu. Simply adding another
spreadsheet to the MIS system to monitor the new product is not sufficient. Budgets and
financial projections need to be modified, new forms need to be developed and existing
manuals and reporting systems modified, loan officers need to be trained, clients need to
be informed, etc. In addition, changes to incentive systems need to be considered if these
changes impact the reward structure of the existing system (for example, adding a group
education and training component could reduce the amount of time loan officers have
available to recruit new clients which could in turn decrease their incentive bonus).

5.4.6. Product/Service review and assessment

Review and assessment of products and services at Nirdhan relies on a similar process to
that of needs assessment and product development. Loan officers listen to client
feedback at weekly meetings and report issues to their branch manager, who in turn
reports to the area manager. In addition, annual meetings are held with center chiefs
where issues regarding Nirdhan’s products and services are discussed. Annual regional
staff meetings also offer an opportunity for staff and management to discuss what
problems and improvements to products and systems. Occasionally Nirdhan will request
that outside consultants who are surveying existing clients also include exit clients with
former clients to assess what they liked and didn’t like about Nirdhan’s services.

31
5.4.7. Product Development Cost

5.4.7.1. Total cost

In general, Nirdhan monitors income and expenditure on a portfolio wide level, including
budget variance and operational and financial self-sufficiency. While Nirdhan closely
monitors total income and expenditures, they do not practice cost accounting so are
unable to determine the total cost to develop or offer any particular product. However,
with services (such as life insurance and remittances) which require linkages with outside
providers, they are able to offer a better approximation of whether these products make
money for the organization or not.

5.4.7.2. How were they funded

A mix of donor and internal funding has been used to support product development. For
example, the ex-kamaiya product was developed with funding from the ILO and the hill
country products with funding from USAID, but life insurance and transfer payments
services were developed with internal funds. Nirdhan has a clear preference for sourcing
donor funds for development of new products and outreach to new areas.

5.4.7.3. Outsourcing during the development process

Most new products are developed internally by Nirdhan’s planning department.
However, if a new product requires expertise in an area where Nirdhan does not feel it
has technical competency, they will contract out for professional advice and support. In
the case of the Client Data Monitoring System and the Information Education and
Communications training curriculum funded by Plan International, Nirdhan outsourced
local technical assistance for the development of both products.

5.4.8. Feedback loop

For Nirdhan management, two primary feedback indicators on the organization’s success
at reaching its clients are loan repayment and repeat borrowing. Other systems for
soliciting feedback have been described above. These include weekly contact with
clients by loan officers and annual meetings with center chiefs. Although it is not a
regular feedback tool, exit survey was included in Nirdhan’s recent impact assessment
study. This survey asked previous clients how they felt products and services could be
improved. Suggestions for changes included lower interest rates, increasing loan size,
providing skill training, simplifying loan procedures and decreasing meetings.

5.5. Implementation Process

Summary of work plan, action steps and example of the typical process followed.
The development of Nirdhan’s annual work plan begins in the field, with branch
managers meeting with loan officers to discuss performance targets for the upcoming
year. Branch managers then meet with area managers to come up with area-wide targets.
Each year in early June Nirdhan organizes an annual programming and budgeting
workshop where the targets submitted by branch and area offices are discussed, budgets
established and a strategy for the year developed. (Nirdhan’s planning department

32
compares targets proposed by field offices with its own projections developed on
programs such as Microfin.) By the end of the Nepalese fiscal year (June 15th), the work
plan and budget for the following year are finalized for board approval. By July 15th the
board discusses and approves a work plan and budget, at which point the targets for each
area and branch are officially established. Later in July, area managers hold regional
planning workshops to discuss the targets and strategy for the year with branch managers.
Branch managers then meet with loan officers to discuss targets for the branch and set
targets for individual loan officers.

A specific example of Nirdhan’s of project work planning process can be observed in a

recent grant from USAID to develop new products and open new branches in
underserved rural hilly areas. The grant work plan included action steps which began
with a survey of potential areas for opening new branches, rapid rural appraisal of
promising communities, collection of government statistics on the area, and analysis of
the competition. Market surveys were then designed and implemented through focus
groups and individual interviews. Based on these surveys, the planning department used
MicroSave tools to develop new loan products, which were again tested and adjusted
based on focus group feedback. With all this information in hand, a business plan was
drafted for each new branch. These business plans were presented to the board for
approval. Once approved, staff were informed of the plans, staff recruited and trained
and offices equipped and opened.

6. Results
6.1. Method of Measuring Results

6.1.1. What information does management use to track performance, results and
impact?
Nirdhan’s performance, results and impact are measured at different levels using different
tools. Financial performance is measured on a monthly basis through indicators such as
portfolio at risk, operating efficiency, number and volume of loans and savings, etc.
Programmatic results are also monitored on a monthly basis comparing targets set at the
annual planning and budget workshop to actual results (i.e. number and volume of loans
by branch and area, number of new clients, etc.). Program impact however is more
difficult and costly to measure. Nirdhan has funded outside impact studies on a periodic
basis, the first in 1996, the second in 2001 and the latest in 2006. These studies measured
Nirdhan’s impact on clients’ economic, educational, social and health assets.

6.1.2. Where does this information come from? How is it collected and stored?
Information on portfolio financial performance originates at the group level when clients
and loan officers manually fill in savings and repayments forms during their bi-weekly
meetings. (For individual loan clients, repayments are made at the branch level.) These
forms are then brought to the branch office where they are manually entered into
accounting ledgers and sub-ledgers. Savings and loan information is then automated at
the area office level, from where it is sent to the accounting department at headquarters
on compact disks. This information is downloaded into the financial and management

33
information systems and compiled and analyzed on a monthly basis. Programmatic
results are captured using the same manual and automated systems. Impact indicators are
discussed below.

6.2. Impact
Through periodic impact assessments implemented by local consulting firms, Nirdhan
has compiled a series of snapshots of its clients over time. The latest of these
assessments dates from early 2006 and measures the impact of Nirdhan’s services on its
clients’ assets and empowerment. Asset indicators used in the survey include economic
assets such as income, expenditure, savings and food sufficiency. Other physical assets
include housing conditions, access to utilities and land ownership. In addition,
educational assets were measured such as percentage of school age children going to
primary and secondary school and percentage of female school age children going to
primary and secondary school. Social assets, such as female’s involvement in intra
household decision making, female attitudes towards their future, female self-esteem and
female participation in community activities were also assessed. Finally, health assets,
such as access to quality health care (in particular gynecological care), childhood
immunizations, access to pre and post-natal care and use of contraceptive devices were
measured.

Findings from this study indicate that Nirdhan clients fall into the following poverty
categories: very poor 26.46%, poor 37.08% and middle poor 36.46%. Despite a
systematic pro-poor emphasis, it was found that Nirdhan’s services had a greater impact in
helping clients move from being poor to middle poor than in helping to very poor clients
to become merely poor. This said, Nirdhan has had a clear impact on a range of important
poverty indicators. For example, 30% of clients had an increase in income and 30% also
increased their savings. Of all clients surveyed, 28% improved their nutritional status and
74% improved food security. Finally, 86% increased their decision making on loan and
savings use.

6.3. Cost Effectiveness and Sustainability

6.3.1. Scale and Replicability

6.3.1.1. What is the strategy for scale?

To date Nirdhan’s growth strategy has been to build on their existing infrastructure and
expanding laterally into underserved area adjacent to current branch offices. Since
becoming a bank in 1998, Nirdhan achieved impressive growth in scale. From a portfolio
of 9,000 loans averaging at $ 384,000 in December 1998, to 50,000 loans averaging at
$4,762,000 in December 2005, Nirdhan has increased its number of loans more that 5.5
times and increased the value of its portfolio more than 12.3 times. Nirdhan’s plans for
growth in the future are equally ambitious. From 58,000 loans in June 2006, Nirdhan
plans to reach 140,000 clients by 2009 and more than 200,000 by 2015. If they can attain
growth on this scale, they will be reaching close to 30% of the currently estimated
number of microfinance clients in Nepal.

34
In order to reach this scale, Nirdhan is pursuing a multi-tiered growth strategy focused on
building systems capable of sustaining rapid expansion and of attracting the capital need
for growth. At the grassroots level, Nirdhan continues to mobilize deposits from its
members. (Savings form more than a quarter of its lending capital.) Nirdhan has also
designed an incentive system that rewards loan officers for growth in both the volume
and quality their portfolio. On an administrative level, Nirdhan is putting in place
systems that will allow for sustained growth, such as their new integrated financial and
management information system. On the investor level, Nirdhan has in the past been able
to attract enough debt funding to meet its needs, but in order to strengthen their balance
sheet, management has realized the need for more investor equity. Nirdhan recently
more than doubled the amount of equity shares in the Bank, and offered dividends for the
first time in order to attract new shareholders. Continued growth of paid in equity will
also allow Nirdhan to meet Central Bank requirements for opening offices in new
districts. (Their current capitalization level limits them to working in 10 districts.)
Finally, Nirdhan is actively seeking donor funding to finance horizontal expansion into
new areas, especially hilly and mountainous regions.

6.3.1.2. How replicable is the program?

Because Nirdhan is itself a replica (of the Grameen Bank), management feels that, with
modifications based on local culture, geography and population, the potential for
replicating Nirdhan is also strong. The CEO of Nirdhan believes strongly in the
replicability of the model and has already begun to develop plans for Nirdhan’s
expansion into northern India. (Nirdhan’s headquarters in Bahairawa is only 20
kilometers from the Indian border.) However, one crucial factor contributing to
Nirdhan’s success that will be very hard to replicate is the dynamic relationship between
a visionary founding CEO and a pragmatic and financial-oriented GM. The skills,
experience and personalities of these two men have been invaluable for Nirdhan’s growth
and it is questionable that Nirdhan would have had the same kind of success without
them.

6.3.2. Financial and operational self-sufficiency

6.3.2.1. Financial expense ratio

According to recent data from the MixMarket, Nirdhan’s adjusted financial expense ratio
for 2004 was 4.0%, which compares favorably to the 6.1% benchmark of other medium-
sized Asian MFIs. This low figure is due largely to Nirdhan’s ability to source
inexpensive loans from commercial banks which are required by the Central Bank to lend
to the deprived sector.

6.3.2.2. Operational expense ratio

The MixMarket found Nirdhan’s adjusted operating expense ratio of 6.7% to compare
extremely favorably to the benchmark of 18.2% for medium Asian MFIs. This low ratio
places Nirdhan among the most efficient MFIs in the world. Much of this is due to
Nirdhan’s ability to keep overhead costs low through a no frills management approach
and access to an inexpensive labor pool of loan officers.

35
 6.3.2.3. Cost per client
Nirdhan’s cost per borrower also compares favorably to regional benchmarks. In 2004,
Nirdhan’s adjusted cost per borrower was $15 and cost per loan was $13. Regional
benchmarks for the same year were $25 per loan and $20 per borrower.

6.3.2.4. Clients per staff member

Ratios for borrowers per staff member were, however, below regional benchmarks.
Nirdhan staff members averaged 131 clients each in 2004, while on a regional level staff
members averaged 161 borrowers each. Nirdhan hopes that this ratio will increase with
the growth of its self-reliance group model.

6.3.2.5. Average loan balance per borrower

In comparison to regional benchmarks, Nirdhan’s average loan balance per borrower is
relatively high at $113. Regionally, medium-sized MFIs in Asia manage and average
loan balance of $94 per borrower. What is more telling is that Nirdhan’s average balance
per borrower/per capita GNI is 44%, while the figure for comparable Asian MFIs is 20%.

6.3.2.6. Average savings balance per saver

Through its savings data, Nirdhan clearly demonstrates the strength of its poverty
outreach relative to other MFIs in the region. Nirdhan’s average savings per borrower is
$3, while the benchmark is $13. As an average number, this figure can cover up a very
small number of large savers, but since every client of Nirdhan is required to save, this
figure actually represents lots of very small savings accounts.

6.3.2.7. Portfolio at risk

Portfolio at risk for Nirdhan is high by both regional and industry standards. At 6.8%,
Nirdhan’s 2004 PAR is significantly higher than the regional benchmark of 1.1% and the
industry standards of less than 5%. Since the MixMarket report, PAR has grown
significantly worse, and as of June 2006 stands at 14.25%. A major external influence on
loan performance has been the ongoing disruptions caused by the Maoist insurgency
which have had a negative impact on clients’ ability to repay their loans. Another
negative influence on portfolio performance has been the internal strain put on Nirdhan’s
management systems by rapid growth. From 44,000 clients in 2004, Nirdhan has almost
doubled its portfolio to 74,000 in 2006. Management believes that when new
information systems are fully on line that their ability to control delinquency will
improve.

6.3.2.8. Tailoring of product/service – does tailoring help/hurt efficiency?

The efficiency impact of tailoring new products to reach the very poor depends on who
bears the cost of developing and rolling out the product and then of delivering
unremunerated non-financial services such as training and social outreach. In the case of
Nirdhan’s hill country self-reliance group village bank product, the development and roll
out costs were funded by USAID, which therefore had no impact on efficiency.

36
However, the cost of implementing group formation and training over the long run will
be borne by Nirdhan, which will require loan officers to spend more time with their
groups and impact the number of clients each loan officer is able to serve. Nirdhan
expects that this trend will eventually reverse.

In the case of Nirdhan’s ex-kamaiyai product, development costs were paid by USAID
and implementation costs by the ILO. These costs therefore had no impact on efficiency.
In addition, the design of this integrated product was structured so that a separate
organization, Nirdhan NGO, will continue to bear the cost of offering literacy, numeracy
and business training and social support to very poor clients, while Nirdhan bank is
responsible only for lending. This product is likely to have a positive effect on efficiency
because another organization is bearing the unremunerated cost of group formation and
development and Nirdhan only needs to offer and recover loans. One interesting caveat
to this equation is that, hoping to same time and money, Nirdhan NGO took over some of
the groups that it is working with from other programs but found that the groups were
often to large and poorly trained. While there can be certain advantages in working with
pre-formed groups, these advantages can also be limited depending on how well the
organization that formed them did its job.

6.3.3. Cost effectiveness of non-financial services

Because Nirdhan does not capture detailed costing data on its products, it is extremely
difficult to estimate cost effectiveness of either financial or non-financial services.
However, as shown in the example of ex-kamaiya non-financial services, is it clearly
more cost-effective to have another organization offer these unremunerated services.

The question of cost-effectiveness takes an interesting twist when one considers that, as
an organization, Nirdhan believes that offering non-financial services is an essential part
of its mission to alleviate poverty, but that as an MFI, Nirdhan should not be offering
these services directly. However, in many cases, non-financial services are either
necessary or beneficial to the provision of financial services. For example, non-financial
services such as training clients how to fill in their passbooks are necessary to the
provision of financial services. Additionally, non-financial services such as business skill
training can have a positive impact not only on clients’ ability to manage their businesses
better, but also on their capacity to manage and repay their loans.

In reality, Nirdhan often crosses the line of separation between financial and non-
financial services, in particular with its Information, Education and Communication
(IEC) training curriculum. The provision of IEC training is a response to the dilemma
posed by a situation in which a MFI believes that its clients need non-financial services,
but there is no partner available or willing to offer these services to its clients. Thus,
while Nirdhan does not believe it is cost effective for an MFI to offer non-financial
services, they do so because they feel that their clients need these services, and because
they believe that providing these services will eventually improve loan repayments.

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6.3.4. Strategies to cover/reduce costs

6.3.4.1 Delivery mechanism

The development of Nirdhan’s self-reliance group village bank product is an example of
the trade offs that can be found in trying to reduce costs by implementing new delivery
mechanisms. Because loan officers should be able to manage more self-reliance group
clients than regular clients, the cost of wholesale lending to self-reliance groups should
eventually be less than direct lending. However, the cost to build the capacity of these
groups for self-management represents a significant front end investment. In addition,
because Nirdhan has chosen to offer self-reliance groups a reduced interest rate (15%
instead of the standard 20%), their income statement will take a hit with both decreased
income in the long run and increased expenditures in the short run. Again, management
feels that working through self-reliance groups will eventually reduce costs, but they
have no hard data and these groups are too new to assess at this time.

Other modifications Nirdhan has made to the standard Grameen methodology have had a
less ambiguous impact in reducing costs. For example, Nirdhan changed repayment
meetings from a weekly to bi-weekly, thereby increasing the number of clients a loan
officer can manage from 400 to 600.

6.3.4.2 Cross Subsidization

Although Nirdhan clearly subsidizes the cost of its non-financial services such as IEC
training with income from its financial services, there are no hard data on the value of
this subsidy by product. Nirdhan captures figures on the cost of offering IEC training,
but not on the income from the specific loan products that this training supports.
Therefore cross subsidies can only be measured on a portfolio-wide basis.

6.3.4.3 Private/public partnerships

Recognizing that poverty alleviation requires more than just access to financial services,
Nirdhan has sought partnerships with other government and non-governmental
organizations. For example, in the case of the ex-kamaiya product, Nirdhan took over
groups of ex-bonded laborers that had been formed by the Ministry of Land Reform and a
Nepalese NGO, Mahila Upkar Munch.

It is interesting to note that the potential for public-private partnerships changed

dramatically when the Maoist guerillas effectively took control over most of the areas in
which Nirdhan operates. Although Nirdhan enjoys the support of the government in the
capital of Kathmandu, this is effectively meaningless in rebel controlled areas. Therefore
Nirdhan has had to engage in a public relations campaign with the Maoists rebels to
explain the goals, objectives and operations of the organization and to get permission to
continue operating in areas they control. While Nirdhan’s relationship with the Maoist
rebels can not really be called a partnership and was not designed to reduce costs, it has
been absolutely necessary for them to continue to do business. Even though Nirdhan was
one of the very few organizations able to continuing operating in rebel controlled areas,
their relationship with the Maoist has not been without incident, and several Nirdhan

38
branches were attacked and looted by rebels. It is interesting to note that in addition to
communicating with the Maoist, Nirdhan’s public relations campaign also reached out to
community leaders to remind them of the reasons for their presence in the community
and to clients to remind them of the nature and value of Nirdhan’s commitment to serving
their financial needs.

6.3.4.4 Automation to reach scale

An important cost cutting strategy for Nirdhan is the installation of a new management
and financial information system. By automating data collection and information
management Nirdhan expects to cut staff costs at both field and headquarters levels. In
addition, improved efficiencies through these new systems will free staff time to recruit
new client groups and to better manage existing groups, increasing both the size and the
quality of Nirdhan’s portfolio. It is also hoped that using automation to reach more
clients while reduce portfolio at risk will also improve Nirdhan’s economies of scale.

7. Conclusions

7.1. Challenges and Pitfalls/Lessons Learned

7.1.1. Challenges
While there is room for debate regarding where Nirdhan has done well and where there is
room for improvement in their outreach to poor clients, this discussion much take into
consideration the challenges of the context in which Nirdhan is working. Nirdhan is
operating in one of the poorest countries in the world, serving poor clients in remote rural
regions, and they have been doing so during a 10 year old active conflict that has already
killed 13,000 civilians. While this doesn’t necessarily mean that Nirdhan should be given
leeway for basic issues such as their high portfolio at risk ratio, they should at least be
given credit for overcoming fundamental challenges that have daunted less dedicated
institutions as they have continued to actively target and serve poor women.

In addition to external challenges, Nirdhan is also faces internal issues as it focuses on

serving the needs of the poor. One internal debate that is still not entirely resolved is that
of how to remain a sustainable financial institution when client needs extend beyond
savings and loans. Clearly there are large numbers of MFIs who have struggled with the
same dilemma and are able to remain sustainable. Yet there appears to be an inherent
tension in Nirdhan between wanting to offer profitable financial services, while knowing
that many clients need more. This issue has been partly resolved by sourcing outside
donor funds and forming strategic alliances with implementing partners in order to cover
the costs of offering such un-profitable services as training and social outreach. Clearly,
indications are that serving smaller numbers of very poor clients will not be as profitable
as serving larger numbers of poor and middle poor clients. However, key to Nirdhan’s
mission is the idea of uplifting the poor with its inherent financial implications.

The challenges of serving the very poor are more than a simple question of mission over
money. Serious methodological challenges exist regarding just how poor even a
dedicated pro-poor MFI can reach. Despite the fact that Nirdhan is both driven by pro-

39
poor values and equipped with pro-poor management systems, the Nepalese Centre for
Microfinance found that only 26% of their clients are very poor and 37% are poor. Is it
possible that these figures indicate the limits of Nirdhan’s poverty outreach? Have they
reached a trade off point between depth and scale where an increasingly greater effort
will be required to reach and increasingly smaller number of very poor clients? And
what will the impact of increased focus on the very poor be to efficiency and
sustainability? Indications are that the pressures of dramatically increasing scale of
outreach have had a negative effect on dept of outreach and that loan officers have found
it easier to recruit more new poor and middle poor clients than very poor clients.
However, until Nirdhan can effectively cost it individual financial and non-financial
products and measure the impact of its services, these issues will remain open for debate.

Many of the methodological challenges that Nirdhan is faces in reaching the poor have
their roots in systems-related issues. For example, while some degree of responsibility
for Nirdhan’s very high portfolio at risk can be attributed to the Maoist insurgency,
simultaneous rapid growth in outreach and downreach have created significant strains on
Nirdhan’s management systems. Nirdhan’s Excel-based MIS system has simply proven
inadequate to managing its growing portfolio and their new Oracle-based system has not
been fully implemented yet. Also, while this new system should help Nirdhan to handle
information more effectively, at present they are gathering more information than they
can manage. This includes not only portfolio information, but also client poverty-related
data. Nirdhan will need to overcome these information systems challenges in order to be
able to effectively analyze the volumes of data they collect on each client and to begin to
measuring the impact and effectiveness of their financial and non-financial services.

7.1.2. Lessons Learned

Experience in reaching very poor groups such as ex-bonded laborers has led Nirdhan
management to the belief that simply wanting to serve the poor isn’t sufficient. Effective
poverty outreach requires not only a desire to serve the poor, but also products and
services that the poor need and can use. More often than not, this means more than just
loans, but an integrated package of non-financial and financial services. In fact, many of
the bonded laborers that Nirdhan is working with became bonded laborers by taking on
more debt than they could repay and are therefore very reluctant to borrow again. For
these clients, significant of training and social outreach to build their confidence and their
assets is required before they are able and ready to borrow again.

A corollary to this lesson is that reaching poor clients requires not only will, but also
management systems. Nirdhan is an excellent example of a pro-poor management ethos
that begins at the bottom of the organization and continues all the way to the top. This
requires the commitment of everyone from loan officers to board officers, but also the
training, information, financial and management systems to effectively implement
Nirdhan’s pro-poor mission. In addition, reaching large numbers of poor people demands
systems robust enough to handle quantities transactions and manipulate data efficiently
and effectively. Nirdhan is pushing the limits of its current systems and its ability to
reach more and poorer clients will be negatively impacted until these systems can be
replaced.

40
With regards to developing and implementing pro-poor management systems, Nirdhan
has found that simpler systems are often better. In order to reach the poor, Nirdhan built
simple systems that would enable them to target and select poor clients and to measure
poverty. For example, one of Nirdhan’s simplest poverty targeting tools has been to set
up branches in poor areas. Another slightly more complex method of poverty targeting is
developing products and services that are useful to the very poor and poor, but not to the
better off. Nirdhan’s other poverty targeting tools include a list of seven means testing
criteria for new clients, focused mainly on housing and land holdings, that are easy to
gather and verify. By keeping these criteria simple, Nirdhan also helps to ensure that
loan officers are able to collect and report client data accurately and efficiently. Simple
criteria also allow for easier collection of follow on data between loan cycles in order to
measure changes in client means.

However simple and effective any set of selection criteria are, Nirdhan has found that
they need to be adapted to the context in which they are being used. For example,
maximum landholdings as a selection criteria works well in rural areas, but not well at all
in urban areas. And while a simple set of focused indicators may be adequate for
capturing poverty outreach data, they may not be able to effectively measure poverty
impact. In order to get an in depth perspective on poverty impact, Nirdhan has found it
useful to hire a local consulting firms to organize statistically sophisticated studies and to
measure the kind of information that Nirdhan’s means testing system simply doesn’t
produce.

While it may seem obvious that in order to serve poor people, an MFI needs to offer
products and services that they need and can use, the development of these products has
been by no means self-evident. Nirdhan has learned from experience that the costs
associated with developing pro-poor products are not reserved to the products themselves
and do not end with the successful roll out of the products. While Nirdhan has been able
to source donor funds for the product development and roll out process, few donors are
willing to provide open-ended funding to subsidize product delivery. And although all
new products require upfront investment of financial and human resources in design,
testing and roll out, in addition pro-poor products also require ongoing investment in
client targeting, selection and monitoring to ensure that services are effectively reaching
the poor. Finally, many products require modification over time, means a long term
investment in systems to capture client feedback and to refine products.

While volumes of best practices documents exist on product development, Nirdhan found
that no new product can be developed in an institutional vacuum. In designing any new
pro-poor product, consideration must be given for how it will fit in with existing
structures and systems. One key system to consider in this context is the loan officer
incentive system. If a new product is not made part of the existing incentive system, loan
officers may be less motivated to promote it, or worse feel like offering the new product
is negatively impacting their salary. Because it is easier to adapt from within a system
than to introduce from outside of it, Nirdhan has learned from practical experience that it
is often significantly simpler to modify an existing product rather than to develop an

41
entirely new product. At the same time, management recognizes that entering a new
market or reaching out to a new client group may inevitably require that new products be
developed. Finally, Nirdhan has found that the most effective way of ensuring that a new
product is meeting the needs of its clients is to regularly solicit client feedback on what
they like and don’t like about the products and services they are being offered.

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 Appendix 1
Contacts and Sources of Information

Anita Mahat, USAID/Nepal, amahat@usaid.gov, 977-1-427-0144, Box 5653 Kathmandu, Nepal.

Arjun Gurung, Save the Children, agurung@savechildren.org.np, 977-1-441-2598, Box 2218,

Kathmandu, Nepal.

Arjun Khanal, Nirdhan Utthan Bank, Aryabhanjyang, Palpa, Nepal.

Bhaskar Mani Gnawali, Nepal Rastra Bank, bgnawali@nrb.org.np, 977-1-441-0515, Baluwatar,

Kathmandu, Nepal.

Bhoj Raj Bashyal, Nirdhan Utthan Bank, bhoj@nirdhan.com, 977-71-523-764, Himali Path,
Siddharthanagar – 7, Bhairahawa, Nepal.

Bir Bikran Rayamajhi, Nepal Rastra Bank, bbr@nrb.org.np, 977-1-441-2262, Baluwatar,

Kathmandu, Nepal.

Chaitanya Gopal Dangol, Save the Children, cdagnol@savechildren.org.np, 977-1-441-2598, Box

2218, Kathmandu, Nepal.

Harihar Dev Pant, Nirdhan Utthan Bank, nubl@ntc.net.np, 977-1-426-2461, 125 Mirmire Marg,
Anamnagar, Kathmandu, Nepal.

Hem Poudyal, Plan International, hem.poudyal@plan-international.org, 977-1-553-5560, Box

8980, Kathmandu, Nepal.

Hema Khadka, UNDP Microenterprise Development Programme, hema.k.c.@medep.org.np,

977-1-554-1951, Box 107, Kathmandu, Nepal

Jayakurdi Mahila, Nirdhan Utthan Bank, Aryabhanjyang, Palpa, Nepal.

Keith Leslie, Save the Children, kleslie@savechildren.org.np, 977-1-441-2598, Box 2218,

Kathmandu, Nepal.

Khrisna Pradhan, Nepal Rastra Bank, kpradhan@nrb.org.np, 977-1-441-0515, Baluwatar,

Kathmandu, Nepal.

Lakshaman Pun, UNDP Microenterprise Development Programme,

lakshman.pun@medep.org.np, 977-1-554-1951, Box 107, Kathmandu, Nepal.

Naren Chanmugam, USAID/Nepal, nchanmugam@usaid.gov, 977-1-427-0144, Box 5653

Kathmandu, Nepal.

Neena Thapa, Nabil Bank, nthapa@nabilbank.com.np, 977-1-442-9546, Box 3729, Kamaladi,

Prabin Dahal, Nirdhan Utthan Bank, prabin@nirdhan.com, 977-71-523-764, Himali Path,

Siddharthanagar – 7, Bhairahawa, Nepal.

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Prahlad Man Mali, Centre for Microfinance, pmali@cmf.org.np, 977-1-449-2042, Box 20933,
Kumari Galli, Bhatbhateni, Kathmandu, Nepal.

Prakash Raj Sharma, Nirdhan Utthan Bank, prakash@nirdhan.com, 977-71-523-764, Himali

Path, Siddharthanagar – 7, Bhairahawa, Nepal.

Ram Bahadur Yadav, Nirdhan Utthan Bank, prabin@nirdhan.com, 977-71-523-764, Himali Path,
Siddharthanagar – 7, Bhairahawa, Nepal.

Santa Bahadur Gurung, Nirdhan Utthan Bank, Bastari, Palpa, Nepal.

Sarda Chandra Ghimire, Nirdhan Utthan Bank, Bastari, Palpa, Nepal.

Shankar Man Shrestha, Rural Microfinance Development Centre, rmdc@wlink.com.np, 977-1-

426-8018, Box 20789, Putalisadak, Kathmandu, Nepal.

Sribindu Bajracharya, USAID/Nepal, sbajracharaya@usaid.gov, 977-1-427-0144, Box 5653

Kathmandu, Nepal.

Uddhav Poudyal, International Labour Organisation, uddhav@iloktm.org.np, 977-1-554-9590,

Box 8971, Kathmandu, Nepal.

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 Appendix 2
Socioeconomic and Poverty Indicators: definitions, explanations and sources

“Nepal Human Development Report 2004: Empowerment and Poverty Reduction” UNDP,
Kathmandu, Nepal, 2005.

“The CIA World Fact Book” CIA, Washington, DC, 2006.

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