In Nepal only 25% customers are banked through formal channels and a large majority of close to 40% are served through informal channels like cooperatives and FINGOs, the rest are unbanked. Mainstream financial institutions are concentrated in urban areas and presence in rural and remote areas is limited. Digital Financial Services (DFS), specifically branchless banking, has the power to transform the number of unbanked people that have access to safe formal financial services in Nepal.

Over the course of 2014 MM4P commissioned a number of research on the demand for DFS and agent networks and channels to reach rural unbanked people in Nepal.

The demand side study took a deep look at people’s experience of existing services and their providers. It looked into the needs of the low income customers, and how financial institutions can improve product and service offering. This qualitative study covered 1019 respondents across 5 regions.

The study indicated that preference for formal service providers has grown in the last ten years, while the use of informal financial service providers such as money lenders, relatives and friends, and Dhukuti groups has decreased. Interestingly, the use of informal groups to meet financial needs i.e. women’s, mothers’ and sisters’ groups has increased in the last ten years.

It highlighted the needs of low income customers for financial assistance, linked to key life events: children’s education; marriage in the family; illness of family members and celebration of festivals. The prime reasons for dependence on informal or the needs not been met were: high interest rates on loans; no need-based products; and the long distances from service delivery points.

In choosing the financial service provider, two key attributes trustworthiness and ease of access, was highly listed by the consumers.

To learn more about this study, please read the full report: https://www.uncdf.org/en/node/3065