Kathmandu: Following the revision of the dividend policy by Nepal Rastra Bank (NRB), three microfinance institutions (MFIs) appear capable of distributing dividends up to 25 percent.
Although seven MFIs have a capital adequacy ratio above 12 percent and non-performing loans (NPLs) below 5 percent, only three of them have sufficient retained earnings from the last fiscal year to declare dividends of 25 percent.
Chhimek, Jeevan Bikas, and Sana Kisan Microfinance are expected to distribute 25 percent dividends. However, despite being allowed by NRB’s directive to distribute up to 25 percent, four other MFIs lack the required retained reserves and thus cannot distribute dividends to that level.
RSDC, First Microfinance, Suryodaya Womi Microfinance, and NMB Microfinance will not be able to distribute dividends according to their dividend capacity.
Similarly, National, Nirdhan Utthan, Global IME, Deprosc, and Sworojgar Microfinance are expected to distribute dividends up to 20 percent. Although these MFIs have the capacity to exceed 20 percent, their dividends remain capped at 20 percent due to capital adequacy and NPL ratios.
Among 13 MFIs that qualify to distribute dividends up to 20 percent based on capital adequacy and NPL standards, only five have sufficient retained earnings to declare 20 percent or higher.
Nerude and Mirmire Microfinance qualify to distribute 15 percent dividends based on capital adequacy and NPLs, but lack the retained earnings to do so. Meanwhile, 14 MFIs are eligible to distribute only up to 5 percent dividends, but among them, Dhaulagiri and Laxmi Microfinance do not even have the reserves to meet that.
Although Nesdo Samriddhi Microfinance shows a dividend capacity of 58 percent, it is barred from distribution due to having NPLs above 15 percent. Similarly, NIC Asia Bank is running in accumulated losses while its microfinance wing also has an NPL ratio above 15 percent, preventing dividend payouts.
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