When Will Nepali Businesses Get Credit?

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The title of my article should have been ‘When will Nepali Businesses get Credit in an affordable Interest Rate?’ Forget affordable interest rate, I am compelled to title this article, ‘when will Nepali Businesses get Credit?’

This time liquidity issues or so called C/D ratio (capping at 90%) of Banking System has really prolonged and Businesses, more particularly SME businesses are suffocating due to unavailability of credit. Forget new factories, product launches, expansions, businesses are even struggling to manage their working capital and their day-to-day cash flows.

Without naming Organizations, we can bet that even some of the large organizations have not paid their salary dues for months. Similarly, expenses such as Rent, Interest and other operating costs are overdue and not paid. Are the stakeholders, more particularly NRB, Ministry of Finance & Prime Minister’s Office, sensitive about this? Do they know the severe negative chain effect this is causing to the economy? I doubt.

In the middle of such grave liquidity and credit crunch, Finance Minister has resigned, owing to investigation pertaining to a very peculiar case of allowing unknown people during budget preparation and there are question-marks and pressure for NRB Governor to resign because of his alleged involvement in a political party. Ministry of Finance has come into Prime Minister’s portfolio, when the PM himself has lot of political issues and pressures, both from within and outside his party, in his plates. When the state of minds of key personnel, supposed to be economic drivers, are in such a volatile situation, how can we expect any positive outcome in the near future. Vice Chairman of Planning Commission looks like a sensible person and possesses good understanding of the economy, but does he have execution authorities?

Debt/Equity Ratio or Leverage Ratios are something we have grown up studying. All of a sudden, the debt component from Capital Structure has evaporated from the market and businesses are suffering because of this liquidity/credit crunch and the resulting chain negative effect on business sustainability, growth, new products, new companies/factories thereby impacting on employment.

At the time of ongoing Stagflation (unprecedented Inflation coupled with de-growth or negligible growth), this Credit Crunch is surely going to make our situation even worse.

We can only appeal to the Government to take necessary action, quickly. In case, any suggestions or inputs required from the Private Sector, we are always open.  

Author is Founder/Executive Chairman – KFA

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