Stop issuance of new co-op licences: Probe panel

KATHMANDU, MAY 21 - A high-level probe commission on cooperatives has recommended the government stop issuing new licences in the cooperatives sector across the country.

The commission, which submitted its report to the government on Friday, said new cooperatives could be allowed to open in VDCs where there are no such institutions. “The government could allow opening cooperatives only in those VDCs where there is a complete absence of cooperatives,” it said.

Besides halting new licence issuance, the commission also recommended stopping registration of new cooperatives associations. “New cooperatives associations should not be allowed until a proper regulation is in place,” states the report. The committee made such a recommendation, according to one of its members, considering that the Department of Cooperatives is struggling to monitor and regulate the sector amid a rising number of cooperatives.

“The surge in the number of cooperatives has posed a challenge for the department to effectively supervise this sector,” said Sushil Ram Mathema, a member of the commission. Stating that even a well-equipped central bank is struggling to regulate the limited number of banks and financial institutions, Mathema said the department could not regulate the sector effectively due to resource constraints.

The department currently has 538 employees, but the number of cooperatives has reached more than 29,000. The number of Savings and Credit Cooperatives and Multipurpose Cooperatives, which carry out banking transactions, is more than 15,000.

After problems started to emerge, mainly in valley-based Savings and Credit Cooperatives, the government has stopped granting new licences for such institutions for the last two years. Most of the cooperatives are concentrated in the valley.

The commission has also pointed out the need for establishing division cooperatives offices in all 75 districts. “In addition, there is a need for a 60-70 member monitoring team with high technical skills that can look after even big cooperatives,” said Mathema.

Currently, there are just 38 district cooperatives offices. Although the budget for 2013-14 announced to open 20 more district cooperatives by the end of this fiscal year, it has not been implemented so far.

The panel has also recommended forming a powerful Cooperative Promotion Committee, authorising it to take decisions on issues related with to sector, such as setting standard depending on the status of cooperatives and taking troubled cooperatives to forced merger. Cooperatives associations have said there should be qualitative restriction. “The government should fix the licence quota based on the population size, transaction volume and area in which cooperatives operate,” said Rishi Raj Ghimire, president of Nepal Federation of Savings and Credit Cooperative Unions.

Terming the report “more control oriented”, Ghimire said: “Those who violate the norms of good governance should be punished. The government should focus more on educating both the general people and cooperatives operators to control irregularities.”