Kathmandu. KATHMANDU: Association of Hire Purchase Companies of Nepal (ACEM) has welcomed the ‘Policy and Procedural Provision for Approving Hire Purchase Loan Companies-2083’ issued by Nepal Rastra Bank on August 11, 2083.

The Association believes that the new arrangement will help recognize the role played by hire purchase companies in the financial sector of Nepal and will create an environment conducive for connecting consumers and businessmen who are out of the reach of banks and other financial institutions to financial services.

KATHMANDU: Nepal Rastra Bank (NRB) has introduced a new directive allowing its customers to charge 1 percent service charge. On the other hand, the problem of spread has been addressed. This will benefit companies in the long run.

The association believes that the provision of 10 years renewal period of the company will have a positive impact on the institutional stability of the hire purchase company and the investment climate.

Currently, there are 10 hire-purchase companies operating in Nepal with permission from Nepal Rastra Bank. These companies have been providing loans for the purchase of various goods and equipment including mobile phones, home appliances, electric appliances, motorcycles, reconditioned vehicles, heavy equipment, etc.

Bishnu Kumar Agrawal, president of Association of Hire Purchase Companies of Nepal, said that the main objective of the Hire Purchase Company is to bring financial access to the consumers who do not have easy access to loans from banks and other financial institutions.

“There was no easy situation to get loans from banks to invest in vehicles, motorcycles or heavy equipment. Even though I got a loan from the cooperative, the process was not easy. To address this situation, the government had brought regulations for hire purchase companies,” Agrawal said.

In recent times, the services of the Hire Purchase Company are not limited to vehicles and heavy equipment. At present, hire purchase companies are providing loans ranging from electronic goods to washing machines costing up to Rs 10,000. This is making it much easier for consumers who do not have the environment to take loans from banks.

Hire purchase companies are also contributing to new enterprises and job creation by providing loans to commercial vehicle drivers and entrepreneurs, small entrepreneurs, and consumers who do not have access to the banking system. According to the association, the higher purchase sector has an important role to play in increasing the productivity and efficiency of the citizens through investment in vehicles and equipment.

It is a positive thing that the Nepal Rastra Bank has made arrangements to allow hire purchase companies to open liaison offices in different places through the new system. We hope that this will help expand the higher purchase service even in the remote areas where banks and financial institutions have less access.

For the last 12 years, Hire Purchase Companies have been operating under the regulation of Nepal Rastra Bank. The association was formed after the regulatory body advised the companies to organize and raise their issues to solve the practical problems in the old guidelines.

Even now, some issues related to the loan recovery process are still not clear and practical. There is no provision for registering auction vehicles in Gandaki, Bagmati and Lumbini provinces. We need to find a solution to it. Another thing is that the hiring purchase companies should also be able to use the services of the Debt Recovery Tribunal, which has experts in the financial sector.

Overall, the association has concluded that the new arrangement of the Rastra Bank will encourage the hire purchase companies to move forward in a more systematic, sustainable and service-oriented manner. In the coming days, the Hire Purchase Companies will play a more effective role in expanding financial access to Nepali consumers, promoting entrepreneurship, creating employment and expanding the overall economy.