Kathmandu, May 29: Financial irregularities, misuse of depositors’ funds, and weak regulatory oversight have severely undermined public trust in Nepal’s cooperative sector, according to a report. The report, prepared by the Commission of Inquiry into Irregularities in Cooperatives, 2082 — formed by the government to address problems in the cooperative sector — reached this conclusion.
According to the report, although the cooperative sector is envisioned as a key pillar of the economy under Nepal’s constitutional three-pillar economic policy, growing financial misconduct, misuse of savings, and ineffective regulation in recent years have weakened public confidence in cooperatives.
The report states that approvals for the registration of cooperative institutions, expansion of operational areas, and establishment of service centres and branches were frequently granted without adequate study, needs assessment, or compliance with established standards.
The Commission concluded that serious weaknesses in these decision-making processes contributed to many cooperatives becoming problematic. It said some cooperative operators and managers had strayed from the sector’s core objectives by engaging in the misuse of depositors’ funds, opaque financial transactions, and activities driven by personal interests.
The report further highlighted that weak regulation in the past, haphazard registration and expansion processes, political affiliations of cooperative operators and managers, and direct or indirect political interference collectively contributed to the current crisis.
In addition, the Commission identified poor coordination among multiple regulatory bodies, the lack of an effective information system, financial indiscipline, weak governance, and a shortage of skilled human resources as major challenges facing the cooperative sector.
Read Full Report [Nepali]
