From Informal to Formal Finance: The Transformation of an Indigenous Institution in Nepal

Hans Dieter Seibel and Heiko Schrader

No 1999,1, Working Papers from University of Cologne, Development Research Center

Abstract: Rotating savings and credit associations (RoSCAs) are, next to moneylenders, the most prevalent type of informal finance around the world. In 1988, Seibel & Shrestha traced the evolution of the dhikuti, as RoSCAs are called in Nepal, and published the results under the title Dhikuti: The Small Businessman?s Informal Self-Help Bank in Nepal in Savings and Development (XII, 2:183-200). Ten years later, a remarkable institutional innovation had occurred, benefiting from a change in the legal framework: the transformation of an organization of dhikuti origins into the Himalaya Finance & Savings Company. No subsidy or technical assistance was involved. HFSC provides doorstep savings collection services to low-income people throughout the country, shifting at the same time from group to individual technology. Matching assets and liabilities, it combines two categories of term finance: medium-term savings contracts and medium-term loans. Continuing its morphogenesis, HFSC is now ready to transform itself into a bank and to pursue an even more vigorous course of internal resource mobilization.

Date: 1999
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