What Is Deprived Loan?

Deprived sector lending refers to small loans that are provided to poor and rural people for small projects. The loans are supposed to be one of the measures used by the central bank to promote financial inclusion and establish the habit of formal banking in the rural and poor areas. According to the monetary policy, the commercial banks have to lend 3.5 percent of their total loans to the deprived sector while development banks and finance companies’ loan portfolios should contain 3 percent and 2.5 percent loans issued to the deprived sector, according to monetary policy. The amount will be increased by 0.5 percentage point in two successive years. It offers several credit facilities directly or in collaboration with partner institutions targeted at micro-enterprises and individuals who have been deprived of easy access to finance in suburban and rural areas of Nepal.The main objective of deprived sector credit is to 
uplift the sociology-economic status of these people. 
Micro finance is a process of delivering financial services to the deprived groups of 
people that includes various activities including that of micro credit, saving mobilization, 
transfer of money, micro insurance and payment services to rural poor people. It helps to 
provide self-employment opportunities and income generating activities in rural areas.

Features Of Deprived Loan :

• Available to the community level and small enterprises such as cottage industries, alternative energy, health, agriculture, livestock farming & individuals
• Easily accessible in remotest parts of the country with flexible repayment schemes.
• Wholesale lending facility to Microfinance Institutions who are specialized in deprived sector lending.

Impact of Deprived Sector Loan

The fundamental micro finance activities undertaken in the country revealed that the deprived sector credit policy has created favorable impact on increasing access to finance, expansion of microfinance activities and improving socioeconomic status of the deprived people. The impact of the policy can be evaluated based on following indicators:

Increased in access to finance: 

The rapidly expanding banks and financial institutions particularly micro credit development banks have contributed to increase in access to finance of the rural poor. Increase in number of borrowers, Institutional development and Competitive Micro Credit Business.

Increase in Micro Finance Activities: 

The mandatory deprived sector lending policy is being one of the main and continuous sources of funds for Micro-fiances institution(MFIs). deprived sector credit policy has contributed significantly on the various aspects of Micro Credit Development Banks and micro financing activities in the country.

Improvement in Socioeconomic Status 

Micro credit program helps to assemble poor people in-group, give an opportunity to discuss and share of information about their business and create awareness against poverty. Micro credit financing procedure has developed the attitude of financial discipline among the poor. As a result the flow of micro credit, outstanding repayment rate and increase in group savings has been achieved by MFIS. This indicates that the policy provision has enhanced the socioeconomic status of the deprived people. 

Increase in Economic Activities 

Once the poor people get credit for income generating activities it energized them and became more productive. It will help to enhance economic activities thereby increase in income, self-employment and livelihood of the poor people.

Benefits Of Deprived Loan:

• Creating opportunities for self-employment to individuals in communities
• Enhancing skill-based enterprises and introducing affordable technologies for uplifting the living standards of households