In the past 30 years, banks and financial institutions have increased loans by 20% but Nepal’s economy has expanded by only 4.5%.
Bankers have gradually started to realise that our sector has not uplifted our economy. But I believe the NRB should be guiding the bank towards investing in productive sectors. It is only natural for investors to seek profit but they should not expect a high-level return. Otherwise, the economy will collapse. What is the meaning of such banking that would not propel the economy forward and benefits just one group? Investments without a positive impact on the society, citizens, environment and the country will benefit no one.
Having said that, banks have also invested in productive sectors like the expansion of hotels and cement industries. But now we need to look at the energy consumed by these projects invest in, their environmental impacts and carbon emissions. In Europe, I came across a bank building that did not depend on grid electricity during the day. We can adopt such practices ourselves.
But banks investing in imports and real estate sectors have negatively impacted the economy and the environment.
The government and the baking sector both should shift their priorities. Nepal should be self-reliant in manufacturing and create employment opportunities. Banks should invest in building such a system. High imports and unproductive investment can push the country into an economic crisis.
Food and energy are critical sectors for any country. The finance sector has played a strong role in energy generation by investing in hydropower. And Nepal is now nearly self-sufficient in electricity and as a banker, I’m proud of this. This now should be replicated in food and agricultural production which makes up one-fourth of our imports. This can be replaced with domestic production if we prioritise and invest in agriculture.
We also have a huge potential for pilgrimage tourism from Janaki to Pashupati to Muktinath. If we do not prioritise the real economy we will likely crash, this is what recent events in South Asia have taught us. By producing essential commodities including agricultural goods, exporting electricity and promoting electric transport, we can reverse the balance of payments deficit.
How will Nabil itself put these values into practice?
We set up a sustainable banking department last year. We are also training youth in entrepreneurship and leadership. We are giving loans to up-and-coming businesses in remote Nepal to start local agricultural enterprises but we also educate them about their responsibility towards the environment.
Nabil Bank is also a member of the Global Forum on Partnership for Carbon Accountants Finance. We are committed to tracking our loans and how much they have contributed to reducing carbon emissions.
Nepal needs to prepare a roadmap in various areas of sustainable development, finance and green economy. It also needs to implement its commitments including the Paris Agreement. Nabil Bank is moving in that direction, other banks should too. The past experience, present needs and future goals should all align when we invest in financial sectors.