KATHMANDU: Non-performing loans (NPLs) of microfinance institutions in Nepal have surged to Rs 50.82 billion as of mid-July 2026, according to the latest off-site supervision report by Nepal Rastra Bank. The NPL ratio rose to 10.42 percent, up from 7 percent in the previous fiscal year.
Total credit extended by these institutions grew by 10.09 percent to Rs 487.74 billion. However, the growth rate of bad loans significantly outpaced credit expansion, climbing by 63.83 percent. This trend highlights a growing challenge regarding the quality of assets within the sector. Consequently, the loan loss provision for NPLs increased by 84.08 percent, reaching Rs 29.43 billion.
Despite the pressure from rising bad debts, the net profit of retail microfinance institutions increased by 48.14 percent to Rs 10.78 billion. Currently, there are 51 microfinance institutions in operation, 48 of which are retail lenders. Agriculture remains the primary focus for lending, accounting for 58.63 percent of the total credit portfolio.
While the number of members served by these institutions grew by 4.96 percent to 6.53 million, the total number of branches continued to decline, dropping by 0.75 percent in the 2025-26 fiscal year. The institutions have mobilized Rs 437.81 billion in financial resources through deposits and borrowings. Despite the rise in bad loans, the central bank noted that the capital adequacy of the sector remains satisfactory. By mid-July 2026, the total assets of these microfinance institutions reached Rs 655.42 billion, marking a 7.88 percent increase compared to the previous year.
