Nepal cooperative crisis blamed on weak regulation, political interference in report

A government commission has identified a confluence of factors, including lax regulation, political meddling, and opaque dealings, as the root causes of the crisis plaguing Nepal's cooperative sector. The findings, released by the Ministry of Land Management, Cooperatives, Federal Affairs and General Administration, paint a grim picture of a sector where approvals for registrations and operational expansions were often rubber-stamped without proper scrutiny.

The report detailed how some operators allegedly diverted from cooperative principles, engaging in embezzlement and mishandling depositor funds. Compounding these issues were a lack of inter-regulatory body coordination, inadequate information systems, financial mismanagement, poor governance, and a deficit of skilled personnel. The commission explicitly pointed to the political affiliations of operators and managers, alongside direct and indirect political interference, as significant contributors to the sector's current predicament.

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Weak regulation, political interference and non-transparent operations have been identified as the main causes behind the crisis in the cooperative sector, according to a commission report made public on Thursday.

Public trust in cooperatives has reportedly plummeted due to recent financial irregularities and weak oversight. Despite these challenges, the ministry has pledged the government's commitment to reform. Current efforts focus on enhancing monitoring and regulation, revising existing laws, and prioritizing the restitution of savings and the recovery of loans. The commission itself was established on January 16 and led by former High Court judge Binod Prasad Sharma.

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Although the cooperative sector remains an important pillar of Nepal’s socialism-oriented economy, recent financial irregularities, misuse of funds, and weak regulation have led to a significant erosion of public trust in the sector.