KATHMANDU, Sept 6: Labor-related problems, which have proved to be a bane for the manufacturing sector, have now started sprouting in the microfinancial sector, threatening people´s access to finance and jobs of thousands of people.
These problems have currently surfaced at three microfinance institutions (MFIs) - Swabalamban Microcredit Development Bank, Development Project Service Center (DEPROSC) Nepal and Nirdhan Utthan Bank.
The trouble started brewing on March 2, when employees of Swabalamban submitted 46-point demand to the management, insisting that it raise wages by around 41 percent, fix working hours, provide health insurance for all field workers and grant permanent status to employees who have completed 240 days at workplace, among others.
After the talks between the management and protesting workers, including those facilitated by the labor office, failed to yield positive results, the employees shut down the institution on July 14 and remains closed till date.
The problem that cropped up at DEPROSC Nepal is almost identical. Employees on March 6 demanded pay hike, promotion, and benefits like provision of vehicles to staff, among others. Although the strike at the company has ended, the management is not happy with the verdict and has appealed for revision of decisions at the labor department.
Now, employees of Nirdhan Utthan Bank have also jumped on the bandwagon and have shut down the institution.
All these instances show growing conflict between the management and employees, with each of them calling their stance “correct”. But in this tussle, creditors lying in the country´s far-flung areas, who seek unsecured loans of up to Rs 100,000 from these institutions, are losing the most.
“Inability to settle the issue amicably through dialogue will hit the customers who lie in the lowest rungs of the economic ladder,” said Anil Shah, CEO of Mega Bank, which has tailored its own microfinance products and is also working with other MFIs to cater to the rural market.
MFIs came into being in the country almost two decades ago with the aim of increasing rural population´s access to finance. Over these years, they have expanded network to almost every part of the country, while keeping default rates on loans at almost zero level. This has established that even low-income people are bankable.
Because of this success story and higher inflow of remittance income in rural areas, even commercial banks are now eager to cater to this population - indicating high chances of banking services expanding as rapidly as telecommunications services in the country.
Yet protests launched by employees of these institutions have created a level of discomfort among those planning to penetrate the rural market. “Such examples will only encourage them to drop the idea,” Shah said.
Although employees, who launched the protest, are aware of the drawbacks, they told Republica they were forced to resort to the measure because “the management was inconsiderate about problems they faced”.
“We work in rural areas and fall into accidents every now and then. In such cases, we have to take leaves of several days, without getting any compensation. So is it wrong for us to ask the management to cover us with health insurance policy,” Prakash Banskota, president of Swabalamban Bank Employees Union, told Republica.
Regarding wages, Banskota acknowledged that workers initially asked for increment of over 40 percent - from Rs 12,078 to Rs 17,000 per month. “But we have lowered that amount to Rs 14,500 per month,” he said. “This is appropriate amount as we won´t be demanding wage hikes for another two years because of restrictions made by the labor law.”
The company, where Banskota works, on the other hand, claims it would need to fork out additional Rs 380 million per year if it were to fulfill all 46 demands. “That´s simply unaffordable for a company that generated a net profit of Rs 60 million in 2010/11,” Kanhaiya Pradhan, CEO of Swabalamban, said. “All we are asking them to do is be reasonable and reduce the amount to around Rs 40 million.”
Considering this episode, it could be said statements made by both the sides are logical. But at times employees clearly violate labor laws while launching strikes - as in the case of DEPROSC Nepal.
The employees there padlocked the office right after placing demands in front of the management, which clearly goes against labor law that restricts strikes within 51 days of submission of demands.