Micro-credit and Rural Development:
The Importance of Credit Cooperatives to Small Scale Entrepreneurs in Rural Nepal

Mentor: Shankar Ghimire, Assistant Professor of Economics
Students: David Clifford, Grace Costa, Nick Sexton, Taylor Rigatti

This team received a SFF grant in 2015 but postponed their trip to 2016 due to the 2015 earthquakes in Nepal. 

Project Abstract

The ASIANetworkStudent-Faculty Fellowship team from Maryville College studied the role of microfinance activities in the development of rural Nepal. Particularly, the team analyzed the expansion of Savings and Credit Cooperatives (SCCs) and Micro-Finance Institutions (MFIs) in the Kabre Village Development Committee (VDC) of the Dolakha District and their impact on small businesses and local farmers. Kabre has grown as a regional hub for savings and credit cooperatives since the early 2000s. These institutions are considered to have contributed to the development of the major sectors of the rural economy, including farming, retail, business, and service industries. This project was aimed at conducting a scholarly analysis on the importance of these credit cooperatives in a broader context, mainly from two perspectives: (i) the role of SCCs in business expansion, and (ii) their role in employment generation, in Kabre VDC. 

The data required for the study was collected via a survey among 129 local businesses. Additional data from four cooperatives and five local farmers were collected in the form of interviews. The four researchers were divided into two groups taking into account the Asia experience and the research expertise of the students. The first group (David Clifford and Grace Costa) analyzed the impact of SCCs on business expansion and the second group (Nick Sexton and Taylor Rigatti) analyzed the impact of SCCs on employment generation. From this project, students gained a deepened appreciation for the diversity of people in Asia – religiously, culturally, socially, and economically. By focusing on rural communities and their local economy, this project increased our students’ knowledge and appreciation of the economic lives of the people in Asia. The experience was enriching for the students to learn about the details of a research project – conducting surveys, interviews, data collection and analysis, and writing up the results.

The survey data were analyzed using various statistical tools. Of the 129 respondents, 68 received loans from credit cooperatives to start their business, while 61 used their own source of revenue. The results show that at an individual level, the microfinance loans are more successful in promoting business expansion, compared to the overall sample studied. The findings also suggest that beneficiaries from credit cooperative loans are able to increase their personal hiring potential, creating more jobs to meet the demand. The implications of the studies are that credit cooperatives have the opportunity to identify and enable business ventures to start and expand, and if properly implemented, catalyze business and employment growth in rural Nepal.

David Clifford
The research experience I gained on the microfinance services in Dolakha, Nepal, greatly impacted me. I contextualize the work the research team conducted into the broader context of microfinance in Asia, by noting the rapid expansion of the microfinance industry in Asia, and the role it has played in a region that is largely comprised of developing nations, which Nepal certainly is classified as. I chronicle my personal experience, including the four case studies we conducted, the interviews of local credit cooperatives, and the experience of surveying 129 businesses in the village of Kabre in the Dolakha district.

The project helped advance my professional and academic development, in allowing me to gain valuable, high level research in a published academic paper, as well as provide me with important experiences in interacting with another culture, while studying an industry that had previously been foreign to me. The trip was able to provide deeply enhancing experiences for me in that it provided an opportunity to experience a different culture and community as well as provide valuable research experience that will be immensely helpful in future endeavors like graduate school. The advanced research techniques and work required for publishing a scholarly article, and the process of presenting the findings will be an invaluable asset that will serve me well as I begin my professional and academic careers.

We were able to live and interact with the people of Dolakha for three weeks, by spending time and talking to local residents, living in the same area as them and being active members in the community, eating meals with them, and hearing from them what it is like to be a member of a growing community. The project’s findings are summarized in a working paper that we hope to publish. I look forward to presenting the findings at various venues, including Maryville College and the ASIANetwork Annual Conference.

Grace Costa
Concerted efforts have long been in place to provide affordable credit to poor borrowers, like usury laws and Islamic prohibition of interest, but the most prevalent contemporary form of microcredit effective in Asia today is microfinance and credit cooperatives. Our methodology for investigating the relationship between borrowers and lenders of microcredit began with visiting our faculty mentor’s hometown, Kabre VDC of the Dolakha District in Nepal. From there, we surveyed 129 shopkeepers, had personal interviews with five successful farmers, and discussed microfinance with four credit cooperatives responsible for making the dreams of rural entrepreneurs into a reality. Over the course of the study, I was able to understand how our research into the lives of individuals in a developing country can help contribute to the improvement of their well-being and future economic success.

Our work remaining includes completing a short film on our experiences in Nepal and organizing the dates to present our findings. There are several avenues available at Maryville College through which we can make public presentations about the project to students, faculty, and community members. These opportunities will prepare me for presenting our work at the ASIANetwork Annual Conference in Chicago in March 2017.

I am beyond grateful for this opportunity as I developed my skills as a researcher, photographer, surveyor, international traveler, and came out a smarter tourist as well. I’ve also learned how to collect data from a population and analyze the findings by drawing on the interdisciplinary skills I’ve acquired as a liberal arts college undergraduate student. This process will be invaluable to me as an international studies major at Maryville College. Furthermore, I focused on my abilities as a photography enthusiast while taking photos and videos of our trip. I can use these skills in marketing and design to make myself more marketable to potential employers, or as an entrepreneur.

Nicholas Sexton
Microfinance in the Asian context has become a welcomed source of startup capital for many rural entrepreneurs. Living and working in Nepal for 25 days has given me a new appreciation for these financial services, reemphasizing their importance to local economies. Collaborating with local partners who are involved in borrowing and lending, gaining insight into current issues, and conducting the research itself has allowed me to grow both professionally and personally. Similarly, being immersed in unfamiliar cultural practices has challenged me to interact with new people, creating valuable professional relationships.

Similarly, hearing about the success of local entrepreneurs was perhaps the most meaningful part of the entire experience. From buffalos to cardamom, the agricultural sector in Nepal has experienced a noticeable boost with the introduction of micro lending services. Watching people succeed through their participation in these new services was inspiring, illustrating the importance of our research. Interacting with local partners exposed me to the local culture firsthand, giving me valuable background information for the report itself.

This experience has allowed me to develop many skills that will aid me in my future career efforts and professional growth. For instance, utilizing advanced research techniques on a daily basis has introduced me to the world of scholarly publication, making me want to pursue further meaningful research efforts. These skills will aid me as I make the transition from my undergraduate work to my first year of law school. Also, potentially publishing a scholarly article would help in my career development, making me more competitive in the job application process. So far, the team has completed two separate articles for consideration. We hope to present our findings to students and faculty this fall at Maryville College, as well as the ASIANetwork Conference in March of 2017.  My travels in Nepal fundamentally changed my life, allowing me to cultivate a new level of appreciation for people of other cultures.

Taylor Rigatti
Our research team from Maryville College traveled to Kabre Village Development Committee (VDC), Dolakha in Nepal in order to study the effect of credit cooperatives on rural economic development.  Due to the success that microfinance and microcredit has seen in rural Asian communities in reducing poverty, the research team wanted to interview the credit cooperatives in Kabre VDC and survey the business owners in order to determine the effect of microcredit on business development and employment generally in Nepal.

The work was humbling and eye opening as we were able to see how people in rural developing communities live, and it’s a world away from what we experience at home in the United States.  These individuals are surviving and even thriving in some cases in the tallest mountains in the world by earning an income through whatever means possible—be it from opening a shop by borrowing from a credit cooperative or expanding their agricultural operation from their own savings.  Not only was I able to learn a lot about microfinance and the rural poor, but I was also able to further my skillset and increase my academic and professional development on this trip; I am better prepared for a future in graduate school and in a career with an NGO or international company.

As we continue to complete our reports and give presentations to various outlets (faculty, staff, students, and community) upon our return, my marketability will increase as my technical writing and presentation skills continue to improve.  We will also be compiling and editing a video on our time spent in Nepal.   This video will include our interviews with various credit cooperatives and loan beneficiaries and our own personal insights into the experience.