Dhikuti: The Self-help Bank of Nepal

Dhikur (in Thakali), dhukuti or dhikuti (in Nepali) - literally a storage box, used for valuables or food grains - The Dhikuti is a financial self-help group which originated from a system of communal food grain storage for the needy. With the onset of the market economy, it expanded quickly and became a sophisticated informal people's bank, providing capital for small businessmen as well as farmers. Its resources are solely derived from internal savings mobilization.

Thus, the Dhikuti can be defined as a rotating credit association in which equal amounts of money are collected from the participants in regular intervals and allocated to one member at a time. Its rotation is mostly determined by secret tender, the fund going to the lowest bidder, except at the first and last rounds of a round. Dhiktui has become a major informal financial institution for small enterprise finance in Nepal, particularly for investments in non-farm and off-farm activities. In many cases, it is the only source of credit.

In many detailed studies made on Dhikutis between 1964 and 1988, the following features were identified:

While it is very popular all over Nepal, Dhikuti members have not always been happy with its performance: Comparing banks and Dhikuti,
Banks excell in two respects:

  • in terms of the quality and reliability of their deposit safe-keeping facilities;
  • in terms of their refinancing capacity, which is particularly pronounced in the present situation of excess liquidity

Dhikuti excell in terms of:

  • broad appeal and popular participation
  • low transaction costs
  • effective social controls, resulting in low default rates.
The Nepal Rastra Bank, Nepal's central bank, has been organizing national consultations to work out plans for linking Dhikutis and banks. The approach is limited to preexisting groups evolved from "below" or grassroots. Deposited savings is used as collateral in a savings and credit scheme, which would reinforce savings mobilization and strengthen financial self-reliance. Permanent funds can also be generated by such schemes.
Abstracted from:
Hans Dieter Seibel, "Dhikuti: The Small BUsinessman's Informal Self-Help Bank in Nepal" Savings and Development, Volume XII, Number 2, 1988, pp. 183 - 198.

Hari Srinivas - hsrinivas@gdrc.org
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