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:
- Very common, each with 10-30 or more members
- Access is open to all, both men and women. Individual shares may also be multiple or partial.
- Cycle of rotation is annual in the case of smaller groups and semi-annual in larger groups. The turnis determined by drawing lots/bids, except in the case of the first round and last rounds.
- Members are fined Rs.5 to 10 for not attending a meeting. Each group has a founder and an administrator. Each member winning a bid has another member who stands as a guarantor.
- Each group has a constitution, detailing all features and activities of the group. At each turn, two contracts are drawn up - one between the share-taker and the members, and the other between him and his guarantor.
- Books are always kept, with records of all transactions and with all signed and witnessed contracts.
- A sophisticated system of incremental interest payments is used.
- Cases of defaulting, fraud or embezzlement have remained exceedingly rare at all times.
Comparing banks and Dhikuti,
- In the process of bidding, members forgo sizeable portions of the sum which would be contributed without bidding.
- Investment planning is made difficult by the fact that the time when the fund is obtained cannot be calculated.
- Once a member has obtained the fund, he has no recourse to additional loans in case of an emergency.
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.
- 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.
- 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 - email@example.com
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