Dhikuti: A Challenge to Financial Institutions in Nepal

Transcription

1 Dhikuti: A Challege to Fiacial Istitutios i Nepal Keshar J. Baral, PhD Associate Professor 1. Backgroud of the Study Fiacial system ecompasses the fiacial markets, istitutios, laws, regulatios ad techiques through which fiacial assets are traded, iterest rates are determied, ad fiacial services are produced ad delivered aroud the world (Rose 1997). It carries out savig, wealth, liquidity, credit, paymets, risk, ad policy fuctios. There are formal ad iformal fiacial systems 1. Commercial baks, developmet baks, isurace compaies, fiace compaies, cooperatives, credit guaratee corporatio, securities dealers, ad moey exchagers are the istitutios of formal fiacial system. Most of them are providig the services to the urba elite. A few are providig the services i sub-urba areas. Iformal system plays a cosiderable role i the least developed fiacial system like ours. It carries out savig, wealth, liquidity, ad credit fuctios i ivisible maer. The iformal fiacial istitutios are wide spread i Nepal. Idigeous bakers, social cotributio, user group, cooperative system i traditioal form moka-jya ad prima, dharmabhakri, ad dhikuti are such istitutios foud i Nepal. Of these, idigeous bakers ad dhikuti are foud i both rural ad urba areas, ad the rest i rural areas. I this paper, attempt has bee made to aalyze the dhikuti i savig ad credit mobilizatio perspective. 2. Coceptual Framework Origi of Dhikuti: These terms dhikur, dhikuri, ad dhikuti are used iterchageably. The term, dhikuti is commoly used i Pokhara. Dhikur (or thukur i the Gurug laguage) is used i Ti Gau i Maag district (Messerschmidt 1972). Similarly, dhikuri is used i Thakali ad Loba of Mustag, Tibeta Refugee Camp of Chhorepata of Pokhara ad Cetral Hill of Nepal (Chhetri 1995). I operatio term, all these terms refer to the same savig ad credit istitutio origially amog the Thakali ad Gurug commuity. Thus, it is logically cocluded that the term dhikur is derived from thukur ad fially dhikuti is derived from dhikur. There is o empirical evidece about the origi of dhikuti. However, it is believed that Thakali commuity copied this from Tibeta traders. Thakali traders may have bee forced to form dhikuti associatio to raise the fuds required to ru the busiess. But some of the Gurug residets of Ti Gau of Maag believe that this rotatig credit system was iveted by Gurug commuity (Messersmshmidt 1974). Thus there are two versios (i) Thakali commuity copied this from Tibeta traders ad (ii) Gurug of Ti Gau itroduced this system by the ispiratio of the Tibeta traders about its origi. But there is o evidece that supports either of these versios. But it is logical that Himalaya traders borrowed dhikuti system from Tibeta traders as a meas of raisig 1 Some writers have categorized it as orgaized ad uorgaized system. But istitutios uder uorgaized system are iformally orgaized. 1

2 fuds required to ru the busiess. Latter o, the Himalaya traders especially Thakali commuity brought about this system i differet parts of the kigdom alog with their migratio. At preset, it is commoly foud i busiess commuity, regular earers especially i urba areas as a savig ad credit scheme. Formatio of Dhikuti: It is a volutary savig ad credit associatio of idividuals associated with a particular area, professio ad commuity. Athropological studies doe so far have cosidered it as oly rotatig credit associatio. But, fiacially, it has ot oly the elemet of credit but also the elemet of savig ad ivestmet. I formal savig ad loa associatio, the same idividuals used to provide the loaable fuds ad borrow the moey from the associatio but ow-a-days, however, savers ad borrowers are frequetly differet idividual (Rose 1997). I the case of dhikuti, savers ad borrowers are the same idividuals. Idividuals other tha the savers (members of dhikuti) are ot etitled to borrow the moey. Thus, dhikuti is cosidered as a istitutio of savig ad credit associatio. As stated earlier, it is a volutary associatio. There is o formal rules ad regulatio goverig the formatio of dhikuti. The fouder of dhikuti, kow as ghopa (we use this term after owards) i Pokhara (Chhetri 2000) ad thukur amma i Ti Gau (Messerschmidt 1972) ormally calls o the potetial members ad briefs them his/her itet of ruig the dhikuti. I geeral, ghopa dissemiates the iformatio o the iteded member umber, share, ad type of the dhikuti. Ghopa works both as a maager ad etrepreeur of the dhikuti. He/she has to take the whole risk of savig ad credit fuctios of a dhikuti. So, he/she decides who will be a member of the dhikuti. Fiacial coditio ad character of a idividual are cosidered before acceptig the membership. I geeral, ghopa calls up all members to a dhukuti party the party give o the opeig day of the secod roud ad discusses the rules regardig the due date of istalmet of each roud, iterest o the fuds, disbursemet of the fuds ad takes the approval of all members. Formatio of dhikuti is cosidered complete whe dhikuti party is over ad proposed rules are approved by members. Types of Dhikuti: Dhikuti, o the whole, ca be classified o two grouds i. period of istalmet ad ii. fud disbursemet system. Normally, i Pokhara, istalmet of dhikuti is due i each moth member should pay each istalmet i each moth. Messerschmidt has reported the dhikuti whose istalmet is due aually (1972). Such dhikur was commo i Ti Gau of Maag district. I additio to mothly ad aual dhikuti associatios, Mazardo has reported the bi-aual dhikuti also. Such dhikuti was popular i Thakali commuity (Mazardo 1978). But, ow-a-days, especially i Pokhara, dhikuti other tha mothly are ot commo. Fud total moey cotributed by each member of dhikuti raised by a dhikuti is disbursed accordig to the system set by its members. I geeral, two types of disbursemet system are foud. The commoly used fud disbursemet system is biddig system. I this system, members who wat to borrow the fuds submit the secret bid to the meetig of each roud. Let me clarify this system with a example. Mr. A fouded a mothly dhikuti with 20 members. Its oe share is Rs.10, 000. Thus the amout of the fud to be raised i each moth is Rs.200,000. The first roud goes to the ghopa. This is a ormal custom of dhikuti. For the secod roud ad the rouds to come, members who have yet to borrow the moey ca submit the secret bid for loaable fuds. The member biddig the lowest amout wis the fuds for that particular roud. To 2

3 clarify this, let us assume that Mr. B submits the bid for Rs.170, 000, Mr. C for Rs.180, 000 ad Mr. D for Rs.160, 000. The lowest amout is Rs.160,000. So, Mr. D wis the fuds i secod roud. Here, the amout of the fuds is Rs.200,000 ad the discout is Rs.40,000. There are three system of distributig the discout beefits amog the members. I the first system, discout is distributed amog all members o pro rata basis. I our example, each member gets Rs.2000 discout beefit. This discout beefit is deducted from the share of each member. So, i the secod roud, each member cotributes Rs.8000 to the fuds provided that ghopa does ot pay iterest. Ghopa may or may ot pay iterest o the fuds. Normally, iterest for each period is fixed i amout. Suppose, i our example, iterest for each period is Rs.1000 ad ghopa does pay the iterest, the he has to cotribute Rs i the secod roud. Iterest goes to the wier of the fuds. I our example, Mr. D will get Rs.153,000 et (after deductig his cotributio). I the secod system, discout is distributed to the members who have yet to wi (borrow) the fuds. I our example, Mr. A has already borrowed the fuds from the associatio. So, he will ot etitle to the discout. Here, the discout is distributed amog 18 members o pro rata basis. I the previous system, each member gets Rs.2000 discout ad i this system 18 members get Rs discout each. This discout is deducted from the share of respective members. This type of dhikuti is ot i prevailig i Pokhara. But oe of the ghopas of Pokhara reported that this system is commo i Baglug district. Third system of distributig discout was reported from Pumdi Bhumdi village of Kaski district log back (Dolebel 1985). I this system, wier gets the bid amout plus iterest. All members cotribute the full share to the fuds. I our example, 20 members cotribute Rs.10, 000 each i the secod time makig the fud Rs.200, 000. Separate fud for auxiliary credit equal to the amout of discout is created. Dhikuti ivites the bid for the auxiliary credit. It provides the auxiliary credit whoever bids the highest iterest rate o it. The borrower of the auxiliary fud pays the pricipal ad iterest i the ext roud of the dhikuti. The the amout of the auxiliary fud is distributed to all members i each roud. The wier of the mai fud gets the bid amout plus the iterest o the fuds. Thus, uder this system, at the same time, except i the first roud, associatio provides two types of credit credit from basic fud ad credit from auxiliary fud. The secod fud mobilizatio system is tur system. I this system, ghopa etitles to the fud i the first roud ad latter o, tur is determied by lot. I our example, Mr. A will get Rs.200, 000 i the first roud of the mobilizatio of the fuds ad other members will get the basic fuds plus the iterest o the fuds by lot. Member wiig the secod roud will get Rs.201,000 (amout of the fud plus iterest for oe moth). I the same maer, member wiig third roud will get Rs.202,000 (amout of fud plus iterest for two moths) ad so o. So far we discussed the dhikuti that has the fixed amout of share. I other words, the amout of the share remais costat through out the life of the associatio. I our example, Rs. 10,000 remais costat through out 20 moths. But i some dhikutis, the amout of the share does ot remai costat. The amout of the share icreases by a costat amout i each period. This type of practice was reported i the aual dhikuti (Messerschmidt 1972). I such a dhikuti, borrower does ot pay iterest. The member borrowig the moey at the ed of the period gets the maximum beefits ad members 3

4 borrowig earlier bear fiacial cost. I our example, if share of the dhikuti icreases by Rs.1000 i each moth, the ghopa will get Rs.200, 000. I the secod roud, each member will have to cotribute Rs.11,000. The member wiig the secod roud of the fud will get Rs. 220,000. I the same toke, the member wiig the third roud will get Rs. 240,0000. Thus, the loaable fud icreases by the costat amout i each roud. 3. Review of Past Studies Dhikuti as a iformal fiacial istitutio has played cosiderable role i mobilizig the savig ad credit especially i urba ecoomy. Dhikuti mobilizes millios of savig ad credit i a urba cetre like Pokhara. Busiess commuity ad commuities domiated by Gurkha soldiers are more iterested i dhikuti i Pokhara. A few years back, daily dhukuti also were i operatio. But, due to the high risk, such a dhikutis have ceased to exist i Pokhara. I 1990s, dhikuti had become challege to the formal istitutios of bakig ad credit (Chhetri 1995). Its existece i both urba ad sub-urba area, somewhere i rural area also, is still a challege to the fiacial istitutios. Foreig as well as Nepalese scholars have carried out may athropological studies o it. But there is o cosiderable study o it i fiacial perspective. Messersmchmidt had carried out a study o dhikuti of Ti Gau of Maag district borderig to Tibet, Chia, i He had ivestigated ito the various facets of dhikuti of Gurug commuity of Ti Gau i social perspective. He has just metioed two basic fiacial aspects raisig ad ivestmet of fuds of dhikuti i geeral. I 1985, Dolebel had carried out a study o dhikuti of Pumdi Bhumdi Village Developmet Committees, Kaski. He has described dhikuti as a credit co-operative. I his study, he has metioed that it is importat with a view poit of accessibility of the credit without pledgig ay security (Dolebel 1985). Mr. Chhetri had carried out a case study of dhikuti amog the Loba of Mustag, the Tibeta refugees, ad busiess people i the urba cetre of Pokhara. I his study, he has cocluded that dhikutis seem to exist as competitors of moder fiacial istitutios (Chhetri 1995). I the course of studyig the various aspects of Thakali commuity, Mazardo has described the dhikuti as a fiacial meas of establishig a ew busiess, ad part ad parcel of the Thakali ecoomy. He cocluded that it helps Thakali to start "heavily capitalizatio vetures, to use ew methods i busiess ad ew techiques i agriculture, to diversify the ivestmet, ad to maitai cohesiveess amog people (Mazardo 1978). KC has coducted a study o dhikuti i Pokhara i This is the oly study o it doe so far i fiacial perspective. He has idetified three types of dhikuti mothly, weekly ad daily. Of these, he foud that mothly dhikuti is the most popular i Pokhara, ad weekly ad daily dhikutis are less popular. This study has covered these dimesios dhukuti system, social backgroud of the members, fiacig of share, risk factors, ad ivestmet of fuds raised from associatio of dhikutis beig ru i urba cetre of Pokhara. This study also has preseted dhikuti as a challege of formal fiacial istitutios especially commercial baks, fiace compaies ad cooperatives (KC 2000). 4. Methodology of the Study Data Source ad Collectio: For the purpose of this study, 13 dhikutis beig operated i Pokhara were idetified. These dhikutis had altogether 233 members. For the purpose of 4

5 the opiio survey, 96 members ( 41%) were sampled radomly ad their opiio o the differet facets of dhikuti was take through structure iterview. Attempt to collect the fiacial data o all 13 idetified dhikutis was doe but oly ghopas of 7 provided the fiacial data. Aalysis of fiacial aspect of dhikuti has bee doe o the basis of the data of these 7 dhikutis. Calculatio of MIRR: Modified iteral rate of retur (MIRR) has bee used to measure the profitability of the ivestmet i dhikuti. Sice iteral rate of retur (IRR) is ot adoptable whe project does ot have ormal cash flows. A project has ormal cash flows if oe or more cash outflows are followed by a series of cash iflows (Brigham, Gapeski ad Ehrhardt 1999). I the case of ivestmet i dhikuti, patter of cash flows is ot ormal. Ghopa receives cash (iflow) i the first roud ad does pay his/her share with/without iterest i the cosecutive rouds. I other words, for ghopa, first, cash iflow ad the series of cash outflows util the termiatio of the dhikuti. Exceptig to the member wiig the fuds i the last roud, cash follow patter for all members is, first, sigle/series of cash outflows, the sigle cash iflow, ad the sigle/series of cash outflows. For member wiig the fud i the last roud, the flow patter is, first, series of cash outflows ad the sigle cash iflow. Thus, cash flows i the ivestmet scheme are o-ormal. I such a coditio, IRR gives the multiple rates. So, IRR techique creates a problem i workig out the rate of retur o ivestmet. MIRR has bee used to do away the problem of multiple rates o ivestmet. The followig model has bee used to work out MIRR: PVI =PVTVF... (1) PVI= preset value of moey ivested i dhikuti fud (periodical cotributio to the dhikuti fud) PVTVF= preset value of termial value of moey received from dhikuti. Every member cotributes to the fuds for a specified period. For example, if dhikuti is mothly, cotributio should be made mothly ad if it is aually, cotributio should be made oce i a year. Thus the periodical cotributio to the dhikuti fud is the ivestmet of each member. Amout of cotributio to the fuds varies from roud to roud. Normally, amout of the cotributio gradually icreases with a lapse of the duratio of a dhikuti. So, the cash outflows are ot level. Paymet is made at the begiig of each period. So, the followig model is used to work out the PV of ivestmet: = COF1 1 COF2 1 COF3 1 COF 1 PVI (2) (1 + k) (1 + k) (1 + k) (1 + k) COF =cash outflows (cotributio of a member to the dhikuti fuds i each roud k=cost of capital We reduce model (2) to the followig mode (l): COFt 1 PVI =. (3) t 1 t = 1 (1 + k) t= umber of roud of the fuds 5

6 = total umber of roud Here, I would like make clear the distictio betwee t ad with a example give earlier. I our example, dhikuti will mobilize the fuds for 20 times. So, the total umber of roud of this associatio is 20. Thus, here, value of is 20. If Mr. A pays Rs.8500 for third time, the value of t is three. As stated earlier, cotributio is paid at the begiig of each period. So, we deduct 1 from t. Let us talk about the right had side of model (1). As we kow that each member receives the credit from dhikuti oly oe time ad oly oe member gets the credit i oe roud. So, the termial value of the fuds received from the dhikuti is give by the followig model: + 1 t TVF = F( 1+ k)... (4) TVF =termial value of the fud F=credit received from the dhikuti t= umber of roud of the fuds = total umber of roud So, PVTVF is give by: + 1 t F(1 + k) PVTVF (1 + MIRR).. (5) Now model (1) is restated as follows {combiatio of model (3) ad (5)}: + 1 t COFt 1 F(1 + k) = t 1 t = 1 (1 + k) (1 + MIRR).. (6) For each member, all variables except to MIRR are kow. So, usig the fiace fuctio of Microsoft Excel, MIRR of ivestmet of each member of a dhikuti has bee worked out. Calculatio of COF ad F : Ivestmet of each member comprises of et cotributio plus iterest o the borrowed fuds. Net cotributio i the case of biddig system is a share of the dhikuti mius discout beefits. I our example, discout beefit is Rs So, et cotributio to the fud i the secod roud is Rs I the secod roud, for ghopa, COF is Rs.9, 000 ad for all members, it is Rs But i o-biddig dhikuti system, there is o discout beefit. So, COF is equal to the share of the dhikuti plus iterest. Ghopa, ormally, icurs egligible expeses while ruig the dhikuti. For this, ormally, he/she raises the fuds from the member wiig a bid or lot. This expese has bee adjusted to the amout of the credit received from the dhikuti. So, while workig out the COF, followig model has bee used: ( M Bt ) COFt = P + PMT. (7) P = face value of share M=amout of the dhikuti fuds B=bid amout =umber of roud or umber of members PMT=iterest per period Model (7) ca be used for all types of dhikuti. The secod term of the model represets the discout beefits. I o-biddig system, discout beefit is 0. 6

7 Credit represets the lump sum beefit received for regular cotributio to the dhikuti. As stated i model (4) it is deoted by F. F is give by the followig model: ( M Bt ) Ft = M Dt + ( PMT)( t 1) S ( P ).... (8) S = service charge Dt = M B t D t =total deductio i t roud I some dhikuti, ghopa does ot pay ay iterest ad takes o service charge. I this case, we eed to modify the model (8) slightly. I such a case model (8) is modified as follows: ( M Bt ) Ft = M Dt + ( PMT)( t 2) ( P )... (9) Usig the model (7), (8) ad (9), COF ad F have bee worked out for each member of differet dhikutis. Effective Aual Iterest Rate (EAIR): Cost of borrowig of each member has bee measured i term of EAIR. This has bee worked out by usig the followig model: 12 PMT EAIR = 1 t (10) F t EAIR t = effective aual iterest rate for member borrowig i tth roud, F t = credit for tth roud, ad it is worked out accordig to model (8) ad (9) PMT=iterest per period 5. Aalysis of Data Profitability: Major factors affectig the profitability of ivestmet i dhikuti are discout beefits ad iterest per period to be paid by the members borrowig the fuds. I geeral, member i eed of moey ad havig the iformal market lik to put up the moey at higher iterest rate bids at higher discout. So, profitability of ivestmet i dhikuti largely depeds o the compositio of members. Dhikuti havig the majority members from busiess commuity may yield higher profit. Coversely, dhikuti ru by the employees may yield a low profit. But, ivestmet i the former types of dhikuti is very risky. Profitability aalysis has bee doe o two scearios (i) mothly reivestmet rate of 1.5 % ad (ii) mothly reivestmet rate of 1 %. Mothly iterest rate at preset i iformal fiacial market of Pokhara varies from 1% to 3 %. Ghopa also charges the iterest rate o the arrears of the share by the same rate. So, assumptio of 1.5% ad 1% mothly reivestmet rates is cosidered adoptable for the aalysis. MIRRs uder the assumptio of higher reivestmet rate are higher tha that of uder the assumptio of lower reivestmet rate. This shows that market iterest rate affects the retur o the ivestmet i a dhikuti directly. Stadard deviatios of returs o the ivestmet of members of the same dhikuti uder the assumptio of lower reivestmet rate are greater tha that of uder the assumptio of higher reivestmet rate. This implies that variatio of the retur o the ivestmet of the differet members of the same dhikuti is adversely related with the reivestmet rate, ad the higher risk i the lower market iterest rate. 7

8 The retur across the dhikutis also is highly variable. This is because of the variatio i the iterest amout, biddig amout ad size of the fuds. Profitability i Biddig System: I both scearios, i fiacial term, o member of all mothly biddig dhikutis has icurred ay fiacial cost. The MIRRs of ivestmet of 77 members of observed dhikuti imply that it is profitable ivestmet for regular savers. It is the most profitable for ghopa ad the less for the members who borrow the moey at earlier rouds. I both scearios, patter of retur is the same. O the whole, retur o the ivestmet of members of the observed dhikutis suggests that it gradually decreases i earlier roud ad the icreases. The ratioale behid this retur patter is that i earlier rouds, members ormally bid leavig greater amout of discout ad get less amout of iterest, ad i latter rouds, members bid the fuds leavig the less discout ad get the more iterest o ivested fuds. This patter of retur o ivestmet is logical with a view poit of risk factor also. Ghopa is the etrepreeur ad resposible to all dhikuti members for default i the paymet of due istallmet. So, accordig to the risk retur theory, it is he/she who has to get the highest beefit for bearig the highest risk. Sometime, systemic risk brigs about the disaster i the dhikuti. 2 Default i oe dhikuti may affect adversely to others. As a result of this, ivestmet may ru ito spoil. Such risk is high for those members who bid for fuds i latter roud. So, it is logical to get the better beefits by the members i latter rouds. Profitability i No-Biddig System: As stated i the foregoig aalysis, retur patter, i geeral, i both types of associatios is the same. But, i o-biddig/rotatio system, relative to the biddig system, retur o ivestmet is ot so attractive. Here, the retur solely depeds o the iterest per period. I the observed dhikutis, mothly iterest rate o the loaable fud varies from.5 % to 1.09 %. Due to the low iterest o the mobilized fuds ad absece of the discout beefits, MIRRs i both scearios are less tha that of biddig system. But the rage of MIRRs o ivestmet of members of the same dhikuti is smaller tha that of biddig system. Relative to the biddig system, dispersio of retur both across the dhikutis ad members is less. The less dispersio of retur is due to the certai i the beefits received i terms of accumulated iterest. Ulike i the biddig system, ivestors are ot ucertai about the retur o their ivestmet. The profitability aalysis of both biddig ad o-biddig dhikutis implies that ivestmet i dhikuti is more profitable tha i the fiacial istitutio like commercial baks, co-operatives, ad fiace compaies. So log as members of the dhikuti get the aveue for puttig up the borrowed moey at higher iterest rate tha the iterest rate o the fixed deposit or savig schemes ru by fiacial istitutios, ivestmet i the dhikuti will remai attractive. Tax evasio o the iterest ad discout beefits is oe of the factors that cotributes to the attractive retur o ivestmet. Ivestors ca ot evade the tax o iterest icome if they put up their moey i fixed deposit or i ay savig schemes of fiace compaies ad cooperative. Ivestmet is the fuctio of storig the value of wealth. The ivestmet ad its value i the observed dhikutis clearly suggest that dhikuti is dischargig the wealth fuctio of fiacial system efficietly i iformal sector. Ghopa i dhikuti 1, coverted his/her Rs.290, 000 savig ito Rs.380, 000 immediately o bearig certai risk ad maagig the 20 savers associated with him. Similarly i the same dhikuti, the member wiig the 2 I Pokhara, there are may istaces of such disaster brought about by systemic risk. May busiessme ad campus employees are i trouble due to the adverse effect of systemic risk at preset. 8

9 last roud of the fuds fetched Rs.383, 300 by ivestig Rs.270, 254 o istallmet basis. I the case of o-biddig system, ghopa ca ot icrease the value of ivestmet directly but he/she ca icrease the value of ivestmet by ivestig the moey borrowed from the dhikuti. I the case of dhikuti 5, ghopa ca raise Rs.1, 000,000 fuds at the very begiig of the dhikuti by ivestig Rs.100, 000 i 10 istallmets for ext 10 moths. Similarly member wiig the fud at 11 th roud ca have Rs.1,108,000 by ivestig Rs.1,000,000 i 10 istallmet. These evideces show that this iformal fiacial istitutio is a challege to the fiacial istitutio i ivestmet perspective also. Savig Mobilizatio: Dhikuti is viewed as a compulsory savig scheme of a regular earer. Like i the savig scheme of fiacial istitutio, fud matures i a specified time. The maturity of the fuds varies, i geeral, from 10 moths to 24 moths. But i the case of aual system, it takes eve 10 years to mature. Members are motivated to save certai percetage of their regular icome to pay their share. So, a dhikuti mobilizes the cosiderable amout of savig i each roud. I our observatio, thousads of rupees have bee mobilized i a roud. As stated earlier, there are may dhikutis i operatio eve after liberalizatio of fiacial sector i Pokhara. Eve educated employees, campus teachers prefer to put up their savig i dhikuti. Eve though oly 17 % of the sampled members have a savig purpose, aroud 71 % members have fiaced the ivestmet from their regular icome ad rest from other sources like loa ad moey borrowed from other dhikuti. Majority of the members opied that beig a member of a dhikuti forces them to save certai percet of their icome. Oe of the seve observed dhikuti has mobilized the savig ragig Rs.380, 000 to Rs.383, 800 i each moth for 20 moths. This dhikuti i total has mobilized Rs.5, 678,836 savig i 20 moths. Dhikuti associated with the busiess commuity mobilizes relatively large amout of savig. Oe of the observed dhikutis used to mobilize Rs.1, 000,000 savig i each roud. Hudreds of such dhikutis are i operatio oly i urba cetre of Pokhara. These facts imply that i savig mobilizatio perspective also, dhikuti is challegig the orgaized fiacial sector. Credit Mobilizatio: As stated earlier, dhikuti makes the credit accessible to all members. Members ca raise fud to meet the fiacial requiremets of busiess, ritual fuctios like marriage, sacred thread givig ceremoy, ad household durables. Fud is raised from dhikuti to purchase eve vehicle, lad ad buildig, ad repay the due loa. This study shows that more tha 50 % members borrow the moey for domestic purpose ad less tha 50% do for busiess purpose. For domestic purpose, borrowers use the fud to purchase household appliaces televisio set, refrigerator, ad furiture, vehicle especially motorbike, ad persoal computer. Some of the members raise the supplemetary fuds required to purchase house lad ad costructio of a ew buildig. Idividuals havig a regular icome, istead of approachig fiacial istitutios, borrow the moey from dhikuti. The reaso behid this is that the members of dhikuti ca borrow moey without ay paper hassles ad pledgig ay security at lower iterest rate. Aroud 57% respodets opied that the iterest rate is cheaper tha that of fiacial istitutios. This opiio is bolstered by the aual effective iterest rate (AEIR) o a loa borrowed from dhikuti. Credit i o-biddig system is much more costly tha that of biddig system. The ratioale behid this is the discout beefits i biddig system. The maximum ad miimum limits of AEIR i observed o-biddig dhikutis are approximately 15 % ad 7 %. I the case of biddig system, EAIRs are far below the 9

10 iterest rates o domestic, mortgage ad hire purchase loas of fiacial istitutios. The maximum ad miimum limits of EAIR of observed biddig associatios are 7% ad 4%. Thus, from borrowig view poit also, biddig system is far better tha the o-biddig system. All these facts cofirm that dhikuti is mobilizig the credit to their members at cheaper iterest rate. This is the reaso why idividuals prefer dhikuti loa to fiacial istitutio loa. I additio, idividuals do ot approach fiacial istitutios maily because of the official hassle ad security problem. As we kow, except to few cases, fiacial istitutios do ot provide loa without pledgig ay securities. Out of the sampled members of the dhikuti, aroud 42 % opied that they do ot approach the bak due to the official hassle ad 37% do ot do due to the security problem. Thus, idividuals who do ot have assets for bak security ad do ot have a idea to hadle the official hassle prefer to borrow moey from dhikuti. 6. Coclusios Dhikutis, eve i a highly urbaized area of Nepal, are providig regular savers a relatively more profitable ivestmet outlet o oe had ad o the other; they are supplyig the credits at lower cost i a iformal fiacial markets. They are attractive as a savig ad ivestmet scheme amog idividuals associated with a particular professio, istitutio, locality ad affiity. They are mobilizig millios of credits i the market without official hassle ad securities. So, they have tured out a challege to the fiacial istitutios i the savig ad ivestmet perspective ot oly i the rural areas but also i the urba cetre like Pokhara. Refereces Brigham, Eugee F., Louis C. Gapeski ad Micheal C. Ehrhardt Fiacial maagemet: theory ad practice. 1 st Idia reprit. Delhi: Harcourt Asia Pte Ltd. Chhetri, Ram B Rotatig credit associatio i Nepal: Dhikuri as capital, credit, savig, ad ivestmet. Huma Orgaizatio 54: Dolebel, T.C Dhikuti associatio i the wester hills of Nepal: a case study of Pumdi Bhumdi village. The Ecoomic Joural of Nepal 8: K.C, Krisha Bahadur A study o Dhikuti associatios i Pokhara sub-metropolis. Master thesis, Tribhuva Uiversity, Kathmadu. Koh, Meir Fiacial istitutios ad markets. 5 th Idia reprit. New Delhi: Tata McGraw-Hill Publishig Compay Limited. Mazardo, Adrew Eric To be kigs of the orth: commuity, adaptatio, ad impressio maagemet i the Thakali of wester Nepal. PhD diss., Uiversity of Wiscosi, Madiso. Messerschmidt, Do Rotaig credit i Gurug Society: the Dhikur associatios of Ti Gau. The Himalaya Review 3: Rose, Peter S Moey ad capital markets: fiacial istitutios ad istrumets i a global marketplace. 6 th ed. Sigapore: The McGraw-Hill Compaies, Ic. (Published i The Nepalese Maagemet Review, Vol. xii, No. 1 (Jauary 2004):