The commission concluded that public trust in the cooperative sector has significantly declined due to financial irregularities, misuse, and weak regulation.
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The commission formed to investigate the situation in cooperatives has made its report public. The Ministry of Land Management, Cooperatives, Federal Trade and General Administration made the report public on Thursday.
In the report, the commission concluded that the main reasons for the crisis in the cooperative sector are weak regulation, political interference and opaque operations.
The commission stated that approval was given without adequate study and criteria while registering cooperatives, expanding their scope of work, and expanding service centers and branches. The report states that some operators deviated from the original objective of the cooperative and embezzled, misused and transacted in opaque transactions.
The report also considered lack of coordination among multiple regulatory bodies, lack of effective information systems, financial indiscipline, weak good governance and lack of skilled manpower as the main reasons for the problems in the cooperative sector.
Similarly, the commission has concluded that the political affiliation of cooperative directors and managers and direct and indirect political interference have also led to the current crisis. The commission has mentioned in its main conclusion that public trust in cooperatives has declined. 'From this study, although the cooperative sector is an important foundation of Nepal's socialist-oriented economy, the main conclusion of the commission is that public trust in this sector has declined significantly due to financial irregularities, misuse and weak regulation seen in recent times,' the report states.
The commission has concluded that cooperatives have also been recognized as a major pillar of Nepal's three-pillar economic policy, but cooperative organizations have not been able to operate according to their core values, beliefs and principles. 'Although various commissions, committees and task forces formed in the past to solve the problems of the cooperative sector have identified similar problems and presented suggestions for reform, the implementation of these seems to be very low, which has not resulted in any progress in solving the problems,' the commission concludes.
The commission has stated that there is a lack of division of powers and coordination among cooperative regulatory bodies. 'The involvement of multiple regulatory bodies has created regulatory ambiguity, while the monitoring, inspection and supervision system has not been effective,' the commission's report states, 'The lack of an integrated, reliable and 'real-time' information system has made it difficult to identify and control problematic cooperatives in a timely manner.'
The commission has also pointed out that there is a lack of good governance in cooperatives. 'There are serious financial irregularities such as misuse of the organization's resources by directors and officials, excessive loan flow to a single person, double accounting statements of the same organization, inadequacy of loan loss fund and lack of transparency,' the commission concludes regarding the problems of cooperatives. 'The tendency to do business outside the designated scope of work, accumulate savings through unhealthy competition and invest in unproductive sectors has increased institutional risk.' The commission says that there is a tendency to use the facility of integration of cooperatives as a tool to hide their weak financial condition and expand their scope or service centers rather than for institutional strengthening.'
The commission concludes that agricultural cooperatives have deviated from their original purpose and focused on savings and loan transactions. 'Overall, the problems seen in the cooperative sector are seen as a combined result of weak regulation, legal ambiguity, lack of information system, lack of good governance and weaknesses in the implementation side,' the commission concludes. 'Therefore, an effective regulatory structure for strengthening the cooperative sector, Reliable information systems, strong governance arrangements and real implementation of past suggestions seem indispensable.'
The Ministry of Land Management, Cooperatives and Poverty Alleviation, while releasing the report, stated that the government is committed to reforms in the cooperative sector.
The ministry stated that the reform work has been taken forward by making cooperative monitoring and regulation effective, amending acts and rules, and prioritizing savings return and loan recovery.
The then Sushila Karki-led government had formed the commission on Magh 2 under the coordination of former High Court judge Binod Prasad Sharma.
