The central bank placed a mechanism under which microfinance companies are allowed to distribute 5 to 25 percent dividend based on their capital adequacy ratio and non-performing (NPL) till the end of last FY.
Previously, microfinance companies were allowed to distribute maximum of 15 percent dividend. The companies were required to maintain 50 percent fund of above the dividend limit set by NRB in the general reserve fund if they wanted to distribute more than 15 percent dividend.
As per the new provision, microfinance companies with capital adequacy ratio above 12 percent and NPL less than 5 percent after dividend distribution are allowed to distribute 25 percent dividend.
Similarly, companies with capital adequacy ratio of 10-12 percent and NPL below 5 percent can distribute 20 percent dividend. Likewise, companies with capital adequacy ratio of 8-10 percent and NPL below 5 percent can distribute 15 percent dividend.
However, up on requirement of consideration of additional factors along with capital adequacy ratio and NPL, NRB can approve dividend below the set limit.
Microfinance companies seeking to propose cash dividend should maintain minimum capital adequacy ratio of 9 percent. Moreover, companies with NPL above 15 percent are not allowed to distribute dividend to their shareholders.
