Microfinance Companies Show Growing Dividend Capacity: A Detailed Look
28 Microfinance Companies Listed on NEPSE Publish Fourth Quarter Financial Reports
Currently, there are 48 microfinance companies listed on the Nepal Stock Exchange (NEPSE). Out of these, 28 have published their financial reports for the fourth quarter of the last fiscal year, indicating a gradual improvement in their financial health. Most companies have shown an increase in both net profit and distributable profit, suggesting a rise in their dividend distribution capacity.
Dividend Distribution Capacity Ranges from 0.99% to 125.70%
Despite a high dividend distribution capacity, microfinance companies are restricted by regulations from distributing all of their potential dividends. If they propose an annual dividend (cash or bonus) exceeding 15%, they must deposit 35% of the proposed amount over 15% into a general reserve fund, as mandated by the Nepal Rastra Bank. This requirement limits their ability to distribute large dividends despite their capacity.
Increasing Share Market Attractiveness
The share market has been on the rise recently. Due to the limited supply of shares from these small-cap companies, their attractiveness is high. Currently, companies in this group dominate the market in terms of share value.
Top Dividend Distributors: Unique Nepal Leads the Pack
Among the 28 microfinance companies that have published their financial reports, Unique Nepal Microfinance stands out with the highest dividend distribution capacity of up to 125.60%. Jeevan Bikas Microfinance follows with a capacity of 64.43%, and Sana Kisan Microfinance has a capacity of 45.44%.
Swabalamban and Mahila Microfinance also have significant capacities, each exceeding 30%. Five other companies can distribute dividends above 20%, while four companies have capacities above 10%. Five companies, however, have a capacity below 10%.
Challenges for Some Microfinance Companies
Unnati Sahakarya, Grameen Bikas, and Himalayan Microfinance are currently unable to distribute dividends. Additionally, six companies have published their financial reports under the old structure, leaving their dividend capacities unclear.
This analysis highlights the growing financial strength of microfinance companies and their potential for higher dividend distributions, despite regulatory limitations.
