Supreme Court Orders Government to Curb Attacks Against Microfinance Institutions

The Supreme Court has issued a mandamus order directing the government and relevant agencies to take effective measures against attacks targeting microfinance institutions.

For several years, a group calling itself the “Struggle Committee Against Microfinance” has been staging protests, alleging that high interest rates, multiple loans, and strict recovery procedures have victimized borrowers. However, the movement has escalated into unlawful actions such as threatening members and staff, pressuring borrowers not to repay loans, attacking offices, obstructing collateral recovery, and spreading false promises of loan waivers.

A joint bench of Justices Hari Prasad Phuyal and Bal Krishna Dhakal intervened, citing the state’s failure to control these activities despite their serious impact on financial governance and public order. The petition was filed by advocate Subas Pathak and four other lawyers, naming the Office of the Prime Minister and Council of Ministers, the Ministries of Home, Finance, and Law, Nepal Rastra Bank, and nine other agencies, along with the Nepal Microfinance Bankers Association, as respondents.

The court concluded that the state mechanism had not been effective in curbing organized attacks against the financial system. It emphasized that such activities should not be viewed merely as expressions of dissatisfaction but as coordinated assaults on the microfinance sector.

Although government agencies claimed in written responses that they were active, the court found no evidence of effective control or enforcement. Citing Nepal Rastra Bank’s own studies, the order noted rising internal and external risks within microfinance institutions.

The court stressed that organized illegal activities against financial institutions cannot be tackled through routine criminal investigations alone. Instead, the state must adopt proactive risk identification and mitigation strategies. It warned that instability in the financial sector could have broader repercussions on the national economy, and directed law enforcement agencies to act swiftly and preventively.

The petition also sought a ban on registering organizations under names such as the “Struggle Committee Against Microfinance.” The court, however, rejected this demand, stating that existing laws already prohibit registration of institutions with unlawful objectives, and extraordinary judicial powers cannot be used to block specific names.

Similarly, the demand to create new laws declaring obstruction of microfinance operations as a separate criminal offense was also dismissed. The court held that adequate provisions already exist under the Nepal Rastra Bank Act, the Banks and Financial Institutions Act, the Banking Offenses and Punishment Act, and the Criminal Code, and that the problem lies in weak enforcement rather than legislative gaps.

The order directs the government and concerned agencies to actively curb illegal gatherings, protests, boycotts, loan repayment obstruction, intimidation of staff, attacks on offices, resistance to collateral recovery, and false promises of loan waivers. It requires “active and immediate” action to ensure that microfinance institutions can operate without disruption. The full text of the order, originally issued in January, has now been made public.