Financial Inclusion in Nepal: Progress, Prospects, and the Road Ahead

Research highlights several pathways through which financial inclusion drives development. First, it fosters economic growth and job creation by enabling entrepreneurs and small businesses to expand through access to credit and efficient payment systems (Beck et al., 2007; World Bank, 2025). Second, it supports poverty reduction and resilience, as households can smooth consumption, cope with shocks, and invest in health or education, with digital products offering additional protection against economic and climatic risks (Allen et al., 2016; Beck et al., 2007). Third, it promotes the empowerment of women and marginalized groups, enhancing financial autonomy, economic participation, and social equality (Delechat, 2017). Finally, it contributes to the formalization of economies by broadening the tax base, mobilizing capital, and improving transparency, thereby strengthening the foundations of inclusive growth (Beck et al., 2007; World Bank, 2025). Financial inclusion also creates positive externalities by reducing market frictions and enabling more productive use of resources (Demirgüç-Kunt et al., 2008). Sahay et al. (2015) demonstrate a strong link between household financial access and economic expansion.

Nepal has made notable strides in recent years. Progress has been achieved in access, usage as well as quality of the services (IFC, 2025; IFC & UNCDF, 2023).  For instance, the percentage of adults using formal financial services (from banks and other formal providers) has increased from 61% in 2014 to 90% in 2022 (International Finance Corporation (IFC) & United Nations Capital Development Fund (UNCDF), 2023). The Financial Inclusion Index, which captures accessibility, usage, and quality, shows progress across all three dimensions in recent years. This progress reflects the government’s policy efforts and market growth (NRB, 2025). 

Table 1: Financial Inclusion Index (FII) for Nepal

Source: Nepal Rastra Bank, 2025

However, significant gaps remain. Exclusion is concentrated among rural and remote residents, where difficult geography limits access to financial outlets (IFC, 2025; IFC & UNCDF, 2023). Low-income and informal workers also face challenges due to irregular earnings, lack of documentation, and reliance on informal savings mechanisms. Gender disparities persist and high service costs deter participation, while low financial and digital literacy constrain effective use.

Digital financial services (DFS) are transforming Nepal’s financial landscape. According to the IFC’s report, the growth of digital channels has helped expand account ownership (IFC, 2025). The COVID-19 pandemic accelerated the adoption of digital tools, from mobile wallets to online payments. Today, digital payment systems, QR-based transactions, and mobile banking apps are increasingly common in urban centers and gradually spreading to rural areas. The percentage of adults making or receiving digital payments increased by 190%, rising from 9.9% in 2014 to 28.6% in 2021 (IFC, 2025). Similarly, there has been significant increase in the digital payments both in terms of volume as well as numbers of transactions and people are increasingly using digital methods for smaller, everyday transactions. Overall, fintech and digital finance in Nepal have shifted inclusion from a challenge of access to one of usage. By lowering transaction costs and extending reach, fintech has accelerated the pace of inclusion in Nepal. 

The role and importance of Digital Financial Services (DFS) in Nepal’s economy are considered critical for driving growth, enhancing financial inclusion, reducing costs, and improving efficiency across various sectors. First, DFS enhances financial inclusion, particularly in geographically remote areas where traditional banking is limited. Mobile banking, wallets, and other fintech solutions improve accessibility and convenience, reduce reliance on informal finance, and support underserved groups such as women, low-income workers, and rural entrepreneurs.

Second, DFS drives economic modernization and efficiency by reducing transaction costs, improving payment systems, and fostering innovation through tools like QR codes, digital lending, and government-to-person transfers. They also open opportunities for cross-border remittances, a vital source of income for Nepal. For example, integration with India’s Unified Payments Interface (UPI), which started in March 2024, processed over 100,000 transactions worth NPR 250 million by June 2024. This growing interoperability not only enhances convenience for users but also strengthens regional financial connectivity. For Nepal’s large migrant workers, such services mean faster, cheaper, and safer transfers—a direct boost to household welfare and national foreign exchange earnings.

Third, DFS strengthens sectoral growth. For Micro, Small, and Medium Enterprises (MSMEs), which contribute around 22% of GDP, DFS has potential to improve cash flow management, financial transparency, and access to credit. Similarly, remittance inflows—accounting for about 25% of GDP—can be made faster and cheaper through digital platforms. The IT sector and agriculture also benefit, with digital payments supporting export earnings and enabling farmers to access inputs, labor, and insurance more efficiently.

Finally, Nepal Rastra Bank (NRB) emphasizes stability and security, focusing on consumer protection, cyber resilience, and trust-building through frameworks like the Cyber Resilience Guidelines (2023) and the Nepal QR Standardization Framework. These measures safeguard users, strengthen financial infrastructure, and build confidence in digital transactions.

Digital financial inclusion in Nepal faces several challenges. Limited digital and financial literacy, particularly in rural and marginalized communities, restricts people’s ability to confidently use services. Infrastructure gaps, such as weak internet connectivity, high data costs, and unreliable electricity, further constrain access. Regulatory bottlenecks and limited interoperability between banks and payment platforms make transactions inconvenient, while high service fees—especially for small-value and cross-border payments—discourage usage. Trust and security concerns, including online fraud and weak consumer protection, also reduce confidence. Moreover, women, older populations, and those in remote areas remain disproportionately excluded, while micro and small enterprises are slow to adopt digital tools due to informality and lack of incentives. Together, these barriers highlight the need for stronger policy, infrastructure, and awareness measures to achieve inclusive digital finance in Nepal.

To overcome these barriers and advance digital financial inclusion in Nepal, several steps are crucial. First, promoting financial and digital literacy through targeted awareness campaigns can empower marginalized groups to use services safely. Second, investment in digital infrastructure, improving internet access, reducing data costs, and expanding mobile coverage, are essential to close rural-urban gaps. Third, interoperability across banks, wallets, and payment systems should be prioritized, enabling seamless transactions and reducing inefficiencies. Fourth, regulators need to create an enabling policy environment, including the use of regulatory sandboxes that encourage innovation while safeguarding consumers. Fifth, lowering transaction costs, especially for remittances and small-value payments, will boost adoption among low-income users. Finally, building trust and security through stronger consumer protection frameworks, grievance redress mechanisms, and cyber security standards are critical.

By addressing these areas, Nepal can unlock the full potential of digital financial services, ensuring that all segments of society, including women, rural households, and MSMEs, benefit from inclusive growth.

Financial inclusion is not simply about expanding access to financial services; it is about creating meaningful opportunities for individuals and communities to participate in and benefit from economic growth. Nepal has made important progress, but the journey is far from complete. With the rise of digital finance services, the country stands at a crossroads: it can either allow persistent barriers to limit inclusion, or it can harness innovation to empower millions.

By promoting interoperability, diversifying products, improving literacy, and enabling regulatory flexibility, Nepal can turn financial inclusion into a driver of inclusive development, economic resilience, and social justice. So, Nepal should be open to explore different fintech services and innovations to harness the benefits from financial inclusion.