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Many cooperatives in Nepal into fraud thanks to nominal monitoring

In 2019, Ram Kumari Shrestha, who operates a business in Bajbajar, got around Rs 1 million after her family sold their ancestral land. Wanting to make the most of it, she decided to use the money to buy land in the outskirts of the city. She was planning to take a loan to manage the funds for the land.

But, with prices soaring, she felt it was not right to buy land in the valley and decided to keep the money. Arjun Khanal, the secretary at Triple M Manapathi Multipurpose Cooperative Ltd found out about Shrestha having the cash and approached her. 

Shrestha says Khanal told her that she would be given whatever amount she needed to purchase the land but asked her to deposit the Rs 1 million at Triple M Manapathi Multipurpose Cooperative Ltd. He promised her that the cooperative would be offering her a 13 per cent interest on her capital and also assured her that he would give her a loan to buy the land at a considerably cheaper rate. Tempted by the offer, Shrestha agreed and deposited Rs 1 million there.

Over 18 months have passed since that day, but Shrestha has neither got her money back nor had the cooperative given her a loan. Her days are spent going to the Cooperatives Department of the Kathmandu metropolitan city and police, trying to get back what she is owed.

This is one example of how cooperatives have been cheating their members openly without getting booked by authorities.

Cheaters

Image by mohamed Hassan from Pixabay 

Triple M Manapathi Multipurpose Cooperative Ltd has moved from the place it was when she deposited the money. The house owner who had rented the cooperative a place says he had to evict the company as it did not pay rent on time. The cooperative has relocated to Dillibazar.

Onlinekhabar tried to meet the cooperative’s officials, but no one wanted to speak. Our efforts to contact Khanal was also unsuccessful.

Shrestha on the other hand has already filed a complaint at the Cooperatives Department of the Kathmandu metropolitan city. The department’s deputy director Bimala Koirala says there have been other complaints against the cooperative by people like Shrestha who claim they have been conned.

“We’ve been trying to contact them, but they’ve been avoiding us. Even when we have got hold of them, they’ve not been proactive in solving the mess they have created,” says Koirala.

Irritated, the department on August 6 wrote to Metropolitan Police Range, Teku asking the police to arrest officials of the cooperative. Shrestha took the letter herself to the police who then asked her to take it to the Police Circle in Anamnagar. When she reached the circle, she was shocked.

“There were many others who had filed a complaint against the cooperative. I wasn’t the only one,” says Shrestha.

Shrestha has been trying to contact the cooperative herself, but so far, the talks have not been positive. The officials do tell her that they will pay her back and ask for time, but in action, they just seem like they are stalling, says Shrestha.

There are 20 complaints against Triple M Manapathi Multipurpose Cooperative Ltd at the KMC’s Cooperatives Department alone. In the past fiscal year, the cooperative has taken over Rs 9.1 million rupees. If one adds interest to the amount, it goes in excess of Rs 15 million.

Saraswati Katuwal is facing a similar problem. She had deposited between Rs 100 to Rs 500 every day at Osmosis Saving and Credit Cooperative Limited. For two years, she did that but when she wanted to withdraw the money, she could not. She wanted the money to support her family which had been badly affected by Covid-19, but citing various reasons, the cooperative did not let her withdraw money. Like Triple M, Osmosis also relocated and has been avoiding taking calls from its members.

Over a thousand people in the Kathmandu metropolitan city alone have been cheated by cooperatives. According to the complaints filed at the Cooperatives Department, various cooperatives in Kathmandu owe their members in excess of Rs 400 million. According to the department, 1,069 people have filed complaints against 27 cooperatives for being frauds. While a few have got their money back, many are still awaiting justice.

The department has asked the police to take action against the cooperatives.

On top of the list is Anandanagar Saving and Credit Cooperative Limited that has cheated 54 people of Rs 140 million. Similarly, Om Batu Saving and Credit Cooperative is accused of failing to return Rs 68.20 million to its depositors. Business Savings and Credit Cooperative also owes its members Rs 25.90 million.

Catch us if you can

Koirala from the department says the department receives many complaints, but it has not been able to do much. Some go to the department to explain why they have not been able to pay the depositors. Some ask for time and pay people back and some say they will pay back but go into hiding.

She says all the department can do is ask them to return the money and if they do not, file a complaint at the police.

The Cooperatives Department of the Kathmandu metropolitan city says it sent 1,500 complaints to the police. This fiscal year, there have already been two complaints in the first month alone. The police say that they have arrested one person while they are on the lookout for 11 others who are on the run. Last fiscal year, they arrested 11 people and in 2019-20 arrested 10 people. But, they add that over 50 people who were associated with the fraud are on the run.

DSP Narendra Chand says the trend to cooperatives conning people has increased in the past few years. But, he says the police can only take action after they are asked to do so by either the local government or the respective department. “We have to abide by the Cooperative Act,” says Chand.

Loopholes protecting the frauds

Experts believe the main reason for the rising cases of fraud is the lack of monitoring. There are over 35,000 cooperatives in the country. Despite the news of cooperatives involved in fraud, the number of them being registered is increasing every day. 

The monitoring work has been tasked to the local governments who themselves have been giving permission to operate cooperatives. Before the country went into federalism, there were 42 offices spread across the country that monitored cooperatives. But after federalism, the role has been given to the local and provincial bodies.

Currently, the Department of Cooperatives under the federal government only monitors around 125 cooperatives while the rest are monitored by provincial and local units. The department’s registrar Lila Prasad Sharma says that even though monitoring should have been smoother as it was given to the local level, things have not been better. 

“The situation is a bit dire,” says Sharma.

National Cooperative Federation President Min Raj Kandel also agrees that monitoring is weak. He says it is weak as there are too many cooperatives in the market and due to a few, all are being treated as frauds.

Syndicate for the smart

Most people who operate cooperatives have a lot of influence. Due to that, most never get punished. Sudhir Basnet, from Oriental Co-operative, had run away taking billions of rupees. One person had committed suicide after Basnet ran away with money in excess of Rs 8 billion. After getting complaints of fraud up to Rs 8 billion, police arrested Basnet on December 28, 2016. 

Lawmakers have also been using their influence to con people. Parliamentarian Ichchha Raj Tamang’s Civil Cooperative had given a lot of trouble to its depositors. He has used the money deposited and invested on housing. Despite causing problems to thousands of people, he was not made answerable.

Experts say people who are clever are conning members of the cooperatives, looting millions of rupees in the process. They give naive members fake promises and get money away which they never intend to return. They do not even give a briefing to shareholders of the cooperatives about their roles and responsibilities.

“A few people take all the decisions and don’t keep other members on the loop. That is what’s causing major problems,” says Balaram Niraula, the registrar at Cooperative Registrar Office of Province 1. 

Niraula says most of the fraud cases take place in Kathmandu and the number of such cases in other places is quite low. He says most of the fraud cases reported in cities away from Kathmandu do not seem intentional.

How to stop fraud?

The Department of Cooperatives is closely monitoring 125 cooperatives that fall under the central government. Sharma says that they believe if the department monitors these well, it will set a benchmark for others.

The Cooperative Federation’s Kandel says problems are arising because it has only been a few years since the task of monitoring was handed to the local governments and hence calls for patience.

“Not all are bad. I know there are frauds in the market, but you can’t dub all cooperatives as frauds,” he says, adding a few are defaming the sector.

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Acharya is a business correspondent for Onlinekhabar.

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