M&A as integration in Nepali BFIs

Merger & acquisition in Nepali financial institutions is more of an institutional INTEGRATION rather than M&A. It could be implemented by M&A integration mechanisms & techniques. The past few successful mergers in Nepal have proven this fact as an example. We have witnessed significant minimization of development banks and finance companies and commercial banks in the past 7/8 years.

Integration contrivance on M&A would be a key tool for implementation. Such integration techniques would help BFIs in Nepal to make M&A more successful as most of the BFIs in Nepal have common functionality. For example - organizational culture, technological tools, operation and so on. This type of mechanism would be prominent for BFIs to deal with successful merger. Nevertheless, for the successful M&A, proper due diligence on Finance, Sale, HR and IT should be conducted in an effective manner.

Human resource management could be a minor challenge but can be overcome by including extended business size plan of 25-30% during M&A due diligence for immediate execution after the merger. And it has many possible aspects area due to the new three-level government structure in Nepal and around 40% of the population still being unbanked in Nepal and hold cash economy in the market making it difficult to figure exact amount. It is one of the huge losses for the economy which could be the best tool after M&A to overcome HR management.

Big mergers with extended sizes have multiple possibilities in the upgraded level of banking in Nepal. In the financial sector, it would be more sensible to have a qualitative service rather than quantitive. Rapid growth in digitization and fin-tech improvement in Nepali BFIs, it has increased even more risk in a continuous manner recently. To overcome those risks merger could be the prominent solution for BFIs which enhances the capacity of bearing day to day operational risk. Growing in size can make a significant impact on the economic growth of the nation as BFIs can invest in multi-billion projects designed by the government independently. For those BFIs which are struggling to full-fill the expectation of stakeholders, the merger could be the rescuer to value the trust. Sooner or later merger is the only and best way to upgrade the level of banking in Nepal.