Global IME Laghubitta’s Profit Declines by 10.51% Amid Rising Credit Risk

Global IME Laghubitta Bittiya Sanstha Limited has published its second-quarter financial report for the current fiscal year, showing a decline in net profit despite strong growth in core income. The report reflects growing challenges in Nepal’s microfinance sector, particularly related to loan quality and risk management.

During the review period, the company earned a net profit of NPR 105.9 million. In the same period of the previous fiscal year, it had recorded a profit of NPR 118.3 million. This represents a decline of around 10.51 percent, indicating pressure on overall profitability.

Despite the fall in profit, the company’s net interest income increased significantly. By mid-Poush, net interest income reached NPR 487.6 million, up from NPR 350.7 million last year. This growth of nearly 39 percent suggests that the company has expanded its lending activities and improved interest collection.

Similarly, total operating income rose to NPR 521.8 million from NPR 392.1 million in the previous year. This marks an increase of around 33 percent, reflecting stronger operational performance and higher revenue generation from core business activities.

However, the positive impact of rising income was offset by a sharp increase in impairment charges. Last year, the company had set aside NPR 27.6 million for loan loss provisions by mid-Poush. This year, the amount surged to NPR 161.1 million, an increase of 483 percent.

The rise in impairment charges indicates growing concerns over loan recovery and asset quality. As credit risks increased, the company was required to allocate more funds to cover potential losses. This significantly affected profitability, causing operating profit to decline from NPR 169 million to NPR 152.2 million.

As a result, key performance indicators also weakened. Earnings per share (EPS) declined from NPR 38.24 to NPR 32.67. The non-performing loan (NPL) ratio rose sharply from 4.10 percent to 8.96 percent, signaling deterioration in loan quality and higher default risk.

Meanwhile, the company’s net worth per share stood at NPR 194.68. The price-to-earnings (P/E) ratio was recorded at 35.59 times, while the liquidity ratio remained at 4.92 percent. These figures suggest that although the company maintains a stable capital base, financial risks are increasing.

In terms of capital structure, Global IME Laghubitta currently has a paid-up capital of NPR 648.2 million. Its reserve fund has reached NPR 630.7 million, providing some buffer against future uncertainties. However, analysts note that rising credit risk could put pressure on these reserves if not addressed in time.

Experts believe that the company’s latest financial results reflect broader challenges facing the microfinance sector. Sluggish rural economic activities, difficulties in loan recovery, and rising operating costs have affected many institutions in recent months.

They emphasize that improving credit monitoring, strengthening recovery mechanisms, and enhancing risk management systems will be crucial for sustaining growth. Without effective control of non-performing loans, continued profit pressure is likely in the coming quarters.

Looking ahead, market observers say that Global IME Laghubitta’s financial stability will largely depend on its ability to manage credit risk while maintaining income growth. If the company succeeds in improving asset quality and controlling impairment costs, its profitability could gradually recover.

For now, the second-quarter report shows a mixed picture: strong revenue growth on one hand, and rising financial risk on the other. How the company balances these factors will determine its long-term performance in Nepal’s competitive microfinance market.