The Department of Cooperatives has moved to connect cooperatives operating across the country to the federal and sub-national governments through the internet so that they can be monitored more effectively.

Two years ago, the government introduced an online financial reporting system named Copomis, and instructed cooperatives to install the software. Among the 34,512 licensed cooperatives in the country, 29,000 have linked up to the system, according to the department.

Tok Raj Pandey, registrar of the department, said they had started the process of upgrading the Copomis system in a bid to make the monitoring mechanism more effective. According to him, the department on Monday called for expressions of interest from eligible firms to upgrade the software.

Proliferating cooperatives and lack of an efficient mechanism to monitor them has resulted in malpractices in the sector, officials said.

Taking membership in multiple cooperatives, failing to involve the members when making major decisions, and providing large loans to board members are among the problems plaguing cooperatives which has put savings at risk.

The Ministry of Land Management, Cooperatives and Poverty Alleviation has so far declared 12 savings and credit cooperatives in the Kathmandu Valley problematic after they failed to pay back their depositors’ money. The Problematic Cooperatives Asset Management Committee has been working to liquidate their assets to raise cash to pay off creditors.

Copomis has been installed in a large number of cooperatives, but many of them have still been failing to report to the department and the local governments which are in charge of supervising them. “Improvement of the software will allow the number of fields to be increased and permit authorities to collect additional information from them,” said Pandey.

The department plans to maintain a cloud server at the Department of Information Technology to ensure smooth functioning of Copomis. According to Pandey, the server will provide access to the Cooperative Department, seven provincial governments and 753 local governments. “In addition, all cooperative unions will be connected to the main server.”

Among the cooperatives operating in the country, 13,578 are savings and credit cooperatives and 4,371 are multipurpose cooperatives which are licensed to carry out banking functions. These cooperatives hold deposits totalling more than Rs300 billion.

Two decades ago, the directors of more than 110 cooperatives fled with the depositors’ money. In 2014, a probe commission formed under the chairmanship of Special Court Judge Gauri Bahadur Karki identified 130 cooperatives as troubled, and urged the government to enforce stern laws and regulatory system to control wayward cooperatives.

Apart from creating an effective online financial reporting system, the department has been mulling to facilitate the unification of cooperatives. Recently, the department imposed a cap on the interest rate cooperatives can charge on loans. They cannot charge an interest rate of more than 16 percent per annum. The maximum spread between deposit and lending rates has been fixed at 6 percent.