Weak regulation, political interference and non-transparent operations have been identified as the main causes behind the crisis in the cooperative sector, according to a commission report made public on Thursday.

The Ministry of Land Management, Cooperatives, Federal Affairs and General Administration released the report.

According to the report, approvals for the registration of cooperatives, expansion of operational areas, service centres and branch offices were granted without adequate study or clear standards.

The report said some operators had deviated from the core objectives of cooperatives and engaged in embezzlement, misuse of depositors’ savings and non-transparent transactions.

The commission also identified a lack of coordination among multiple regulatory bodies, weak information systems, financial indiscipline, poor governance and a shortage of skilled manpower as major causes of the sector’s problems.

The report further concluded that the political affiliation of cooperative operators and managers, along with direct and indirect political interference, contributed to the current crisis.

The commission said public trust in cooperatives had significantly declined.

“Although the cooperative sector remains an important pillar of Nepal’s socialism-oriented economy, recent financial irregularities, misuse of funds, and weak regulation have led to a significant erosion of public trust in the sector,” the report said.

While releasing the report, the ministry said the government remained committed to reforming the cooperative sector.

The ministry said efforts were underway to strengthen monitoring and regulation, amend laws and regulations, and prioritise the return of savings and recovery of loans.

The commission was formed on January 16 by the government under the leadership of former High Court judge Binod Prasad Sharma.