Kathmandu, Sept. 30 -- Maya Shahi of Tikapur-1 in Kailali has been dealing with microfinance institutions for two decades. She is now blacklisted by three of them. Banks will not lend money to her, and even relatives no longer trust her financially.

Shahi, who ran a hotel in Tikapur, had borrowed from two microfinance institutions and a savings and credit cooperative. During the Covid-19 pandemic, a six-month lockdown disrupted her business and she could not keep up with payment instalments. Before the pandemic, she had managed to make regular payments using income from her hotel and by borrowing from one microfinance institution to repay another.

When her income dried up due to pandemic-triggered lockdowns, she was unable to service he...