June 26, 2017 Print

Street vendor in Kathmandu Nepal. Photo credit: De Visu / Shutterstock

In Nepal, small businesses make up 90 percent of the nation’s GDP. So when Nepalese group Samriddhi Foundation had the opportunity to lower the cost of doing business for entrepreneurs, they knew they had to act. According to research coordinator Akash Shrestha, Samriddhi has engaged extensively with the Nepal’s last three Ministers of Industry — with great success.

Current outgoing Minister, the Hon. Raj Joshi, has been amenable to Samriddhi’s idea to spur economic growth by encouraging entrepreneurship. The group’s most recent wins come in the form of free registration for microenterprises and a waived income tax for the first five years of operation. The main beneficiaries of these policies are industries like rice mills, small poultry farms, shops, and restaurants.  

“We are focusing around micro, cottage, and small industries, and it is these groups that we believe will be most affected by a policy change like the one we have recently seen, and more similar changes we strive for,” said Shrestha. “It costs roughly NRs. 6000 (about $60 USD) for a micro entrepreneur just to pay for all registration-related fees. But since the processes are so cumbersome, and since aspiring entrepreneurs are not very well acquainted with all legal provisions and processes, it becomes much costlier for them to be involved in the entire process. A popular alternative then is to use intermediaries or lawyers to take care of the registration processes. For this, aspiring entrepreneurs have to spend as much as NRs. 20,000 (about $200 USD), in a country where annual per capita income is close to $750 USD.”

Samriddhi realized that small industries needed beneficial policies not only because they are the backbone of Nepal’s economy but also because the few large industries that exist have the connections and the finances to influence policy in their favor. Without an advocate, the many small industries were being bulldozed by policies designed for the few large ones.

One of the policies Samriddhi is working to overturn requires entrepreneurs to submit a business plan when registering a new business. “In a country where most micro- to small-level businesses are started without proper investment planning due to a lack of technical know-how unaffordability,” explains Shrestha, “it is clearly an impractical policy.”