Nepal, a relatively youthful country with the median age of 24.6 years (Worldometers), is ranked 135 out of 190 economies for the World Bank's ‘Starting a Business’ index that tracks small and medium enterprises all over the world. In other words, Nepal is not exactly a business-friendly country.
But still, in the past few years, young entrepreneurs have been coming up with innovative business ideas. Among the hundreds of startups that have originated in the country in recent times some have even gotten global recognition and funding. Even with the domination of a few large industries in Nepal, small and medium enterprises have emerged, creating jobs, contributing to the economy, and providing consumers with a variety of products at fair prices.
According to the central bank's 2019 report titled ‘SME Financing in Nepal’, as of fiscal 2018/19, a total of 275,433 small and medium enterprises (SMEs) were registered in Nepal. The Industrial Enterprise Act 2016 defines small enterprises as businesses having up to Rs 100 million in fixed capital, and medium enterprises as businesses as having fixed capital between Rs 100 million and Rs 250 million. The SMEs contribute an estimated 22 percent to the GDP, while employing 1.7 million people.
Even with little government support, entrepreneurship was thriving in the unsteady Nepali economy. But then the Covid-19 outbreak hit and the lockdown took hold starting March 2020, destroying the hopes and dreams of entrepreneurs and their businesses. Mostly based in Kathmandu, Nepal’s young entrepreneurs are reeling under the pressure of exorbitant rents, high taxes, and other liabilities, even as their businesses have struggled with Covid-19 over the past six months.
Rohit Tiwari, CEO/Co-founder of the pioneer homemade food delivery service, Foodmario, has always had issues with government apathy of startups. Although Tiwari’s Foodmario can now be considered a successful business, the hazards of entrepreneurship have not spared him. Tiwari has also taken it upon himself to actively promote other new ventures, especially the ones taking big risks. Even access to global funding is hard, he complains, as the minimum amount for Foreign Direct Investment (FDI) is set at a rigid Rs 50 million.
Confused government, confounded businesses
“The startup environment in Nepal was already poor when the pandemic hit. Business shrunk by more than 80 percent for most of us during the four months of the lockdown,” says Tiwari who was this year on the prestigious list of ‘Forbes 30 Under 30 Asia’. “At Foodmario, we had to temporarily close down entire operation for three weeks and instead deliver vegetables and essentials to keep the business going,” he explains.
During the lockdown Tiwari had expected some government help for small and medium enterprises. No such help has materialized. “The government seems confused,” he says. The only ray of hope, he adds, is that consumers learned the value of online business during the lockdown.
Bilal Ahmed Shah, CEO and Founder of Latido Leathers, says he had expected the lockdown to last a while and planned accordingly. To ensure the safety of his staff and factory workers, Shah sent them back to their ancestral homes as Latido’s showroom and factory closed. Many of them are yet to come back.
Bilal Ahmed Shah
“Even as our expenses have been rising, we have not earned much in the past few months. There is no way to tell if and when we will be fully operational again,” says Shah, unaware at the time of another round of imminent lockdown in Kathmandu.
On the same website that ranks Nepal so low on ‘Starting a Business’, the country is ranked 79th in ‘Protecting Minority Investors’ and 94th in ‘Ease of Doing Business,’ which are again not very inspiring. Perhaps this is why their friends and families discourage young entrepreneurs from taking what are indeed considerable risks.
Neha Singh, originally from Birgunj, is one such aspiring entrepreneur who has fought all kinds of odds to try and establish a business in Kathmandu. Living by herself at the age of 22, Singh runs ‘Chhotusart,’ an online store for customized products that is yet to be legally registered. “I was just about to register when the lockdown started and all my business plans fell apart,” Singh says. Singh’s online store was the outcome of her creativity and a bit of pocket-money, but has grown into a sizable business, which now requires legal registration. “I managed to make enough to expand my business and also to have some savings, but now everything I saved is being spent on my living expenses, since I have had no income lately,” Singh says.
Panic and anxiety
Singh’s quest for financial independence through a steady business that would cover her living costs, as well as studies, is now in jeopardy. “Entrepreneurship is already difficult for women in Nepali society. Now this pandemic and the ensuing problems will push us back even further,” Singh says.
With her savings almost gone and no sign of the pandemic coming under control, Singh is anxious about the future of her business and fears that she might have to start from the scratch after the pandemic. Her biggest fear at the time of our interview was another lockdown. “Don't know what I will do if I have to stop my business again,” she had said.
Her fear, unfortunately, came true. This second lockdown, which could possibly be further extended, might be the final nail in the coffin for many of the SMEs in Nepal. Without protection from the government, which instead imposes heavy taxes and regulations, entrepreneurs and SMEs will either have to fend for themselves to survive the pandemic or lock their doors forever.
Latido's Shah is already in a panic mode after the announcement of the second lockdown. The previous lockdown had put a big dent on his production and sales. "We will still have to pay rent for our showroom and factory. An even bigger problem is that we will now be unable to prepare for the peak winter season," Shah says.
Rohit Tiwari sums up the hardships of a handful of businesses that were operational during the previous lockdown and subsequent restrictions. Discussing the disruptions to his food delivery business, he writes on his Facebook page: "Only if I could request Government of Nepal to allow smooth Delivery of essentials, Bakery, Dairy products if nothing more! Half of the time we have to call traffic police, ask someone for source Force, just to do simple business. Sad!"