IFC South Asia Gender Compendium profiles case examples of gender impact in agribusiness in South Asia covering India, Bangladesh and Nepal. Business Oxygen’s investments  in Nepal are  improving the lives and livelihood of women smallholders and local entrepreneurs. These are powerful examples of what the private sector-led initiatives can do to promote gender in their business operations and supply-chains.



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IFC-backed Nepalese SME fund invests in home healthcare firm MedPro

Business Oxygen (BO2), a private equity fund backed by International Finance Corporation (IFC) to support small and medium enterprises in Nepal, said Monday it has invested $500,000 in MedPro International.

MedPro, which is led by cardiac surgeon and healthcare entrepreneur Bishal Dhakal, runs a venture under the banner of Health at Home Nepal. Established in 2007, it is an out-of-the-hospital healthcare service provider.

The company provides a range of care services for patients, from general nursing care to critical care for severely ill patients and long-term, chronically ill patients. It also offers counselling for patients, physiotherapy services and monthly prescription-drug delivery.

Dhakal said the firm has over 10,000 people in its network and plans to use the money raised to add a digitisation component to the business.

“We started operations much before some of the well-known Indian names came into the picture and have always been profitable. We are also looking at collaboration and exploring if we can expand into some markets in India, especially Uttar Pradesh and Bihar,” he said.

Dhakal added that the firm has recorded a spike of 600-700% in demand because of Covid-19 and expects to double its annual revenue over the next few years. It may also look at another round of funding in two-three years.

Siddhant Raj Pandey, chairman and CEO of BO2, said that healthcare at home is a novel concept in Nepal that MedPro has tapped into. “Before this service commenced operations, after-care services once the patient left the hospital were not readily available in an institutional capacity. With BO2 funding MedPro will be able to expand its services to other Provinces in Nepal along with enhancing its poly-clinic services and health care services.”

BO2 is the first International SME venture and climate impact fund in Nepal promoted by IFC, the UK government’s The Foreign, Commonwealth & Development Office, Climate Investment Funds’s Pilot Program for Climate Resilience and WLC Ventures.

Nepal is one of the world’s poorest countries with nearly half of the population living below the poverty line. Besides socio-economic factors and the mountainous terrain, susceptibility to natural disasters such as earthquakes, floods and landslides as well as armed insurgencies also make delivery of healthcare a challenging endeavour.


Source : The Capital Quest


Fusemachines Nepal

Bo2 signs SHA with Fusemachines Nepal.   Fusemachines Nepal has paved its growth both internationally and in Nepal as a leading technology company. They have done pioneering work in training Nepali youth in AI software development skills, building cutting edge AI products and continue to create AI solutions for top enterprises globally. Even during the pandemic, the company was immediate to respond by launching Fuse Classroom, an AI-assisted learning tool to empower both Nepali students and educators when all learning became remote. Bo2 is proud to partner with this pioneering company in order to strengthen its capacity in their Nepal office to achieve its targeted exponential growth curve.  

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Giving start-ups a head start

About 250 years ago when King Prithivi Narayan Shah made Kathmandu the capital of unified Nepal, he realised that the city had great potential as a business centre, complementing its role as a trading hub.

He allowed in businessmen from Rajasthan in India to set up shop and allow entrepreneurship to ferment, a move expanded later by Prime Minister Chandra Shamshere Rana. One reason entrepreneurship did not have deep roots in Nepal was the concept of जागिर, a 10-5 salaried position with job security.

That is why the start-up culture took so long to start up and morph in Nepal. The proliferation of, and exposure to the Internet and the recent advent of international private equity firms, accelerators and incubators have paid a pivotal role in making this happen.

Since 2017, successive government budgets have mentioned start-ups and allocated money for their establishment, but without clarity and development. This year’s budget was no different: it also set aside Rs1 billion towards building a start-up ecosystem, including concessional loans.

What the previous governments had missed out on, this one seems to have acknowledged: start with defining a start-up. A voluminous document is doing its rounds through the corridors of our bureaucracy for comments from experts. Until they come up with a definition, let us say a start-up is an innovative idea that uses technology to address unmet demand in the market.

In the United States, the start-up sector is a $3 trillion business. In South Asia, India leads the pack with over 20,000 Start-ups in operation, of which 100 are unicorns with a combined market cap of $240 billion. Bangladesh, Pakistan and even Afghanistan have understood the importance of this sector to the economy.

Internationally, some 90% of start-ups fail to take off. Nepal has invested in 400 start-ups, all in Kathmandu, and the risk appetite for new investments is limited partly because of the absence of an enabling environment.

The cost factor for starting a tech business in Nepal is lower than anywhere else with a constant flow of eligible young graduates well versed in English who are relatively computer literate. The bandwidth for connectivity is getting better. It is an untapped market, an imitation of international successes for local markets can be implemented, and the population is young, and growing.

There are challenges with the lack of legal and policy environment posing the greatest risk. Ideas are the premise of any start-up. Intellectual Property Right (IPR) is the most important legal recourse for safeguarding those ideas, which in Nepal remains a draft and has been in discussion for quite some time.

The current law was formulated in 1964, and does not address developments that have occurred worldwide since then. A lawyer recently remarked that when he tried to register a trademark for poultry feed, the application was denied because a tobacco company had already registered it.

Thankfully, the Supreme Court gave a verdict on the Kansai Nerolac case a few years ago, which protected trademarks. Still, laws need to reflect international best practices for this sector to operate.

Financing start-ups is also a great hurdle. Banks are reluctant and risk averse to lend without collateral. If a loan is secured it is not nearly enough to meet the requirement and equity is difficult to come by. The ones who have demonstrated that they have the ability to serve a niche market and can show potential to scale up have been successful to secure equity financing.

The start-up industry is evolving despite the lack of an enabling environment.  The resilience shown by these entrepreneurs has steadily improved, and the appetite to invest in them is gaining traction. Examples are ride sharing apps that made the government change its policy, e-commerce platforms that have engaged with the government to facilitate the sector, and companies that realigned business plans to accommodate government policies.

A cloud service provider had to create a hybrid model because government officials could not comprehend what it was, and that data could be secure. They needed to see actual physical infrastructure.

But start-ups are resilient, and they will continue to compel the authorities to accommodate them as they continue to grow. They have adapted to the situation and have introduced internal safeguards to secure their ideas in a lax IPR environment.

Some are ensuring strict non-disclosure agreements, developing in-house products knowing that there will be disrupters in the market six months down the road and, focussing on networks as much as focussing on products.

The government’s new regulations will hopefully put it in a facilitating role to create a platform for ideation to grow with the help of mentors from academia and the private sector. Nepal’s start-ups are to stay, and with the right legal and regulatory framework in place, will thrive. One day there will be a Nepali unicorn in the making.



What’s in budget for startups, SMEs and FDI?

The budget of Rs. 1647.57 billion recently unveiled by the government for this fiscal year has significant provisions for startups, small and medium enterprises (SMEs) and Foreign Direct Investment (FDI). Government’s commitment towards small businesses hints that it realizes the importance of contribution of small business to the economy.

Point 68 and point 483 of the budget talk about startups. Point 68 mentions that a challenge fund of Rs. 1 billion will be created to provide seed capital of Rs. 2.5 million to startups under project financing to attract youth entrepreneurs towards startup business. However, this is not the first time the budget has mentioned of startups and tried to provide stimulus. Earlier budget also made a provision of Rs. 500 million but there was no deployment. This time it has been said that registration, renewal and other services to startups will be provided free of cost through one window policy. The same thing was said in the past too. The red tape hurdles may continue. Though the submission of files/documents are done in one window, file will have to travel same or even more distance to multiple departments. Authorized one widow center and streamlined process is the need of time for real output. ‘One window’ is losing its essence and it is not exciting any more.

The FDI policy

The budget promises to simplify policy to attract Foreign Direct Investment (FDI) into startup. As a person associated with Business Oxygen (BO2), the first international private equity fund based in Nepal, I have been more interested toward FDI and scale up financing in Small and Medium Enterprise (SME) space. This particular point caught my special attention.

Minimum FDI threshold at the moment is Rs. 50 million. At BO2, we don’t do start up financing. We consider companies that have proven track record, are in profitable operation for at least past two years and are now looking for expansion as scale up business. As the minimum FDI threshold was raised from Rs. 5 million to Rs. 50 million, we had to drop many pipeline companies in scale up stage.

FDI has always been a hot topic. Apparently, the government is doing its best to create enabling environment to attract FDI into Nepal. But increased FDI threshold, multi layered of FDI approval without defined timeline and lack of co-ordination between different government entities, have created exactly opposite vibes in practice. In general, the mentality has been that FDI means truckload of dollars for huge infrastructure projects and not petty investments, probably because of Switzerland dream we all have been fooled with.

During a discussion, when asked about the logic of FDI threshold, it was said that Nepal doesn’t need small investments, small FDIs are misused for FDI benefits such as visa and when number of small investments increase, it is difficult to monitor and regulate. What a logic!

Why don’t we allow our local companies go global and bring back foreign currencies? If Nepali Wai Wai reached to 32 countries, why can’t Nepali momos?

Point 184 mentions FDI repatriation process will be simplified—too vague to even comment. Services of one point service center will provide its services via electronic medium. I hope it doesn’t mean uploading document in the system and again submitting hard copy.

In our experience of investing in a restaurant specializing in momos, there was a backlash from the people at concerned authorities that Nepal doesn’t need FDI in momos. We need it in the areas where Nepali won’t be able to invest. The restaurant was a popular name in Kathmandu and is now making its name outside the valley too with FDI. It doesn’t sell just momos, now it also sells franchise. FDI is not just about capital but also about technology, international best practices, technical support and other growth drivers. Nepal doesn’t allow its company to go global. Is FDI only solution to our problems or targeted growth? Why don’t we allow our local companies go global and bring back foreign currencies? If Nepali Wai Wai reached to 32 countries, why can’t Nepali momos? Pizzahut and KFC entered Nepal but we are restricting our native products and businesses within the national boundary.

We are proud that Santosh Shah took nepali cuisine to an international platform. IT sector is doing great. Why can’t a local IT company be allowed to establish its own branch or customer relations office abroad where their major/target clients are?

Benefits for startups

Point number 483 mentions of two other benefits for startups. A startup will get 100 percent income tax waiver for five years from the date of start of transaction. Though most of the businesses have losses in their initial years, this is a welcome move. However, there is confusion as to whether the provision is targeted for new startups or even the existing ones can get this benefit. Another benefit under this point 483 is that a private sector industrial enterprise can provide seed capital of up to hundred thousand rupees to maximum five startups and deduct it from its taxable income. If an employee comes up with some unique business idea, employer may be more willing to provide seed capital to the staff under this scheme. Alumni of Flipkart created eight unicorns, alumni of Nepali company may follow suit. This is a unique incentive to create ripple effects though amount is very nominal and nothing is mentioned about the repayment of seed capital back to investing entity and the return on it.

But what is startup? Startup has not been defined yet and we can’t just pull up an English definition here. Will there be sector restrictions to it? Will a newly started trading business also be considered as startup for this purpose? Regulators treated e-commerce as trading till few years back. Government has to define its target beneficiaries and hopefully directives or clarification on this will come soon.

Benefits for SMEs and Covid-19 affected industries in the budget are mostly continuation from earlier budget. SME and industrial sectors have been defined by the Industrial Enterprise Act 2076 in section 17. SMEs are defined based on fixed capital amount irrespective of industry type. Therefore, SMEs can avail sector specific benefit and SMEs specific benefits. During this pandemic, overheads (salary, rent, interest) have been major issues for small business. Business Continuity Fund for salary and working capital which was rolled out last year is continued. Similarly, loan limit and sector for refinancing loan at five percent has been expanded. Businesses took benefit of these facilities last year. In fact, these facilities would not only benefit borrowers but also the banks by reducing their exposure and default risks. Still, there are complaints that banks are reluctant to process concessional loans and refinancing facility. I don’t understand why.

The government is doing its best to create enabling environment to attract FDI into Nepal. But increased FDI threshold, multi-layered FDI approval without defined timeline and lack of co-ordination between different government entities, have created exactly opposite vibes.

Other facilities include tax waivers, waiver of electricity demand charges and renewal fees for specific industry and incentives to move out of valley/industrial zone. It will be interesting to see how the “Made in Nepal” and “Make in Nepal” campaign will be programmed and how SMEs can take benefit from it.

What’s the message?

The budget has tried to give positive message to private sector and has addressed multiple issues. Programs for startup are focused to create more businesses but we need to focus on the quality of the businesses and sustainability too, not just number. Departments and officials need to be held accountable with timeline in their duties. For example, if FDI approval process is taking year/s, the concerned officer shall provide plausible explanation. Instead of creating new one windows or one point service center, usefulness of the existing ones needs to be assessed. Has it shortened the time needed for service delivery or layers in the process? If not why create another functionless or redundant unit? Everything cannot be covered in budget but directives/procedures will definitely clarify unclear issues. One standard refrain comment on budget in Nepal has always been ‘overall good but challenge is in implementation.’ Same goes for this year too.

The response of Finance Minister Bishnu Pauduel to the concerns on implementation challenge was that budget is not just to read but to implement and it will be implemented. Hope his words will come true.

Deepak Sharma is Investment and Finance Manager at Business Oxygen (BO2).

Source : Nepal Live Today

Genese Solutions

Genese Solution is a cloud consulting, web and software development company. Genese is multinational  and Nepal’s first cloud consulting company providing Amazon Web Services (AWS). Genese is an official partner of Amazon, Google, Microsoft, Zoom, Zoho, Nagios, and Facebook for Nepal. The company also provides AWS certifications and trainings, and has trained thousands of students under its Genese Cloud Academy program. With BO2 investment, Genese will expand its hybrid cloud services to Nepal.”

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Assabet Technologies Pvt. Ltd.

Assabet Technologies Pvt. Ltd. is a software development company which designs and builds software and technology products/platform for businesses in health, tourism, banking and education sectors for data management, remote access and is promoted by US based company ESR LLC. In Nepal, Assabet has implemented a complete school college management system for over 7000 students. Assabet will also be developing software/platforms for US based businesses. With BO2 investment, Assabet will scale up their products, expand their team and grow their market presence.

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MiDas Education Pvt. Ltd.

MiDas Education Pvt. Ltd. (MEPL) designs and develops animated interactive audio-visual educational materials like MiDas Edukit. It has been working towards bringing modern, scientific and customized ICT products to encourage education to empower teachers as well as the students. With the major theme of “Be Capable, Be Confident,” MEPL has come up with the innovative idea of MiDas  eCLASS  (in web, app and desktop version) with the prime theme “Play & Learn,” which attempts to give continuity to its rich legacy as a maker of advanced and imaging educational tools. MEPL, has launched an interactive audio-visual e-class based upon Nepal Government curriculum.  Bo2 is proud to partner with MiDas as it scales up its operations.

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THE SME IMPERATIVE : What would it take to help SMEs get back on their feet

The very importance of SMEs for a country like Nepal lies in their significant contribution to the country’s GDP and employment generation. So, helping SMEs survive the current crisis also means safeguarding the country’s economic future.


Over the past nine months, exports of handicrafts have dipped dramatically as the international demand for merchandise goods has been decimated due to the Covid-19 crisis. The Federation of Handicraft Associations of Nepal (FHAN) reports a 70-80 percent fall in exports and an over 80 percent decline in domestic sales of such goods as a result of the absence of tourists in the country. According to FHAN, the fallout of the Covid-19 pandemic has resulted in the closure of handicraft industries in large numbers, many of which have shut down permanently across the country.

Similarly, people who have businesses in Kathmandu’s New Road, the main commercial hub of the capital , say that never in their history have they faced any slowdown like this with dismal sales even during the year’s main festive season. According to the National Trade Association, an association of business owners who have businesses in New Road and adjacent areas, the past nine months have been horrifying for most businesses, except for those trading in essential goods and items like smartphones, ultimately leading to disruptions in cash flow and closure of hundreds of businesses.

Bearing the Brunt
The enormous difficulties encountered by handicraft producers, whose exports constitute a big portion of Nepal’s foreign currency earnings, and New Road-based traders serve as an example of how small and medium enterprises (SMEs) in Nepal are facing the economic headwinds created by the global health emergency.

The Covid-19 crisis has wreaked havoc on businesses from all sectors but it is SMEs that have borne the brunt the most. From handicraft, cottage industries, restaurants to businesses in retail, travel and agriculture, SMEs have been affected enormously. According to Siddhant Raj Pandey, chairman and CEO of Business Oxygen (BO2), Nepal’s first SME sector-focused private equity (PE) fund, the pandemic has had a major impact on SMEs and the entire value chain. “Never had the international and local economies faced all three shocks all at once; supply side shock, demand side shock and then the financial shock,” he says.

For SMEs in the industrial sector, the impact is more pronounced with the sharp fall in outputs due to the lack of imported raw materials, supply disruptions, lack of labour mobility and traffic restrictions. The economic slowdown caused by the four-month long lockdown, and later the prohibitory orders, imposed by the government to curb the spread of coronavirus have had a direct impact on jobs and earnings of a large segment of society and has contributed to the reduction of consumer demand for goods and services leading SMEs to operate below their production capacity.

“This will lead to an increase in industrial waste, thereby reducing operational efficiency and sustainable industrial operations. Additionally, the pandemic has put heavy pressure on the availability of human resource,” shares Umesh Prasad Singh, officiating president of the Federation of Nepali Cottage and Small Industries (FNCSI). According to him, the decline in revenue of micro, small and cottage industries (MCSIs) has been attributed to the direct impact of the lockdown and restrictions on jobs and earnings of a large segment of society which has reduced consumer demand for goods and services.

The situation in the retail sector also paints a bleak picture at the moment despite the lifting of Covid related restrictions by the government about three months ago. “It is not possible to assess our current state of trade and commerce as Nepal-bound containers are stranded at border checkpoints in China and currently there is a huge scarcity of number of goods ranging from imported readymade garments to electronic items to trade in the market. We are also not able to import enough goods from countries such as India, Bangladesh and Thailand at the moment,” says Baikuntha Dahal, president of the National Trade Association. He warns that it may take about two years for retail businesses to fully return to normalcy if this situation continues.

A Cash Strapped Situation
Business owners and other stakeholders of the SME sector report that the pandemic has directly hit the cash flow of such businesses as market activities remained subdued for a long time as a result of the restrictions imposed by the government. Currently, the lack of working capital has hit the pandemic-affected SMEs the hardest, they say. According to Pandey, there are thousands of SMEs that never took loans to operate and such businesses are out of the banking radar. “This missing middle is enormously impacted by the pandemic,” he observes.  According to Pandey, SMEs in Nepal use traditional management practices and do not have proper processes and financial frameworks to withstand situations such as a pandemic. “If lack of finance is not an issue then they suffer from lack of supply of raw materials and parts from the supply chain that eventually affect their businesses,” he adds.

Bankers are also closely watching the situation. According to Niraj Kumar Basnet, head of SME and MF Division at Nabil Bank, the Covid-19 pandemic has impacted SMEs in Nepal both on the supply and demand side. According to him, on the supply side, SMEs are coping with the reduction in the supply of labour and drop in capacity utilisation with shortage of raw materials. “On the demand side, a sudden loss of demand and revenue for SMEs affects their ability to function and is causing severe liquidity shortages,” he says.

Basnet says that the other problems faced by SMEs at present include lack of knowledge in digital transformation, lack of financial skills and absence of a regulatory framework, unfair market practices and most importantly the gap in understanding the banking needs supported by proper documentation.

A survey report published by the International Finance Corporation (IFC), the private sector arm of the World Bank, in late September warned that over 50 percent of Nepal’s micro, small and medium enterprises (MSMEs) face the risk of permanent closure within a month under the current conditions with over 80 percent of businesses suffering from a slump in sales. In the report titled “Covid-19 Nepal Business Pulse Survey,” IFC said that the businesses have resorted to measures such as granting leave without pay and reducing work hours and wages of their employees to offset the losses incurred in their business. “The Covid-19 pandemic has dealt a major blow to Nepal’s economy, with enterprises of all sizes bearing the brunt with little to no revenue. 83 percent of the firms reported a decline in sales compared to the same time last year,” reads the report.

According to IFC, MSMEs contribute 22 percent to Nepal’s GDP employing about 1.75 million people. The exact number of SMEs is difficult to know as only 300,000 are registered with the government authorities. An estimate of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) puts the total number of SMEs at three million.

Lackluster Government Response
Governments in developed countries and emerging nations have injected enormous amounts of liquidity to help the pandemic-stricken SMEs avail cheap credit or even free money to run their business. However, this may not be possible for a country like Nepal where resources are limited. However, experts and entrepreneurs suggest that this does not prevent the government from being proactive. “The government support at this stage is moot. Nothing of substance has come forth and when it is announced it is either too little or very complicated to avail through the banking channel,” says Pandey, adding, “If the government was serious then working capital to the businesses should be available, and not only to the existing borrowers.” According to him, thousands of SMEs never took out a loan in order to operate and they are out of the banking radar. “This missing middle is enormously impacted by the pandemic. The government should address their needs,” suggests Pandey.

FNCSI Officiating President Singh also stresses on the need to save the MSMEs. “At present governments of all levels are prioritising their budget on health spending to fight Covid-19. Thus, the situation of the micro, cottage and small industries (MCSI) sector in Nepal is very critical and the government has not been able to launch recovery programmes to overcome rising unemployment and economic slump,” he says.

Pandey suggests that the government in the current situation can support the sector by deferring tax collection for, at least, those who have in the past shown their commitment to paying taxes. “Likewise, the government can provide an alternative to farmers by buying their produce, prevent cheaper imports from abroad that displace our local produce,” he adds.

The government in the current fiscal year’s budget announced a refinancing fund of Rs 50 billion to help SMEs of different sectors hardest hit by the pandemic. Similarly, the central bank in the Monetary Policy announced to provide the much-needed cash lifeline to small businesses with loan repayment deferrals. However, businesspersons say that only a few have benefitted from the schemes. It is basically due to the lack of information among business owners about the financing processes, they say.

“Very few businesses in the retail sector have benefited from the refinancing scheme. Looking at how banks are working currently, it seems that banks are only trying to collect interest through the refinancing scheme,” opines Dahal.

While officials at the finance ministry and the central bank say that the measures announced in the budget and monetary policy have strongly supported businesses to face the current challenges, stakeholders refute the claims of the government officials. “Relief measures have been announced for the cottage industry and SME refinancing for businesses of certain sectors including tourism and agriculture. But whether these businesses are actually benefitting from the refinancing remains a big question,” opines Singh, adding, “Some entrepreneurs have benefitted from the measures, but many haven’t also because of the lack of information about the financing procedures.”

The current issues surrounding SMEs have become so serious that even big business bodies have started to ask for the government’s due attention to resolve the problems. A delegation of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) which recently met the finance minister Bishnu Paudel to talk about the economic recovery efforts warned that 50 percent of SMEs in the country could be permanently closed in the next few months if the businesses do not get an immediate financial lifeline to continue their operation.

The Necessity to go Digital
The Covid-19 crisis has also highlighted the need for SMEs to change the ways of doing business. The use of web-based platforms such as social media and e-commerce sites has become essential for businesses to survive and this trend will only grow in the post-Covid world. In Nepal too, businesses have attempted to go digital. IFC in the Covid-19 Nepal Business Pulse Survey said that a fifth of businesses in Nepal surveyed have started to use or have been using the internet, social media, specialised apps or digital platforms for business purposes. But the SMEs are yet to benefit from the opportunities offered by digital platforms. “Businesses need to think out of the box to survive,” opines Pandey. He says that the crisis has presented both opportunities and challenges to SMEs. According to him, many have diversified from their traditional business practices and have embraced e-commerce as a medium to reach their customer base. “Others have downsized and managed their expenses and are waiting for this pandemic to blow away. The ones who can adapt and be innovative will survive and thrive in the future,” says Pandey, adding, “An example of diversification during the pandemic is that restaurants have resorted to home delivery of not only their menu items, but also of frozen food stuffs. The e-commerce business has taken off during the pandemic.”

Experts opine that the low level of tech literacy is hinderering the digital transformation of SMEs. According to Singh, while using all the new techniques like data-driven marketing, influencer marketing, content automation may not be feasible for Nepali SMEs given the cost and other associated factors at present, the importance of digital adaptation has become more necessary now than ever for small businesses in Nepal too. “The government and other stakeholders should provide training and organise awareness campaigns in this regard,” he suggests.

Private Sector Financing and Support
While the government’s support has been inadequate, investment companies and banks have come ahead to help the SMEs revive. Investment companies such as BO2 and One to Watch (OTW) have come up with programmes so that SMEs can continue their operation and to face the pandemic-induced challenges. On October 2020, OTW with the support from Swiss Agency for Development and Cooperation launched the Covid-19 MSME Fund Nepal. “The main objective of this Fund is to support businesses that possess the potential to sustain, pivot and return to positive cash flow by providing them interest and collateral free loans to meet their short- term working capital needs,” informs Subrina Shrestha, programme manager at OTW.

For the purpose, according to Shrestha, OTW has partnered with NMB Bank, Laxmi Bank and Nabil Bank. Under this arrangement, the fund will be supporting upto100 MSMEs who will in turn support the retention of 1,000 jobs. Furthermore, selected MSMEs will also be provided with technical assistance in the form of tailored business advisory services to help them improve, sustain and scale their business operation.

The SME-focused private equity fund Bo2 has been assisting SMEs through the pandemic. “Right from the outset of the pandemic, we had a business continuity plan for each of our investee companies. Majority of our SMEs have had to change their business strategy, which we have assisted,” mentions Pandey.  He says that BO2 signed commitments to invest in half a dozen businesses in the time of the pandemic to help the economy.

In the meantime, collaborations of commercial banks with investment companies and e-commerce platforms have raised hopes that the country’s banking sector is making meaningful attempts to support struggling SMEs. Nabil, which is one of three banks to have partnered with OTW for MSME Fund Nepal, has also joined hands with the e-commerce giant Daraz for the Sarathi Program. The Sarathi Program aims to support SMEs that are selling their products through Daraz. “One of our top priorities is to support such SMEs to enhance their business through value chain financing. With the low-cost funds made available to the vendors of Daraz, it will help them to boost their business and enhance the digital economy which is the ultimate requirement of the country,” says Basnet.

Nabil Bank has been working to change its business modality focusing on SME banking. In the last few years, the bank has introduced a number of banking products including Nabil Sajilo Karja, Nabil Nari Karja and Nabil Sajilo Express Karja targeting SME clients. “In designing these products, we have taken into account the need to streamline and simplify our internal processes along with offering sensible pricing to the SME segment. We have also signed an agreement with UKaid Sakchyam- Access to Finance for ‘Designing and Implementing a SME focused strategy to enhance banking services for SME segment in Nepal’,” informs Basnet.

According to him, the bank has shifted its focus from corporate to SME banking exponentially increasing lending in the SME and retail portfolio. In this fiscal year alone, Nabil has disbursed more than Rs 10 billion in loans to retail and SME borrowers. As per Nabil, the share of retail and SMEs is about 50 percent in the overall lending portfolio of the bank.

 Necessity of Technical Assistance
The problems created by the unprecedented economic slowdown can only be faced properly when the problems and requirements of businesses are identified correctly. “Besides the pandemic, problems faced by SMEs include lack of knowledge in digital transformation, lack of financial skills and absence of a regulatory framework, unfair market practices and most importantly understanding the banking needs supported by proper documentation,” says Basnet.

Here, the role of investment companies, banks and private sector bodies become vital in terms of training business owners during trying times and getting ready for the post-crisis world.

While the government and private sector bodies are yet to take any step in this regard, investment companies are providing other forms of assistance to the affected businesses besides financing. “Selected MSMEs will be provided with technical assistance in the form of tailored business advisory services to help them improve, sustain and scale their business operations,” informs OTW Program Manager Shrestha.

Highlighting on the need for technical assistance to SMEs, Pandey says that it is essential for Nepali SMEs to be aware of the benefits and value addition of digital platforms in their businesses. “Therefore, PE investors such as Bo2 not only inject capital in the SMEs but provide knowledge transfer and technical assistance for these businesses to scale,” he mentions.

Because of the Covid-19 pandemic there are dark clouds of uncertainty hovering over the business sector and SMEs are in the thick of it. Experts agree that helping SMEs to strengthen the two key factors of adaptability and linkages should be the current focus of the stakeholders in order to achieve a sustainable recovery. The survival of SMEs rests on their ability to use market information to pivot, maneuver systems, processes and accessibility to get products to their consumers as well as their ability to understand the market and adapt their production to new realities, they say.


Souce: New Business Age