Analysis of Small and Medium sized Enterprises (SMEs) in Nepal following the economic fallout of COVID-19 and possible pathways for recovery for Nepal's agri and tourism SMEs.
SMEs in Nepal are crucial to the country’s economic growth, creating 2.36 million jobs and contributing to 22 per cent of the country’s GDP, but have been hard hit by the Covid-19 crisis.
Nepali SMEs have suffered both external and domestic effects as a result of Covid-19, including disruptions to their supply chains in terms of access to inputs and transportation of goods, and massive reductions in sales. The lack of access to finance – already acute for SMEs – has worsened due to Covid-19 because of impending credit squeezes due to potentially increasing non-performing loans. Further lockdowns and workforce mobilisation challenges has increased the pressure on vulnerable SMEs.
Nepal has taken measures to cushion the economic fallout of Covid-19, but is unable to put in place robust support packages for SMEs comparable with those of developed countries due to limitations on resources.
Given its reliance on SMEs for economic growth and job creation, Nepal must capitalise on every opportunity to bounce back quickly from the economic fallout of Covid-19, and reposition itself in sectors with transformative economic potential. This requires shifts in the policy framework and the incentives provided to businesses in several sectors.