ENTREPRENURES IN NEPAL :                         An Empirical Study                                                       ...
II. The Objectives and Methodology of the Study     The basic objective of this study is to carry out a small research on ...
Table 1: Role of Entrepreneurs                                     Businessmen,           Academics                Overall...
As mentioned earlier, Nepalese entrepreneurs have been facing so many barriers in theway of creation of new ventures and s...
institutions should follow more liberal and practical policies. Similarly, procedural       simplification is required whi...
Selected ReferencesHiggins, Benjamin (1966), Economist Development – Problems, Principles and Policies.Joshi, Navin C. (19...
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Entreprenures in nepal

  1. 1. ENTREPRENURES IN NEPAL : An Empirical Study * – Dr. Fatta Bahadur K.C.I. Introduction Entrepreneurs are individuals or group of individuals who invest capital, organize and directbusiness and industrial units. An entrepreneur assembles, coordinates and directs various factorsof production namely land, labor, capital and other materials. "An entrepreneur initiates ventures,employs workers, organizes production, develops markets and influences the development ofmanagerial thoughts" (Shrestha, 1982:11). As stated by Higgins "Entrepreneurship is meant thefunction of seeing investment and production opportunities, organizing an enterprise to undertakea new production process, raising capital, hiring labor, arranging for the supply of raw materials,finding a site and combining these factors of production into a going concern, introducing newtechniques and selecting top managers for day to day operation" (Higgins, 1966:88).Entrepreneurship is thus, characterized by the dominant element of innovation, a streak ofcreativity and ready for risk-bearing. An entrepreneur could be a trader, a technician, an educated unemployed or the like. Theelements common to all of them are the desire for breaking away from traditional ways of doingthings, face the organizational and technical problems in decision-making process and measureup to the risks which are implicit in the process (Joshi, 1977:40). Entrepreneurs can be divided into three broad categories i.e., Private Entrepreneur,Government Entrepreneur and Institutional Entrepreneur (K.C., 1989:18–19). In capitalist systemof economy, private entrepreneurs have been actually playing dominant role in all sectors of theeconomy mainly industry, trade and the like. But government controls all economic activities andperforms entrepreneurial role in socialist countries. Since Nepal has adopted a system of mixed economy both private and Governmentsectors have been performing entrepreneurship function in the process of industrialization.Private entrepreneurs have promoted many industrial units such as biscuit and confectioneries,bakeries, flour mills, modern rice mills, sugar, soap, tanneries, cotton and textile, solventextraction plants, iron rod, corrugated sheets, plastic pipes and utensils, light engineering units,breweries, television and radio assembly, hotels, etc. In the absence of entrepreneurial ability andlack of adequate capital in the private sector, Government also acts as an entrepreneur indeveloping industrial projects. In Nepal, Government has set up jute, sugar, cigarette, leather,timber process, agro-lime and agricultural tools, brick and tile, cement, dairy, textile, herbs anddrugs, paper spinning industries etc. The development banks, investment trusts, and other financial institutions also act asentrepreneurs. In Nepal, Nepal Industrial Development Corporation (NIDC), Employee ProvidentFund (EPF), Rastriya Beema Sansthan (RBS) and other financial institutions are the examples ofinstitutional entrepreneurs. NIDC, as an industrial development bank, has been playing importantrole for the promotion of industries in the private sector. It assists private enterprises by providingmedium and long-term loans, equity participation, guarantees as well as technical and managerialadvice. It also promotes industries on a priority basis as guided by the National plan.* Reader, Nepal Commerce Campus, Tribhuvan University, Kathmandu.
  2. 2. II. The Objectives and Methodology of the Study The basic objective of this study is to carry out a small research on entrepreneurs in Nepal.However, the specific objectives are: To present the role of entrepreneurs To identify the barriers and problems faced by Nepalese entrepreneurs To analyze the prospects of entrepreneurial motivation in Nepal The required data for the research were collected through primary source i.e,questionnaire. For it only three questions were developed and distributed to 10 businessmen,entrepreneurs and 15 academics including university teachers. The responses there from werecollected and tabulated for analysis. In order to present and analyze the tabulated data, thestatistical tools like the mean value and the ranking were used.III. Role of Entrepreneurs An entrepreneur, who is also known as a risk-bearer, is the central figure in this modernera of business. Economic development of any country cannot be initiated without the pioneeringefforts of entrepreneurs. Many economists including Joseph Schumpeter glorified the role of theentrepreneur and regarded him as the key figure in the process of economic development. Heidentified that the ultimate determining factor of the rate of economic growth is the availability ofdynamic entrepreneurship in the country concerned. Nepal is a least developed country. More than 32 percent of population lie below thepoverty line and the annual per capita income is not more than U.S.$ 370. The pace ofindustrialization in Nepal has remained very slow. The industrial sector contributes around 8percent to GDP and provides employment to about 2 percent of economically active population.Nepal has been experiencing unemployment and acute under-unemployment problem. In a casestudy conducted by Nepal Rastra Bank, the percentage of unemployed in the total labor forcewas estimated at 3.1 percent. Similarly the under-employment rate worked out to 46.4 percentand 33.6 percent in rural and urban Nepal respectively (Nepal Rastra Bank: 1988:64, 75).Therefore, entrepreneurs have important role to play in the process of industrial as well aseconomic development. They could assist to generate employment opportunities, to raise incomeand to break the vicious circle of poverty. In the literature of economic development, an entrepreneur has been heralded as theinnovating man, the path-breaker and the pace-setter of economic and industrial growth (Joshi,1977:39). In a developing country like Nepal, an entrepreneur has to play multi-dimensional roles.He could be worked as the promoter, the financier (investor) and the manager in the process ofindustrial development. An entrepreneur conceives the idea of a business (industrial) enterprise,analysis its prospects, works out the tentative scheme of organization, brings together therequisites like men, materials, machines, money and managerial ability and floats the newenterprise. At the same time he has to act as the financial manager, the production manager, themarketing manager and the personnel manager in an existing concern. He has taken allimportant decisions and implement these decisions for obtaining the predetermined objectives ofhis organization. So it can be stated that an entrepreneur has to act both as a mother and as amid-wife, because it is he who faces various problems to bring the new enterprise to existenceand brings it up into a successful venture. The table below presents the role of entrepreneurs that they can play in the process ofindustrial and economic development of Nepal.
  3. 3. Table 1: Role of Entrepreneurs Businessmen, Academics Overall Entrepreneurs Role Mean Rank Mean Rank Mean RankCapital formulation andmobilization 1.20 1 2.35 2 1.76 1Employment generation 2.21 2 3.31 4 3.26 4Industrial growth 3.75 4 2.49 3 3.12 3Human resource development 4.32 5 1.67 1 3.00 2Balanced regionaldevelopment 3.47 3 4.64 5 4.06 5 As shown in the table, Nepalese businessmen viewed that entrepreneurs can contribute tothe formation and mobilization of capital required for economic development of the countryfollowed by employment generation and balanced regional development. Academics perceivedthat assist in human resource development and capital formation were the key roles played byentrepreneurs. Overall ranking of the roles stood as capital formation, human resourcedevelopment, industrial growth, employment generation and balanced regional developmentshowing the mean values 1.76, 3.00, 3.12, 3.26 and 4.06 respectively.IV. Why Nepalese Entrepreneurs are Shy? Private entrepreneurs in Nepal have traditionally remained very shy to come forward forinvestment in industrial ventures due to various reasons such as limited financial resources, lackof proper entrepreneurial education and training facilities, low rate of return from industrialinvestment, conservative lending policy of banks and financial institutions, lack of adequateprotection to investors, unstable and unsuitable economic and industrial policies of thegovernment, wide-spread corruption in the public sector and the aspiration of many people in theprivate sector to be rich overnight instead of putting efforts to the industrial development (K.C.,1989 & 2003). They have been actually channelising their resources on nationally unproductivesectors like acquisition of land, amassing of gold and silver, construction of building, luxuriousimports and other speculative motives, etc. In the following section, an attempt has been made to identify the barriers and problemsthat are being experienced by Nepalese Entrepreneurs Table 2: Barriers to Nepalese Entrepreneurs Businessmen, Academics Overall Entrepreneurs Barriers Mean Rank Mean Rank Mean RankLimited access to capital 2.32 1 3.83 4 3.08 3Low level of confidence 3.83 4 2.20 2 3.02 2Low return from industrial 3.24 3 3.67 3 3.46 4investmentLack of education and training 4.83 6 4.76 5 4.80 6Political instability 2.61 2 1.60 1 2.11 1Lack of favorable policy 3.92 5 4.80 6 4.36 5
  4. 4. As mentioned earlier, Nepalese entrepreneurs have been facing so many barriers in theway of creation of new ventures and smooth operation of the existing ones. Nepalesebusinessmen and entrepreneurs have viewed that their main barriers include limited access tocapital, political instability, low return from industrial investment, low level of confidence and lackof favorable policy of the government. Academics viewed the political instability, low level ofconfidence and low return from industrial investment are the major causes responsible for poorentrepreneurial motivation in Nepal. Overall ranking also indicates the similar results. It can thus,be concluded that political instability, low level of confidence and limited access to capital are themain problems of Nepalese entrepreneurs. It is realized that the slow pace of industrialization in Nepal is deeply rooted with the lack ofsufficient capital in one hand and the problem of proper mobilization of available (limited)resources in this sector on the other. It is, thus, very appropriate time at present to review suchactivities and discourage such unproductive investments through the effective policy changes forreduction of high premium and return which these pursuits are commanding.V. The Need of Entrepreneurial Motivation in Nepal It is well known that entrepreneurs have key role to play in the process of industrialdevelopment in the country. So, it is required to motivate entrepreneurs especially in the privatesector. Motives, abilities and congenial environment all combine to promote entrepreneurship.The stronger are the motives and abilities, congenial environment will be less necessary. It isespecially important to encourage more people to be long term entrepreneurs interested inpermanent business, rather than short term speculators. First of all, attitudes and motives of the people in the private sectors to become richovernight must be diverted to mobilize their resources in productive sector. The entrepreneurialability and talent could be improved by organizing entrepreneurship development program forpresent and potential investors. Again, adequate institutional services and effective policychanges will help to create an environment which is conductive to induce industrial investment.Table 3 attempts to present the remedial measures to solve the problems and support theentrepreneurs. Table 3: Measures to Support Entrepreneurs in Nepal Measures Mean RankCreation of investment-friendly climate 2.62 3Extension of institutional services 3.98 4Easy access to finance 1.72 1Favorable government policy 2.59 2Provision of education and training 4.03 5 The table reveals that easy access to finance and favorable government policy are the twomost important measures to motivate entrepreneurs in Nepal. It is also found that othersupportive measures include creation of investment-friendly environment, expansion ofinstitutional services and provision of training and education. Here, some suggestive measuresare presented to motivate entrepreneurs as well as to induce industrial investment in Nepal.i) Provision of Adequate Capital: It is essential to provide adequate financial facilities especially to meet the fixed and working capital requirements of the concerned industries. So, the lending policy of development banks, commercial banks and other financial
  5. 5. institutions should follow more liberal and practical policies. Similarly, procedural simplification is required while investing in productive sector.ii) Protection to the Investors: It is especially important to provide adequate protection to the industrial investors. Most industries have failed to protect their industry from the competition of foreign products. Now Government should adopt an appropriate and realistic policy to protect and develop industries within the country.iii) Suitable Government Policy: Only clear and consistent economic and industrial policy can help to induce entrepreneurs. Government should formulate clear, liberal and attractive economic and industrial policies.iv) Expansion of Institutional Services: The adequate institutional services are required to encourage entrepreneurs. The concerned agencies, both the financial an d development institutions should be directly involved to encourage potential investors for investing their funds in productive sectors. NIDC and NPEDC (National Productivity and Economic Development Centre) should launch appropriate entrepreneurship development program. As an industrial development bank, NIDC has to identify and motivate the potential investors by providing financial assistance and technical, administrative as well as managerial guidance and advice. The activities of the Department of Cottage and Village Industries (DCVI), the Cottage Industries Development Board (CIDB) and Industrial Enterprise Development Institute (IEDI) be further improved to encourage small entrepreneurs. Similarly, Women Development Section, Women Training Centre and Nari Shilpakala Kendra should conduct appropriate programs to induce women entrepreneurs and to bring them into meaningful and remunerative job. Due to the lack of sufficient capital, technical and managerial expertise in the country, therecently formed first republican government should adopt to have a liberal policy to attract foreigninvestors. Because foreign capital in the form of collaboration may impart training to Nepaleseentrepreneurs and promoters as well.Conclusion Economic development cannot be initiated without the pioneering efforts of entrepreneurs.Entrepreneurs have key role to play in the process of industrial development in particular andeconomic development in general. But entrepreneurs in Nepal are very shy to invest capital inindustrial sector. Therefore, it is essential to induce entrepreneurs to mobilize their resources inindustrial sector. Government should implement an appropriate policy to motivate theentrepreneurs and to develop industries in the country. Finally the attitude of the people tobecome rich overnight must be changed through effective policy reforms.
  6. 6. Selected ReferencesHiggins, Benjamin (1966), Economist Development – Problems, Principles and Policies.Joshi, Navin C. (1977), "Developing Entrepreneurship in Nepal", Nepal Industrial Digest 1977,NIDC, Kathmandu.K. C., Fatta B. (1989), "Entrepreneurship in Nepal" (in Nepali) Nepalese Journal of GovernmentAuditing–Issue 7m, Vol. 3, June 27, Department of Auditor-General.K.C. Fatta B. (1989), "Unemployment in the Development Perspective of Nepal", NepaleseJournal of Government Auditing– Issue 7, Vol. 4, Oct., Department of Auditor-General.K. C., Fatta B. (1989), Role of Entrepreneurs in Industrialization of Nepal, Nepalese EconomicReview, Vol. 1–2, No. 2, Kathmandu.K. C., Fatta B. (2003), Entrepreneurship and Economic Development, Mirmire, Vol. 32, No. 212,Nepal Rastra Bank, Bankers Club, Kathmandu.Nepal Rastra Bank (1988), Multipurpose Household Budget Survey, Nepal Rastra Bank,Kathmandu.Pyakural, Ramesh C. (1984), "Role of Development Bank in Entrepreneurship Development",Nepal Industrial Digests 1984, NIDC, Kathmandu.Shrestha, Juddha B. (1982), "Role of Entrepreneurs and Managers in Nepal", EmergingConcepts in Nepalese Management, CEDA, Kathmandu.Singh, B. P. and Chhabra, T. N. (1981), An Introduction to Business Organization andManagement, Allahabad: Kitab Mahal, India.