Barriers to Innovative Entrepreneurship in Nepal

Article originally published in April 2017 issue of Business360° Magazine, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.


It is natural that people from different parts of Nepal, depending upon their backgrounds and levels of understanding, will explain reasons behind country’s poor economic performance in different ways. Despite all these differences, in my personal opinion, they agree on one fact – innovation drives economic growth. In fact, in 2015’s Enterprising States and Cities report, the United States Chamber of Commerce Foundation had outlined that the positive correlation between innovation and economic growth had been one of the most consistent findings in macroeconomics that had been true for centuries. Currently, 50% of American annual GDP growth is attributed to increase in innovation.

However, in case of Nepal, there are no major studies that assess current status of innovation and its overall impacts on local and national economy accurately. As a consequence, concerned stakeholders often seem to be ignorant about the true potentials of technological disruptions. According to the Global Innovation Index 2016 (GII 2016), out of 128 countries, United States of America ranks in 4th position while Nepal in 115th position. Though the country has improved its ranking from last year’s, its performance in all seven pillars – Institutions, Human Capital and Research, Infrastructure, Market Sophistication, Business Sophistication, Knowledge and Technology Outputs, and Creative Outputs – is still unsatisfactory. Among South Asian economies, India (66) tops the list followed by Sri Lanka (91) and Bhutan (96). Only two South Asian countries, Bangladesh (117) and Pakistan (119), lag behind Nepal’s position in the ranking.

Innovation does not take place automatically but for it to properly influence economic activities of an economy, there should be few pre-requisites in place. Inadequacy of these factors across the country explain country’s poor innovation outlook. There are numerous factors that hinder innovative disruptions to occur in the country. For our ease, we can categorise such major factors into following three groups:

Poor Investment Climate
Political instability, small market size and difficulties trading across the borders, meagre public and private R&D investments, inadequate infrastructure, insufficient human capital and incompetent access to finance status of Nepalis are some of the key factors that hamper modernization of country’s entrepreneurial activities.

Nepal continues to suffer from rapid changes in political regimes. In past 26 years, the country has witnessed 24 Prime Ministers. With the presence of 164 registered political parties and formation of new parties, Nepalis have stopped thinking of having a single party-led government sometime in next 2-3 decades. In country like Nepal where politics has huge influence in business activities, frequent changes in the governments have negative impacts on overall business environment. In addition, small domestic market, low purchasing power of majority of Nepalis and difficulties while trading across Nepal-India and Nepal-China borders further discourage entrepreneurs and investors to invest their efforts and capital in the country.

A recent study from Berlin’s Deutsches Institut für Wirtschaftsforschung (DIW) has found a positive correlation between R&D and innovation in micro, small and medium enterprises (MSMEs). Nepal still ranks in 93rd position in R&D pillar in the latest Global Innovation Index. In addition to unsatisfactory R&D investments from government authorities and private business entities, country’s academic institutions and think tanks also do not invest ample resources in such activities. Besides poor R&D facilities, Nepal also does not have sufficient infrastructures to boost innovations. Except for gross capital formation (as percentage of GDP), Nepal’s position in rest of the indicators in GII 2016 is in poor conditions. Though country now has mobile phone and Internet penetration rates of 116.59 per cent and 54 per cent respectively, the corresponding growth in use of ICT tools in public and private business activities is low.

A competent human capital also helps to enhance novelty in business activities. A 2015 study by McGuirk et al has concluded that skilled workforce is vital for the conceptualization and implementation of nouvelle business ideas and strategies. By using the concept of Innovative Human Capital (IHC), a concept that incorporates four key elements – education, training, willingness to change in the workplaces and job satisfaction, they have found that IHC is valuable for both small, firms with less than 50 employees, and the large firms, firms with more than 50 employees, with more value being seen for the formers. In case of Nepal, the Government expenditure on education – primary, secondary and tertiary – as percentage of GDP is marginal. As a result, even if we have enough innovation ideas and capital, we do not have sufficient skillful human capital to make use of those resources. Furthermore, Nepalis still do not have an easy access to financial resources. As per the available data, only 61 per cent of Nepali adults have access to formal financial services and 18 of the adults are yet to be provided with such facilities. Also, of those who have formal bank accounts, the ratio of a branch of banks and financial institutions (BFIs) and consumers remains astonishingly high – national average of 6,647 individuals and in some rural parts 72,026 individuals per branch respectively. Likewise, the entrepreneurs have huge difficulty obtaining credits.

Policy Instruments
The second category of barriers to innovations in Nepal comes from insufficient policy instruments. The recent year has given entrepreneurs and investors high hope with the Parliament approving Special Economic Zone Bill, amendments on old Industrial Enterprise Act and Company Act and government also ensuring an investment friendly Foreign Investment and Technology Transfer Act soon. In addition, the proactive roles of the Ministry of Industry, Nepal Electricity Authority and other related public and private stakeholders have further heightened the motivations of local and foreign investors to initiate and upgrade their business ventures in the country. The positive impacts of encouraging developments between August 2016 and March 2017 were clearly visible while Nepal concluded a 2-day long Nepal Investment Summit 2017 during first week of last month with more than 250 investors from different countries pledging investments worth of $13.51 billion. For now, though there has been adoption of favourable policy instruments and progressive commitments from three major political parties recently, we are yet to see how these new policies go into implementation. As Nepal holds bad reputation for turning good policies into actions, this time, the costs for failure to do so would be huge for the country.

Attitude and Behaviour
There has been prevalence of “Fear of failure” among Nepalis, more predominately among majority of country’s youth entrepreneurs. Moreover, there has been simply duplication of business ideas among majority of local businesspersons when it comes to starting a business or investing in one. Besides these individual-level attitude and behaviour problems, there exists an inconvenient perception of private sector stakeholders among government authorities and vice versa. All these factors further deter potential and capable Nepalis from coming into the market with new business ideas or invest into old and new firms by either limiting individual business creativity or by failing to praise one another’s ideas and efforts or both.

Innovations in Healthcare Industry in Nepal

Article originally published in March 2017 issue of Business360°, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.


Citizens’ good health has positive and significant impacts on economic growth of a nation. Researchers from Harvard T.H. Chan School of Public Health, in a 2001 study, found that a one-year advancement in society’s life expectancy increases output by four percent. Though researches afterwards have confirmed varying relationship between health and economic growth across the countries, no one can deny their affirmative link in developing economies like Nepal. Despite these potentials, healthcare services in Nepal and other similar countries are plagued due to four key reasons – complicated geography, inadequate trained human capital, insufficient awareness among people and most importantly government’s low priority in healthcare investments. Since traditional healthcare models in the country have not been able to yield desired outcomes, maybe its time for public and private stakeholders to reconsider old approaches, devise new models that have potentials to deliver quality services to Nepalis across the country.

Assessment of Nepal’s Healthcare System

More than 80 percent Nepalis still live in rural communities where access to healthcare services is limited. This limitation is mostly visible in terms of inadequate infrastructures, trained medical professionals and supply of basic life saving medicines. In recent years, the existing health posts and hospitals across the country have not being able to meet increasing demands of curative care services.

According to a 2013 research done by Society for Local Integrated Development Nepal and Health Research And Social Development Forum, Nepal still lags behind when it comes to meeting World Health Organisation recommendations (WHO). For example, Nepal has 0.67 doctors and nurses – 0.17 doctors and 0.50 nurses – per 1000 Nepalis against WHO recommendation of 2.3 doctors, nurses, and midwives per 1000 individuals. There are about 196 institutions that offer more than 390 health-related training courses in Nepal and between 2009 and 2011 altogether they had produced more than 32,000 health workers – including 7,099 doctors and 8,681 nurses. From government investments perspective, as of 2014, Nepal’s total health expenditure as percentage of GDP stood at 5.8 percent against global average of 9.94 percent. Similarly, Nepal’s health expenditure per capita lags behind world average by a large margin – $ 40 against $1060. In recent years, the private sector has become an integral part of the country’s healthcare system. According to a cover story on healthcare system in Nepal in Business360°’s December 2016 Issue, private sector – with an investment of 5-6 billion and 15,000 human capital – has established half of the existing hospitals and provides almost double the numbers of beds as compared to those from government side and provides services to 50 percent of total patients.

According to WHO, Nepal’s healthy life expectancy in 2015 was 61.1 years against life expectancy at birth of 67.7 years and 70.8 years for men and women respectively.This decline in life expectancy can be explained on the basis of country’s poor performance in other areas of healthcare system. Except in preventing incidents of Tuberculosis, Malarial and HIV infection among adults; country’s performance in other areas – including proportion of population using improved sanitation, proportion of births attended by skilled health personnel, maternal mortality rate, mortality rate attributed to exposure to unsafe WASH services, under five mortality and neonatal mortality rates and prevalence of stunning among them – are not satisfactory in terms of achieving national health goals and also meeting the SDGs targets.

Global Good Practices

Over the years, there has been an increasing trend in the global numbers of chronic disease and dementia patients for whom the medical care is considerably expensive. Similarly, the rising trends in aging population, labor costs, communicable disease patients worldwide are also to threaten affordability of future healthcare. As a consequence, governments internationally need to increase healthcare spending as parentage of GDP to 10.5 percent 2020. According to Deloitte’s Global Health Care Sector Outlook report 2017, the world is expected to see increase in global healthcare spending to $8.7 trillion in 2020 from $7 trillion in 2015. In the light of rising healthcare costs and emerging health threats, public and private actors in different parts of the world have been employing innovative ways in order reach out to larger beneficiaries, minimise related costs and maximise efficiency through incorporation of one or more of these ten healthcare innovations – Next-Generation Sequencing, 3D-Printed Devices, Immunotherapy, Artificial Intelligence, Point-of-Care, Virtual Reality, Biosensors and Trackers, Convenient Care, Telehealth and Social Media – into their business models.
The “American Well” (AE) in Boston, USA is one of such examples and its functions are based on the concept of telehealth. Currently active in 46 US States, AE employs doctor-to-consumer (DTC) model and connect patients directly with the doctors online in order to deliver quality services at lower costs. In order to run business smoothly, AE has also managed to bring together all key actors in American Healthcare System – Patients, service providers (hospitals, nursing homes and clinics), public and private payors (insurance companies, banks), suppliers (pharmaceutical companies, healthcare information technology companies, private equity and venture capitalists).

The Arvind Eye Hospitals in Tamil Nadu, India is another example of an innovative healthcare model – Arvind Model – that has played crucial role in fighting cataract in India. According to the data released by the Hospital, it has treated more than 32 million patients and has performed over 4 million surgeries.Created in 1976, the Arvind Model comprises of activities at three centers – Main Hospital, Free Hospitals and Eye-Camps. Hospital personnel regularly participate in partners funded eye-camps in new places from where they refer genuine patients to either Free Hospitals for free treatments or the Main Hospital for paid services depending upon economic statuses of the patients. In addition, they also rotate duty hours of health workers between free and paid wards. To minimise the costs of the services, he hospital has its own lens manufacturing facility and blood bank.

Additional examples of innovative healthcare initiatives outside Nepal include TelaDoc and ReduClinic in the USA, One Family Health and Child and Family Wellness Clinics in Rwanda, HCG Oncology and Deccan Hospital in India and Beijing Genomics Institute in China.

Current Efforts and Future Potentials in Nepal

In order to properly address emerging health issues and also to resolve prevailing health problems in better and cheaper means, public and private sector stakeholders in Nepal should focus on working on prevention, diagnosis, monitoring and treatment parts of the healthcare ecosystem. In recent years, some of the old hospitals have upgraded their ecosystems and other created entire new company to deal with Nepal’s health issues in innovative ways. Some of these examples include – Tilganga Eye Hospital, Patan Hospital Telemedicine Facility, Possible Health and Health at Home. However, there is still enough room for few more new actors to enter the market, contribute their parts while earning profits.

Considering poor performance of Nepal’s traditional healthcare models, recent technological disruptions, their penetration rates in Nepal, improving internet connectivity and existing barriers to better healthcare services, I can think of enough reasons for public and private sector stakeholders to invest in innovations in order to strengthen national healthcare ecosystem and also to increase people’s access to quality and affordable health services in their local communities.

BRIDGING THE GAP – Emerging Technology Increase People’s Access To Finance

Article originally published in February 2017 issue of Business360°, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.


January 2017 remained a very important month for smartphone users in Nepal, mainly for two big reasons. First, the iPhone was celebrating its tenth anniversary and the second, Nepal Telecom (NT) was launchingLTE-based 4G services for its postpaid GSM users in Kathmandu and Pokhara effective from day one of this year.

When late Apple co-founder Steve Jobs first unveiled iPhone to the public at Macworld Convention on January 9, 2007; most of the senior Silicon Valley entrepreneurs, including former Microsoft CEO Steve Ballmer, suspected that it would have substantial impact on people’s lives.However, in just one decade iPhone has revolutionised the way people live globally. It transformed a traditional communication device into a real “smart-phone”with sophisticated user interface, easy connectivity, rich app store and took the concept of mobile computing to next level with unlimited potential. Enhanced security features, user-targeted and user developed multimedia rich content and alternative ways of doing things that were traditionally less effective changed people’s way of thinking and acting. These developments have changed the way we communicate online thus affecting most aspects of our lives. In 2016, of an estimated 4.61 billion mobile phone users globally, about 2.1 billion users were thought to have been using smartphones and the latter trend is peaking significantly, especially in emerging economies like Nepal.

While there were less than 50 internet users in Nepal in 1995, the year 2016 saw that number increased to over 30 million according to the mid-September 2016 Management Information System report by Nepal Telecommunication Authority with country’s mobile phone and Internet penetration rates now standing at 116.59 % and 54% respectively. Though mobile phone ownership rate in urban areas is higher by about 15 % than in rural areas, the latter parts of the country are expected to see considerable growth in the near future with improved network coverage and expansion of service facilities. With the recently introduced fourth-generation wireless facilities, eligible NT users now can browse Internet at a peak data rate of 32.4 mbps and if used properly it can help them to significantly enhance their personal and professional development. As NT plans to qualify its prepaid subscribers to use 4G networks towards the second half of the year, the anticipated overall positive impact of mobile computing on lives of Nepalis are quite exciting and most of these would take place in rural Nepal where more than 80% people live.

Globally, mobile computing has been helping emerging economies to minimise the digital divide and facilitate a variety of public and private services in money and banking, education, health, transportation, agriculture, tourism and governance sectors in rural and urban areas alike. However, in the context of Nepal, I see huge potential of leveraging emerging technology in order to increase people’s access to finance, especially in the rural parts of the country, given geographical distribution of the country’s population, their current and potential smartphones subscription patterns and projections, annual incomes, literacy rate and underlying difficulties and high transaction costs for opening branches of banks and financial institutions (BFIs) in these regions.

Finance is at the center of the development process. A 2008 World Bank study has outlined that access to finance with an inclusive, efficient and well-functioning financial system leads to steady economic growth through improvement in opportunities and balanced income distribution and poverty reduction. Access to finance, in simple terms, is the ability of individuals or enterprises to receive financial services, including credit, deposit, payment, insurance and other risk management services. Indicators of whether individuals have bank accounts, use banks as their primary financial institutions and can reach financial institutions by foot are used to measure the extent of access.

According to Nepal Rastra Bank, 61 % Nepali adults have access to formal financial services. In recent years, there has been a surge in the network of banks and financial institutions in the country. However, 18 % adults still do not have access to financial services. As of mid-June 2016, there were 4,219 branches of 182 BFIs in the country and population per branch of financial institution stood at 6,647 national average. In some parts of rural Nepal, this figure remained at 72,026. I see a potential injection of mobile computing in order to minimise the existing inequality among ‘banked’, ‘under banked’ and ‘unbanked’ Nepalis at reasonable costs.

Since the last decade there have been many discourses about and experiments on mobile phone’s potential impact on the financial industry. According to the Global Mobile Systems Association (GMSA), in 2015, people in 93 countries made 33 million daily transactions through 271 mobile money service providers. With these developments, mobile money has been changing the overall financial landscape – in 2015, 37 mobile money markets had ten times more registered agents than bank branches and the total number of registered customer accounts increased by 31 percent and reached 411 million globally. Sub-Saharan Africa still dominates mobile money market with Kenya leading the way in harnessing mobile phone technology in financial services. For example, M-Pesa was the first mobile money transfer service in Kenya. Run by Safaricom, a Kenyan mobile-phone operator, M-Pesa was launched in 2007 for basic money transfer and financial services and has now transformed overall economic interaction of the Kenyans. In 2013, this platform witnessed 237 million P2P transactions amounting 43 percent of the country’s GDP. Currently, M-Pesa has became an integral part of the local daily lives as it allows people to accomplish an array of banking services including money deposit and withdrawal, remittance transfer, utility bills payment and microcredit provisions.In less than a decade, it has extended financial inclusion for an additional 20 million Kenyans and helped to create thousands of other small enterprises. Between 2008 and 2011, Kenyan mobile money services users living under $1.25 increased from 20 percent to 72 percent. After promising accomplishments in Kenya, M-Pesa later expanded its services to nine additional countries in South Asia, Africa and Eastern Europe. In addition to M-Pesa, FNB Connect and WIZZIT in South Africa, GTEasy Savers in Nigeria, Smart Money and GCASH in the Philippines, bKash in Bangladesh and EasyPaisa in Pakistan are some of the other successful mobile money service providers.

With the unprecedented innovations in mobile phones and related technologies in the recent decade, globally, more people now own real smartphones and these new devices are getting cheaper with the Internet too becoming easily accessible at lower cost. A 2014 study by GMSA has anticipated that smartphone features would allow every mobile money service provider to ameliorate the quality of its services through introduction of suitable apps, improved user interfaces, and enhanced functionalities. These features would also potentially ease adoption and usage by giving more intuitive customer experiences. Thus, the overall impact of mobile money services on people’s lives is certain to become even more evident in the future.

These successful experiences from different countries in Sub-Saharan Africa, East Asia and South Asia accompanied by available futuristic smartphones in the Nepali market that also can exploit NT’s 4G services, provide sufficient room for the country’s public and private mobile phone operators to work on utilising technologies to break the barrier among ‘banked’, ‘under banked’ and ‘unbanked’.

Moving away from desktop commerce era to mobile commerce era

In October 2016, the numbers of internet users on mobile and tablet exceeded internet users on desktop computers for the first time in the history. This is a clear indication that we are heading towards more sophisticated mobile commerce. An earlier study by ABIresearch (2012) had predicted that in 2017, the share of global mobile commerce revenue would reach 24 percent of the total e-commerce revenue. Same year, Google also carried out a study that had found 65 percent of multi-device shoppers using smartphones as the first platform to check for available goods and services online. If they found something interesting on phone, 35 percent made transactions from the same device, 61 percent continued on a desktop/laptop and 4 percent purchased desired items from a table.

Global share of internet users on desktops, mobiles and tablets (2008 – 2016). Data source:

Looking at the past research findings and existing trends among the users, I think the contribution of mobile commerce to net e-commerce would surpass all past projections. In December 2012, globally 82.42 percent users were active on desktop and only 14.04 percent and 3.54 percent of customers were active on mobiles and tablets respectively. However, in October 2016, these figures have changed dramatically. Now, only 48.74 percent of users are active on desktops. Between 2008 and 2016, users actively engaging  on mobile phones have tripled and now account for over 46 percent of the total users. During the same period, tablet users increased by one percent only and now account for 4.73 percent of these users.

These changing trends among users have also reflected in their shopping behaviors. For example, users in Asia – Pacific rely more on mobile commerce than on desktops. Similarly, Japan saw mobile transactions from fifty-five percent of the total users in the second quarter of 2016. To add more, Alibaba’s 2015 Single’s Day holiday witnessed over sixty-nine percent of customers using mobile devices for transactions – that was a rise in such transactions by twenty-six percent than in 2014 sale event. Finally, in the US as well, mobile transactions increased thirty percent year-over-year and crossed fifty percent mark for mobile transactions in 2016 Q2.