Nepal’s farmers reap what they sow, and moreBoosting small and medium farm enterprises can lift household income and the national economy
Tulsi Giri had little idea three years ago that his agri-food marketing platform in Kaski would take off so quickly.
Today, his digital startup called Kheti has grown from 1,300 farmers in Kaski to over 10,000 spread across Bagmati and Gandaki provinces.
“Food is a basic necessity, and a majority of Nepalis are engaged in agriculture for their livelihood, so we always knew the potential of growth a platform like Kheti would have but we didn’t think it would grow this quickly,” admits Giri, whose platform facilitates farmers to improve farm productivity and connect them to markets.
Kheti does this with advisory technical support to farmers, and collaborates with banks for agri-financing and subsidies. It also documents the agricultural cycle of farmers so they can improve productivity with inter-cropping, as well as directly connect them with consumers.
There is an important role for small- and medium-enterprises (SMEs) in developing Nepal’s agricultural economy, and this is often overlooked in national plans. A report by the South Asia Watch on Trade, Economics and Environment shows SMEs make up 80% of the industrial sector’s contribution to the GDP in Nepal and about one-third of the agricultural sector.
Some 66% of the country’s total population depends on farming for livelihood, yet small and medium enterprises, especially in the agriculture sector, face multiple hurdles for growth.
“Politics and inconsistent policies have always been a huge barrier to economic prosperity in Nepal, including in the agriculture sector. Because of this, farming suffers from the high cost of production and stiff competition in export,” says Gokarna Raj Awasthi of FNCCI at the recent Nepal Agriculture Meeting.
Other challenges include inadequately trained workforce that lacks skills, high interest rates when accessing credit for farmers, procedural difficulty in subsidy programs, poor post-harvesting plans and policies and ineffective dissemination of information about existing incentives and facilities.
Nepal’s diverse topography provides agriculture with immense as yet untapped potential, says Durga Prasad Bhandari of Paicho Pasal, another company that works with over 25,000 farmers in delivering produce across Nepal.
He adds, “Agriculture is the only sector in the country that is capable of mass production, but we have not been able to capitalise on it and export … we have not been able to even meet the local demand market owing to challenges in channeling and logistics management.”
Paicho Pasal also assists farmers in strengthening production capabilities by providing them with technical skill training to improve harvests, and reduce marketing gaps.
“Another reason that has held back growth is a lack of concrete policies to increase productivity. There is also no strategy to export and market the domestic produce in the global market,” says Bhandari.
When asked, government officials admit that almost all farmers in Nepal have small-scale holdings of less than a hectare which keeps them at barely subsistence level. Asked what the state is doing about this, Secretary at the Ministry of Agriculture and Livestock Development, Govinda Prasad Sharma, told us: “The government is prioritising agriculture as the main engine for economic progress and working to reduce risk for farmers and private investors.”
Indeed, in 2015 Nepal unveiled the Agriculture Development Strategy to transform the agriculture sector into a competitive, sustainable, and inclusive sector that brings economic growth, improved livelihoods, job creation and provides food and nutrition security.
The Nepal Rastra Bank has also made provision for refinancing at 2%, special refinancing at 1% and general refinancing at 3% to small enterprises. Banks and financial institutions are also not allowed to charge more than 5% interest on small enterprise refinancing and general refinancing and more than 3% interest on special refinancing from the borrower. In January last year, the government opened the agricultural sector to foreign direct investment for the first time.
And both Kheti and Paicho are currently working with the Commercial Agriculture for Smallholders and Agribusinesses (CASA) implemented by Swisscontact Nepal which supports agri-SMEs to prepare for and secure investment. Since its introduction in 2019, the program has worked with over 20 SMEs, 30 producer organisations, and several industry associations and government bodies to overcome various logistical and financial hurdles and expand their horizons.
“We have been able to bring in over $2 million investment through local financial institutions in the past four years that we have been active. This is of course just a drop in the ocean considering the size of our agriculture sector, we collectively need to do more to realise the full potential of Nepal’s farms,” says Siddarth Khadka of Swisscontact Nepal.
Bhandari of Paicho Pasal agrees that reviving agriculture is critical in generating rural jobs and reducing the pressure on out-migration, but for that the government has to focus on securing investment and dynamic policies.
He adds, “In a world where wars, pandemics, and a climate crisis can throw everything off balance, Nepal needs to strengthen its agricultural production and become food secure.”