As I write this, I don't know what provisions the government has set aside in the new budget to help small businesses. But, if past budget speeches are any indication, there is not going to be much for addressing the needs of small Nepali businesses such as buspark lodges, retail shops, motor repair workshops and security firms, for whom two major concerns are how to reduce the cost of doing business and how to attract financing for business expansion.
The worry about reducing costs starts from the registration process, which-depending on who you know-takes anywhere from a few days to several months. Most small business owners have come to Kathmandu from other parts of Nepal, and lack the political connections and self-confidence required to deal with the bureaucrats, who are supposed to help them formalise their company registration process, without the necessary greasing of the palms.
Small wonder, then, that most small business owners end up deciding that they would rather forgo the cost associated with the registration process and start their businesses informally. Later, if they start making money, some might think about restarting the registration process-not out of a desire to be part of the formal economy, but to get registration papers to wave at police officers who come to demand their weekly share.
One good economic policy to include in the budget would be to help reduce the time and money potential entrepreneurs need to start and run new business ventures. This could be done by eliminating barriers related to registration and by instituting incentives to start new businesses. Otherwise, because of bureaucratic hurdles, the entrepreneurs and the government continue to exhaust each other by playing cat and mouse and both lose out.
The second problem small business owners face is accessing finance. Most say they are happy to just get along and cover their expenses on a day-to-day basis, but some want money to scale up their business. Yet in interview after interview, they say that they use banks only to deposit money, not even considering the additional services that they provide. Instead, these owners borrow money within their own social circle or from moneylenders, who charge high interest rates.
Most say they use moneylenders because they find the banks and other formal institutions intimidating. And Nepali banks are too busy chasing after the same few wealthy customers to be creative in figuring out how to go 'downmarket' so that their offers start generating revenue from thousands of small business owners. Then again, before the banks can make that move, the government has to create an enabling environment through its economic polices. It can do this by making access to credit easier for small businesses, while strengthening credit reporting systems credible for financial institutions.
Nepalis have consistently proved to be enterprising people who can survive under harsh conditions. All we need is a push from friendly policies that level the playing field to make it easier and faster to translate that enterprise into prosperity for all. For that, assisting small businesses is always a good way to start.