Last week, my colleagues and I spoke to about 40 different owners of Kathmandu-based small and medium Nepali businesses on how they use money-related services to improve business performance.

Most had nothing but complaints. Many told stories of how they face needless but repeated and costly harassment from tax officers, from policemen on and off duty and from local politicians. Almost all said that they have no use for formal banking channels, which they see as remote and unfriendly, designed only for big businesses. And all said that they buy auditing services grudgingly. In fact, most admitted that the owners also double up as in-house accountants who keep a loose log of daily accounts on the back of torn cigarette-boxes.

Unhelpful though the government is, these businesses start dealing with it right from birth. In most cases, they are required to pay fees for registration at both the Municipality Office and the Department of Cottage Industry which charge money arbitrarily to renew their licenses. The businesses complain that they have not received a single tangible service, for all their dutiful payment. Yet they go through the registration process because they have discovered that the papers thus obtained are good as an sign of state approval in the event of all too common warrant-less raids and searches, that ratchets up the cost of doing business.

Most of these businesses-bus-park hotels, security firms and agencies that supply labour to overseas markets-deal with millions of rupees every month. Yet they prefer doing business with the money stuffed in their pockets. Other than seeing banks as places where they can deposit money and earn an annual interest, they have little idea as to how to make demands on the financial institutions to provide them with money-related services.

Financial institutions have also displayed a poor understanding of small business needs, let alone have done an appropriate marketing of their services and products. Banks have been slow to exploit opportunities to bring hitherto neglected but cash-rich clients into their fold. Given how competitive the banking sector has become recently, it is short-sighted to think that many small businesses might not be as lucrative as a few big trading houses. Meanwhile, in the face of such indifference, the preferred way of raising cash for small businesses is to borrow from colleagues and money-lenders, even at high interest rates, and ignore the formal channels of finance.

Most small business owners rightly fear that if they keep up-to-date books and use legitimate numbers, then the government might squeeze more money out of them. Their accepted business practice is to keep two sets of books: one for the business and one to show to the government. As for auditing, most use registered auditors (doesn't matter whether of 'B' or 'C' class) who can both balance the books and, more importantly, are on excellent terms with tax officers. They are not sure how to ask more of their auditors (who can double up as financial consultants) in advice on cutting down expenses and managing money better.

There is much talk in the policy circles about how to help small businesses. Some talk about marketing, others about skill-enhancement. But our discussions show that addressing many of the money-related policy constraints (ambiguous laws, unclear tax codes, inaccessible credit lines, etc) would be a good place start for the government to take the concerns of small businesses seriously.