NON Bank Retail outlet.............

In an effort to democratize access to finance, Nepal Rastra Bank has decided to give interest free loans to those banks and financial institutions (BFIs) that open a physical branch in 22 remote districts of Nepal. Incentivize banks to expand in the hinterland is definitely a strong catalyst for financial inclusiveness of thousands of unbanked rural population. However, despite having numerous incentives, opportunities and policies like “deprived sector lending” in place banks are often reluctant to penetrate the uncharted territories. This reluctance is primary derived due to high per customer transaction cost, political risk and lack of human capital. Increasing cost of fund, due to the slowdown in realty sector and poaching of depositors of one bank by other, will also contribute to make BFIs hesitant to add new non banking assets in their balance sheet. Rather than encouraging the BFIs to setup a “brick and mortar” physical bank branch in the remote area, Rastra Bank should allow BFIs to adopted branchless banking model called Business corresponding banking. "In this model, BFIs will work with networks of existing nonbank retail outlets—such as cold stores,chiya pasals —to deliver financial services. These nonbank retail will act as a intermediary of the banks.BFIs will train and equip retail outlets owners with mobile technology that will allow them to carry the banking transaction. Correspondent banking benefits a range of stakeholders. The poor gain convenient access to financial services in their own communities. Financial institutions reach a vast new customer segment. Non bank retail outlets increase their sales volumes and have an opportunity to develop deeper relationships with customers. In Brazil, where the strategy has enjoyed its greatest successes, about 1,600 municipalities (approximately one-third of the total) are served solely by correspondent-banking outlets." - Mckinsey,2010

Problem faced by SME in Nepal

Source: Myrepublica

"According to the survey, there are 32,326 medium scale industries in operation across the country, whose contribution to Gross Domestic Production is 6 percent."

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Aachi aayo..k garni ??

The article “ Sanitation in National budget” in myrepublica clearly shows how lack of investment on sanitation facilities retards economic and social development of the country . Despite chalking myriad of sanitation related policies, progress made by the government to achieve these goals has been very gloomy. Story about government incompetency and huge public infrastructures deficit is not just limited to Nepal, numerous developing countries faces the same challenges. Growing number of private sector, especially in African nations are seeing lack of basic sanitation facilities as a huge investment opportunity. For example, In Kenya,less than 50 percent of population has access to basic sanitation services. Existing public toilets are inaccessible or are overcrowded, unhygienic and and lack privacy . A company called Ecotact, based in Nairobi ,Kenya saw lack of access to basic sanitation facilities as an opportunity to generate social value as well as financial return.It started providing affordable yet high-quality, public pay per use toilet and shower services to low-income communities in Kenya. Customers pay $0.06 USD (NPR 4.32) to use a facility.Ecotact's facilities saw more than five million uses in 2010.Through a Build-Operate-Transfer model of public-private partnership, Ecotact enters into long-term contracts with municipalities to use public land. In return the company bears all construction costs and operates the facilities for five years. But it relinquishes ultimate ownership of the facilities to the municipalities, which can decide whether to extend their contracts with Ecotact.Similar kind of PPP model,but tailored especially for Nepal needs to be experimented.Organization like Water Aid should leverage its pool of high human intellectual capital to innovate new strategies and influence the Government of Nepal and the private investors to partner and provide basic sanitation and water facilities to those who are deprived.Global trend suggest that using profit seeking investment to generate social good is very efficent to dent social and economic challenges and it provide solution at a scale that philanthropic and government interventions usually cannot achieve.

Nepal & IFC -- 2010

• International Finance Corporation (IFC) is partnering with DFID to help the Government of Nepal to ease regulatory constraint and red tapes for allowing more private sector investments in Nepal.
• This is a very encouraging news for the private sector in Nepal,however, a report release in October of 2010 by IFC shows that access to finance is the key constraint for private enterprises in the developing countries .
• With the growing popularity of social entrepreneurship and impact investing (JP Morgan recently classified it as an asset class).IFC should facilitate equity investment in Nepali SME ventures ......... IFC should support the Government of Nepal to chalk polices and acts that will draw international impact investors, patient capital and venture capitalist ....
• IFC invested micro equity ventures are making remarkable difference in India.Successful business model should be replicated in Nepal.
• IFC should support ( financially and technically) private sector to create business incubators to nurture and buttress the fledging effort of future and existing entrepreneurs.

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High food inflation is good for the Farmers.....

"In a report to be released on December 6th, the International Fund for Agricultural Development (IFAD), another UN agency, says higher prices could give farmers, particularly in poor countries, a boost; earning more cash from their produce should spur farmers to lay out more capital on things like irrigation."

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Aid from Europe

"THERE is a lot of financial aid sloshing around inside the European Union. But there will soon be less of it flowing out. At the G8 summit in Gleneagles in 2005, when the rich world made heroic pledges to tackle poverty in Africa, EU members promised to raise aid budgets to 0.56% of GNP by 2010 and 0.7% by 2015. But most countries will miss this year’s target. And with austerity biting, the 2015 goal looks hopelessly ambitious."-The Economist

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Exporting electricity to BIHAR.....

An article was published in my Republica claiming the "For India, it will any day make much more sense to purchase electricity for its industries and households located in Bihar and Uttar Pradesh states from us (Nepal) than supplying them with power from, say, its plants located in the far-flung North Eastern region. " . The next line says " The cost of bringing power from there to these states (Bihar and UP) would easily be way higher than availing it from Nepal. Additionally, opting for hydro power instead of coal (on which India is primarily dependent on now) as far as possible would also give our neighbor something to boast about in a world where environment protection and clean energy are two hot issues."

• Paragraphs above reminds me of a company called "HUSK Power System".Based in Bihar,Husk Power System generates clean, safe and efficient electricity at affordable rates in some of India’s most remote communities. HPS is currently serving serving 130 villages, or more than 100,000 people. Its plants extend villagers’ activities beyond daylight hours; reduce indoor air pollution; increase the time children can study; reduce the amount of time women spend collecting firewood; and reduce emissions. In the next five years HPS aims to deploy 2,000 plants, impacting five million people. HPS was founded in 2007 to target the 20,000 villages deemed out of reach by the Indian government.HPS currently has 40 operational plants in Bihar. They use rice husk to produce electricity.
• Nepal has this lofty dream of selling electricity to India ( especially Bihar and UP).Over the year very little have been done to built hydro power infrastructure.
• Factoring the huge appetite for energy in India, companies like Husk Power System might not be a competition threat for Nepal's plans to export mega watts to Bihar ..But it is for sure that if Nepal ( government and the private sector ) do not expedite hydro power projects,Nepal might loose it competitive advantage on " Green Energy",price and distance ....Potential market share for Made in Nepal electricity is shriking .....

Money for Nepali Trash

"Two plastic boulders roll into the compound and flies scatter. The dirt piles up, and the women who cut and scoop disappear behind it. "Buyers from India come every month. Otherwise we use the hundi system. There are similar kabadas in India as well, but we Nepalis sell cheaper, of course." With this he brought in a sample of white, foamy cotton spun from the mills in India, using the plastic he sells. "These you can use for jackets, blankets, mattresses—everything.""


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• Great investment opportunity for people interested in "Impact investment" asset class......
• This business is addressing environment and unemployment issues
• Local retail stores have profit margin of Rs5 for every Kilo gram of recyclable cotton sold.( higher then selling a KG of rice)
• Value addition/making jackets and blanket out of plastic could be done in Nepal
• Indian Businesses coming to Kathmandu to buy trash and transporting it all the way to India possibility means there is high profit in this sector.
• Growing income levels and spiking consumption rate of the capital city means this business is here to stay (Unless,waster management is privatize )....