A new model of development for unleashing social entrepreneurship: Grow Nepal

March 4, 2020

     By Duncan Green     

For a while now, I’ve been suggesting Oxfam make a conscious effort to ‘seed the ecosystem’ by spinning off more start-up organizations that can be more agile and responsive than our big bureaucracy. So I was delighted to find our team in Nepal are already doing it.

Guest post by Prakash Subedi, CEO, Grow Nepal

Ask an entrepreneur in Nepal what they need. They’ll tell you: access to finance and markets. Not that much different to entrepreneurs the world over.

But consider the scale of Nepal’s challenge – there’s a $2.8bn funding gap for SMEs – equivalent to 11% of our GDP – 75% of small businesses are credit constrained. The rugged terrain that gives Nepal so much of its beauty makes travel difficult and expensive. A 200km drive takes at least 8 hours. Being landlocked, our country is heavily dependent on Indian seaports.

Daunting, but these challenges are surmountable. Nepalese enterprise has much to offer, a long history of handicrafts and weaving, fertile agriculture land, livestock and huge potential for tourism.

That said, the future of business in Nepal must avoid the path followed by so many other countries. A model of profit maximisation for a few, whatever the human and environmental cost. Instead we need to look to alternative businesses models that are tackling the social challenges we face.

I see this kind of social entrepreneurial potential all around me, not least in rural communities and especially among young people, just waiting to be unleashed.

A handful of government and foreign aid programmes have been working to develop the private sector’s potential – some work to improve value chains and farmer productivity, others provide grants and technical support to enterprises. But aid programmes are inherently unsustainable, usually driven by short-term project lifecycles. Philanthropy is enabling unsustainable business models; I fear there’s a ‘grantrepreneur mentality’ emerging.

Entrepreneurs tell me they would prefer it if donors worked to facilitate loans, investment and other sustainable sources of finance. Rather than plain vanilla workshops delivered by aid workers with little business experience, they want tailored support that focuses on the things that matter to them, like accessing national and international markets or sales and marketing services.

Most say they are happy to pay for such services. People value what they pay for. You can’t ask an NGO handing out free stuff for your money back. A commercial relationship creates accountability that is sustainable.

That’s why we, a group of Oxfam staff with experience starting and running our own businesses, have set up a social enterprise called Grow Nepal. We will work with SMEs to facilitate loans and investments from banks and impact investors, provide tailored consultancy, business development and technical support. 

Most of all, we will treat the business we work with as customers and partners. Not ‘beneficiaries’.

So, here’s our plan.

First, we’re going to kickstart our business by raising £50,000 to provide 25 SMEs who have high growth potential and a social mission with the support they need to access finance from local banks and markets that will enable them to grow. We’re not going to give this service away for free like the traditional philanthropic models, we’re going to recoup much of the initial investment and then re-invest.

Once we have this proof of concept and trust from SMEs and financial institutions we’re going to begin facilitating investment from international impact investors. Capital markets in Nepal face a liquidity crisis and access to finance is unequal across gender and geography. Impact investment, while nascent, has the potential to help address these problems. Talking to investors we know that they struggle to identify businesses to invest in. They only meet companies who are based in Kathmandu and so are all fishing from the same pond.

We’re going to address this issue by providing an intermediary service that will support impact investors and banks to identify viable investment opportunities. We will enable these businesses to become investment-ready – with developed governance, digital finance records and robust business plans. We’ll provide investors with due diligence and monitoring and evaluation services, alongside an envelope of long-term services to the enterprises they invest in. Services we know make SMEs more resilient and reduce risks for investors.

Our current plan is to work with at least 100 SMEs over the next 5 years. Based on our experience, this has the potential to create income opportunities for 50,000 households from marginalised groups. But, with the right backers, the sky’s the limit.

Financial literacy is a major barrier to entrepreneurialism and as part of our efforts to create an enabling environment for social enterprises we have partnered with DFAT (Australia’s Department of Foreign Affairs and Trade) to provide financial literacy and training on digital financial services to at least 25,000 women from 100 cooperatives in very remote areas of Nepal. We plan to develop applications for financial management, market information and business development that could eventually benefit SMEs globally.

I’ve lived through conflict, natural disasters and long periods of uncertainty. Nepal remains one of the poorest countries in the world and I see the impact of climate change on farmers every day. Despite this, I have hope. Nepal’s economy is flourishing, current GDP growth is 7% (the second largest in South Asia) and the political landscape is stabilising.

We need individuals or intuitions who share our vision and can support us in this early stage and help Grow Nepal become a real force for good for the Nepalese economy.

Visit our website www.grownepal.com.np to learn more and contact me on psubedi@grownepal.com.np to ask questions, share your ideas and learn more about our vision and how you can support us.

March 4, 2020
Duncan Green