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Given the widespread complaint about the lack of entrepreneurship in Nepal, it is surprising to note that some empirical studies have found quite significant level of entrepreneurial qualities among the Nepalis. And one such study was conducted by none other than Small Business Promotion Project (SBPP), a joint initiative of German aid agency GTZ and His Majesty's Government for promotion of entrepreneurship. Though published in 1994, this was the latest study that was available on this subject. And the developments in the Nepali society in the period since the time of the said report have been more suitable to induce entrepreneurial traits - innovation, desire to be independent, risk-taking etc.

However, though Industrial Enterprise Development Institute (IEDI), the successor to SBPP, and a plethora of other agencies can be found engaged in developing entrepreneurship, the population of entrepreneurs in Nepal is still felt to be pathetically low. This is despite the fact that the success rate of the entrepreneurship training activities in Nepal (measured by the number of enterprises set up as a percentage of the number of individuals who completed the training) is regarded to be quite high. A review by SBPP in 1999 about its activities had reported that 54.5% of the persons trained under entrepreneurship development programs run by it had set up, and were running business enterprises.

Equally noteworthy is the fact that the 1994 study has proved wrong many of the beliefs about the hurdles in entrepreneurship development in Nepal (see box in page 33) for some major findings reported in that study).

The most important point is that the study has found business/industry to be the most preferred occupation by all Nepalis - urban as well as rural. It was so irrespective of the caste, ethnic and gender difference. Similarly, it also has been reported that the Nepalis are not so fatalistic as they are perceived to be. This means religion is not a hindering factor for entrepreneurship development.

Apart from IEDI, Small and Medium Enterprise Development Project (SMEDP) of FNCCI, Women Entrepreneurs Association of Nepal (WEAN) and a number of other NGOs are found providing entrepreneurship trainings. More recently business schools under Kathmandu University as well as Tribhuvan University have started offering courses on entrepreneurship in their Bachelor and Master level curriculum.

If efforts are being made from so many sides for the entrepreneurship development and the Nepalis in fact do have a quite good level of enterprising qualities, what are the factors that are hindering entrepreneurship development?

The people involved in providing trainings are themselves not satisfied with the content, duration or style of running these courses. There are doubts raised on the participant selection in the training courses of the NGOs. Complaining lack of funding, IEDI has significantly reduced its involvement in running the entrepreneurship development programs (EDP) itself. It says, it is now more in human resource development. Under this, IEDI is providing trainer's training to people referred to it by NGOs and Chambers of Commerce and Industry. It is felt that this method has very much diluted the potency of EDP.

Anyone selected by the organizer of the training program is being provided the training. But in principle both of the trainer and trainees of EDPs should be meticulously selected on the basis of what is called "extension motivation" (needed to be very high in the trainer) and "achievement motivation" (needed to be sufficiently existent in the trainee). Some trainers contacted by Nubiz complained that the banks were not paying any heed to provide loan to trainees recommended by the trainer. This indicated that such trainers may be high on "power motivation" rather than or "extension motivation."

One national level EDP training institute has it EDP program (including psychological module) squeezed into nine days, whereas the duration of such a course is normally six weeks from internationally accepted standard.

Also the 50 credit hours of the college course are felt inadequate. The experts say it needs to be of 250 hours.

Major in the list of such hurdles in entrepreneurship development, as generally offered, is the capital constraint. And given the paucity of banking services to the poor, the villagers and those who have no previous track record of dealing with banks, and the absence of venture capital funds in the country, lack of capital is indeed a real hurdle for entrepreneurship development. But by some definitions, an entrepreneur is a business innovator who is quite able to arrange finance for his enterprise. Therefore, logically finance must not be a hurdle for a real entrepreneur. More importantly, there have indeed been several successful initiatives going on in providing micro-finance to prospective entrepreneurs through specially designed schemes. And those involved in implementing such schemes claim very good loan recovery.

The ongoing security situation is another frequently offered reason for stunting entrepreneurship in Nepal. An enterprise may actually have stunted due to this situation as the market has shrunk and sometimes the link to the raw material sources may be cut off. But some analysts also say that situations like this which cause massive displacement of people create the good breeding ground for entrepreneurship. One example to illustrate this is available from Nepal itself. Though while in Tibet, the Tibetans were more engaged in spiritual pursuits, some studies (such as by Laurie Zivetz) have concluded that displacement is one of the major reasons that some Tibetan refugees in Nepal have established themselves as successful entrepreneurs here. This indicates to the prospects for emerging entrepreneurship out of the Maoists victims as well as from the Bhutanese refugees. The more delayed is the return of Bhutanese refugees, the higher is the likelihood of their assimilation into the Nepali society. It may be recalled that many of those who had returned from Burma in the past had started business enterprises and some of the major business houses of today have their origin in those Burma-returns.

Entrepreneurship in Nepal is normally felt to be concentrated in a few ethnic groups - Marwaris, Thakalis and Newars, and to some extent the Sherpas, the Tibetan origin people, Magars, Gurungs and the Manangis. And it is believed that the people in these communities have higher regard to business than the others. But as the 1994 report by SBPP shows, this is not so. Majority of the people, including those from communities other than the above, interviewed for the study, mentioned business/industry as the most preferred occupation. But these people are not going for business because they think that the country's environment is not conducive for business.

Some Myths & Realities about Entrepreneurship

Myth: Any business owner is an entrepreneur.

Reality: Not all the business owners are entrepreneurs in the real sense of the term. Only those who have entered totally new, so uncharted, areas or made a paradigm shift in the business are qualified to be called as “entrepreneurs.”

Myth: Training is needed for entrepreneurship development.

Reality: Only partly true. Most of the successful and world renowned entrepreneurs have never attended any entrepreneurship development training. Entrepreneurship is a combination of some qualities. First set of such qualities are motivational or psychological. The second set involves certain skills and the third involves certain knowledge. While the knowledge and skills can be acquired and honed up through training, the psychological quality (i.e. the need for achievement, as David McClelland has called it) is impossible to be developed in you if you do not have any trace of such motivation. But if you have certain degree of such motivation, this seed can be nurtured and developed through training. It is also said that if you already possess high level of achievement motivation, you may not need to attend lengthy entrepreneurship training because the acquisition of knowledge and skills will be quite simple for you. To measure the achievement motivation, various psychological tests have been developed.

Myth: Entrepreneurship and management are mutually exclusive.

Reality: True partially. However, though the entrepreneurial and managerial functions very much overlap, an entrepreneur is more a risk taker and oriented towards the future by entrusting his present businesses to his managers, while the manager is more concerned with the maximization of profits to his employer entrepreneur by utilizing the present line of products and markets. Since managers are also found increasingly being futuristic in their outlook by delegating the tasks of managing the day to day business to their subordinates, a new term – Intrapreneur - is being used to refer to the entrepreneur-managers.

Myth: Entrepreneurship is about risk taking.

Reality: Partly true. Not all risk takings are considered entrepreneurial. An entrepreneur takes only calculated risks and he is always ready with Plan B. In case the venture he is undertaking fails, he is prepared now to manage that eventuality. And the entrepreneur is always in control of the situation and able to influence the outcome. So a gambler is not considered an entrepreneur.

Myth: An entrepreneur is one who does only totally new businesses.

Reality: Not necessarily. A good entrepreneur very often imitates what others do, but at the same time he is also trying to introduce new dimensions in the style of the business or the product. For countries like Nepal, many businesses are copies of what are being done abroad. Still these copies can be considered to be entrepreneurial as there is always a risk of failure of the ideas that are being implanted in a foreign soil.

Myth: Those experienced in business or educated in business management make good entrepreneurs.

Reality: Again not necessary. Many managers cannot be entrepreneurs. Similarly, many people who score very high in business management courses may become better teachers than entrepreneurs. The street children and those who are trying to do better in musical and sports field are some of the other groups of people who may make successful entrepreneurs.

Myth: Rich people make successful entrepreneur as they do not have capital constraint.

Reality: Totally wrong. If the person does not have the achievement motivation, he may not become entrepreneur, no matter how rich he may be financially.

Myth: An entrepreneur is concerned about making money by hook or crook.

Reality: Partly true, may be. Though the major objective of an entrepreneur is to earn profit, and true entrepreneurs never hide this motive when asked about it, the ultimate objective of such people is to achieve something that others in his relations, neighbourhood or friends circle have not been able to achieve. As personal integrity is very essential for such success to be achieved and maintained, true entrepreneurs are honest.

through other sources. But this logic fails to explain why the other communities, which are more exploited than these groups, have not followed the path of these communities.

This indicates that there are certain additional factors that make these communities entrepreneurial. And here the studies make some other interesting revelation.

One such enabling factor for entrepreneurship is the unique financial support systems put in place by some of such communities to help their own community people, such as Dhikuri of Thakalis. In case of Marwaris, the major enabler identified is the joint family system which pools the resources and allows the family members to take risks.

This point about the Marwaris is illustrated also by several case stories presented in Nubiz, including the Signature Success Icons column in this issue. And this interpretation refutes the conventional wisdom that joint family system is not conducive to entrepreneurship.

The example of Manangis indicates to what a government policy can do to induce entrepreneurship. Everybody now accepts that the special privilege granted to Manangis during Panchayat period to import goods from Hong Kong and Bangkok duty-free, helped them to become big businessmen.

Strong religious belief of the Nepalis that the fate of a person is determined by his or her deeds in the previous life is generally offered as one of the factors blocking entrepreneurship development in Nepal. This view seems to be based on the work of sociologist Dor Bahadur Bista presented in his book "Fatalism and Development" which is used as the first reference book by every development worker who comes to Nepal under a donor assisted project.

But the 1994 study by SBPP has proved Bista's thesis wrong. About 60% of the respondents in the survey did not believe in fatalism. On the contrary, the study has confirmed that the country-frog syndrome (a phenomenon of everybody pulling everybody else down and not allowing him or her progress, also called "leg pulling" tendency or Khutta Tanne Prabritti) is one of the major hurdles in the entrepreneurial development. According to the report, this indicated to the lack of unity in the society. And this seems to be an area where the state interventions for reforms would be very much helpful.

The hypothesis that Hinduism is less encouraging to entrepreneurship is proven wrong by examples also from elsewhere, such as Fiji, the East Africa and Malaysia where the occupation of Hindus has been business and entrepreneurship and they are quite successful in these spheres.

The SBPP study has found that 59% of people with no schooling preferred farming while 29% preferred business/industry. Among those with 1-5 years of schooling, 34% preferred farming and 43% business/industry. Among those with 6-10 years of schooling 58% preferred industry and 22% government service, while among those with 11 years and longer schooling 60% preferred business/industry, 11% non-government service and 21% government service. While this confirms the notion that less educated persons are more likely to prefer farming, their preference to business/industry is still significant.

One recent concept on this subject is that of intrapreneurship which refers to entrepreneurship among the corporate managers who take risks and lead their organizations towards new ventures, thus spinning off new companies. One excellent such example from India is provided by Mr. Deveshwor of ITC Ltd. who brought about big paradigm shift in ITC's business, for example by introducing IT as an effective vehicle to help the company's agro-based business.

In Nepal too, potentials for such intrapreneurship may exist as indicated by the phenomenon of people leaving their jobs in big corporates to set up their own independent ventures. But in most of such cases in which an employee of a company sets up his own company, the result is direct competition with the parent company. That means there is no business innovation introduced by such deserter.

Such people seem to be guided by the notion that entrepreneurship is the same as business ownership and that if you are a good manager, you can also be regarded as a successful entrepreneur.

Despite the potential existing in the society, entrepreneurship is not developing in Nepal and it is clearly not because of any social, religious, cultural, educational or financial constraints. Then the blame turns naturally towards the policies of the state which either stunt the growth of the enterprise once set up or do not allow the emergence of any enterprise at all.