MICRO, SMALL AND MEDIUM ENTERPRISES OF CONSTRUCTION MARKET IN NUWAKOT AND DHADING DISTRICTS, NEPAL

FINAL REPORT

JULY 25, 2018

Submitted By Submitted To Nepal Development Research Institute Mott MacDonald, Shree Durbar Tole, Pulchowk, Lalitpur GPO Box: 8975, EPC 2201, Kathmandu, Nepal Kathmandu, Nepal Email: [email protected] Telephone: +977-1-5537362, 5554975 1

Nepal Development Research Institute (NDRI) is pleased to be a part of Mott McDonald’s Micro, Medium Small Enterprise project. We thank Mott McDonald for entrusting NDRI to carry out such an important study. We express our sincere thanks to Mr. Howarth Simon E, Team Leader of PURNIMA and Mr. Rabindra Bahadur Singh, Private Sector Development Lead, for extending requisite administrative and management support in organizing and hosting the assessment.

We would like to thank all the participants for their kind participation in the study. We are grateful to all the government stakeholders, Mayors and President of municipalities, ward chairpersons of the sample municipalities, chief administrative officers, district leaders of FNCCI, FNCSI, District Contractor Association, and business leaders for taking time out of their busy schedule for the study. NDRI also acknowledges their contribution in this research. The interactions with each of them have contributed significantly to develop the report.

Last but not the least, NDRI also offers gratitude to the entire research team: Prof. Dr. Punya Prasad Regmi, Team Leader, Mr. Jeebanath Adhikari, Team Coordinator, and the field researchers Mr. Ram Prasad Devekota, Rita Pandey, Manoj Karki and Sunita Dhital for their hard work from inception period to project accomplishment.

Dr. Jaya Kumar Gurung Executive Director Nepal Development Research Institute

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Table of Contents Table of Contents ...... 3 Abbreviation and Acronyms ...... 5 List of Tables ...... 6 List of Graphs and Figures ...... 7 Executive Summary ...... 8 CHAPTER ONE ...... 10 INTRODUCTION TO STUDY ...... 10 1.1 Background ...... 10 1.2 Objectives ...... 11 1.3 Scope of the Study ...... 11 CHAPTER TWO...... 12 RESEARCH METHODOLOGY ...... 12 2.1 Method and Tools ...... 12 a. Desk Review ...... 12 b. Site Selection...... 12 c. Primary Data Collection ...... 13 d. Direct Observation ...... 13 e. Quick Survey: ...... 14 f. Key Informant Interviews: ...... 14 2.2 Field Monitoring, Management and Quality Assurance ...... 14 Pre-testing of research tools and finalisation ...... 14 Recruitment and Orientation Training to Research Team: ...... 14 2.3 Data Management and Analysis Plan...... 15 2.4 Deliverables and Timelines ...... 16 CHAPTER THREE...... 17 MAPPING OF SMALL ENTERPRISES ...... 17 3.1 Construction Materials and Suppliers ...... 17 3.2 Development of Markets in Nuwakot District ...... 18 3.3 Estimated Number of Small Enterprises of Construction Market in Nuwakot District ...... 20 3.4 Development of Markets in Dhading District ...... 20 3.5 Estimated Number of Small Enterprises of Construction Market in Dhading District...... 23 3.6 MSME Registration ...... 23

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3.7 Source of Investment for MSMEs in Construction Market ...... 24 CHAPTER FOUR ...... 26 FINANCIAL REQUIREMENTS AND ITS ARRANGEMENT ...... 26 4.1 Willingness to Expand Business ...... 26 4.2 Utilization of Fund to Expand Business ...... 27 4.3 Availability of Capital to Expand Business ...... 27 4.4 Source of Capital to Expand Business ...... 28 4.5 Problems in the Source of Loan...... 29 4.6 Required Size of Capital for Business Expansion ...... 31 CHAPTER FIVE ...... 33 CONSTRAINTS OF MSMEs ...... 33 CHAPTER SIX...... 36 CONCLUSION AND RECOMMENDATIONS...... 36 6.1 Conclusion...... 36 6.2 Recommendations ...... 37 Annex –I: Situation Analysis of Sample Municipalities and Market Area in Dhading ...... 39 Annex – II: Situation Analysis of Sample Municipalities and Market Area in Nuwakot...... 41 Annex – III: Data Collection Format in Municipality and District ...... 43 Annex – IV: Area of Data Collection and Respondents in Districts ...... 44 Annex – V: Sample Respondents in Districts ...... 45 Annex VI: Quick Survey Questionnaire for Supply Side Actors ...... 46 Annex VII: KIIs for Financial Intermediaries ...... 48 Annex VIII: KIIs Questionnaires for Municipality ...... 49 Annex IX: Observation Notes on Market Prospects ...... 50

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Abbreviation and Acronyms

BFIs: Bank and Financial Institutions CFUG: Community Forestry User Group CSEB: Compressed Stabilized Earth Blocks DCCI: District Chamber of Commerce and Industries DDC: District Development Committee DFID: Department for International Development DRR: Disaster Risk Reduction GDP: Gross Domestic Product GoN: Government of Nepal HCB: Hallow Concrete Block KII: Key Informant Interview MSMEs: Micro, Small and Medium Enterprises MSD: Market System Development MOI: Ministry of Industry NAMDP: Nepal Agriculture Market Development NBSM: Department of Nepal Bureau of Standard and Metrology NDRI: Nepal Development Research Institute NPER: Nepal Post Earth NRA: Nepal Reconstruction Authority OPC: Ordinary Portland Cement PPS: Probability Propionate to Sample PSD: Private Sector Development PURNIMA: Post Earthquake Recovery Project NAMDP: Nepal Agricultural Market Development Programme SMEs: Small and Medium Enterprises

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List of Tables Table 1: Division of MSMEs based on the fixed capital and other factors ...... 11 Table 2: Study tools and sample distributions ...... 13 Table 3: List of different MSMEs present in Nuwakot District ……………………………………………………………….19 Table 5 Different enterprises present in Dhading District ...... 22 Table 5: Loan capital requirements for MSMEs to expanding business………………………………………………….31

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List of Graphs and Figures Figure 1: District Map, rivers, and roads passes in Nuwakot District ...... Error! Bookmark not defined. Figure 2: Estimated MSMEs in Nuwakot district ...... 20 Figure 3: district map, rivers, and roads passes in Dhading district ...... 21 Figure 4: MSMEs in construction market in selected municipalities in Dhading district ...... 22 Figure 5: Total MSMEs in Dhading district ...... 23 Figure 6: Number of registered and non-registered business ...... 24 Figure 7: Source of loan for business establishment by business...... 25 Figure 8: Source of loan for business establishment by municipality ...... 25 Figure 9: Business expansion in near future, by business...... 26 Figure 10: Business expansion in near future in municipality ...... 27 Figure 11: Own capital to expand business ...... 28 Figure 12: Own capital to expand business by enterprises ...... 28 Figure 13: BFIs source of loan for business expansion in near future...... 29 Figure 14: Old saving as a source of loan for business expansion in near future ...... 29 Figure 15: Problems in the source of loan ...... 30 Figure 16: Problems in the source of loan ...... 30 Figure 17: Average size of loan demand for MSMEs in rural and urban municipalities ...... 31

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Executive Summary

The reconstruction process is lagging behind in Nepal. Studies have revealed that current market system has not been able to deliver construction materials sufficiently and services efficiently to earthquake victims in rural areas. Private Sector´s development therefore is the key task to support on reconstruction processes. Information about Micro, Small, and Medium Enterprises (MSMEs) of construction market is very important for economic growth and improving livelihood through post-earthquake recovery. The market system development approach seeks to identify the key constraints of market and practical solution. The overall objective of this study is to assess MSMEs of construction market in Nuwakot and Dhading districts. The specific objectives are to map out the MSMEs, identify financial requirements and major constraints limiting MSMEs. The methodology used both the quantitative and qualitative approaches. Questionnaire survey was conducted with the hardware enterprises, crushers, brick suppliers/Kilns, Compressed Stabilized earth block/Hallow concrete block producers, stone cutters, sand extractors, Furniture/timber treatment enterprises, transporters, contractors, and metal worker/grillers. Altogether, 116 quantitative surveys, 12 in-depth interviews, 10 field observations, 24 key informant interviews were conducted. The current reconstruction process is lagging behind mainly due to the market supply gap of construction materials. The presence of construction based MSMEs are highly concentrated around the headquarter cities and major roads around the rivers, while the presence of these MSMEs is very poor at the rural hilly areas. Therefore, construction based MSMEs are largely affected by headquarter based government institutions, prevailing river with local raw materials, and development of road networks. As compared with the urban municipalities, rural municipalities have more supply constraints of construction materials along with topographical difficulties and lack of market information. A large number of mini contractors were not legally registered in construction markets. The functional existence of BFIs and Cooperatives were adequate in headquarter and urban cities followed by a good presence of road access. In contrast, their poor presence was observed in the rural area. Majority BFIs have used separate loan product to flow out their loan to MSMEs. But problems such as insufficient source of income, high cost of capital, process barriers, inadequate collaterals, lack of proper business plans and low level education of customers were some of the constraints in providing loan to such enterprises. Therefore, commercial banks offer limited loan in general category rather than commercial ones. An overwhelming proportion of MSMEs respondents (82%) reported that they wish to expand their business with financial support of BIFs, however, they did not have required amount of own funds and capital to invest in their businesses. Such barriers were prevailing in both policy and operational levels for the

8 establishment of MSMEs. Based on key findings, following policy and operational recommendations are provided: (a) Recommendations for construction market development: Local level development affects positively on construction market. Therefore governments should have plan of physical infrastructure development such as roads, electricity, communication, etc. to address the constraints of the rural area through the private sector. Governments have to address these problems through a broad based and inclusive market development approach. Market supply gap on construction materials should be filled in support of government entities. There is a frequent problems of high price and monopoly power exerted by the few suppliers working on the sand and concrete pebbles. Hence, Government and other authoritative bodies should provide subsidies and other incentives to construction based MSMEs to expand the construction market. Also, the locally produced materials have to be extracted in such a balance way that reconstruction as well as local construction will have an adequate supply along with the protection of environment. Governments should have a balanced tax and royalty approach to address the local demand and for utilization of locally produced materials. Governance reform can be the better practice for the supply of local needs. Those existing local level enterprises should also be locally registered/informed as the registration of micro and mini contractors and transporters were missing at the local level. Local governments have to reduce the cost of registration and compliances and procedurals. Some institutional problems such as low level of education and problems in existing MSMEs expansion should also be addressed.

(b) Recommendations on access to finance: Government bodies should develop long terms plans and policies to encourage new BFIs branches which focus on small and micro enterprises (SME) loan in rural areas. The supply side reforms should be: (a) increase the proportion of MSME business loan, (b) adopt digital technologies such as cloud computing, distributed ledger technology, artificial intelligence that can reduce the transaction cost of BFIs significantly, (c) decrease the lengthy procedures of lending and documentation, (d) include rural social aspects in the risk mitigation measures- scoring matrix of BFIs, (e) enlarge the scope of assets in the list of collaterals, (f) reduce the cost of credit information among MSMEs, (g) educate MSMEs on business development plan and strategies. The demand side recommendations are: (a) increase the payment capacity of MSMEs, (b) reform in the practice of credit transaction of MSMEs, (c) reduce the cost related to the business registration, audit reports and tax compliance (d) reduce the cut throat competition among MSMEs, (e) establish the credit market infrastructures, (f) orient MSMEs and credit market information, (g) develop the local level physical infrastructures of development, etc.

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CHAPTER ONE

INTRODUCTION TO STUDY

1.1 Background

National Reconstruction Authority (NRA) was established under the “Act relating to Reconstruction of the Earthquake affected Structure, 2015”1 on December 2015 with an aim to facilitate overall reconstruction process and build resilient settlement and prosperous society in earthquake affected districts. However, current reconstruction process of Nepal is lagging behind. In addition to several other constraints, studies have revealed that current market system has failed to deliver construction materials and services to earthquake victims in rural areas2.

Market is a powerful and autonomous institution/mechanism that ensures delivery of construction materials and related services for the earthquake victims. However, barriers that limit supply of construction materials and related services have to be addressed through an external supportive mechanism to facilitate reconstruction process in the earthquake affected districts. Market System Development (MSD) Approach 3 emphasises ‘flexibility’ and ‘creativity’ as an essential part in complex market system. It aims to improve efficiency by incorporating all relevant sectors and through a broad based inclusive model. Market strengthening strategies and steps are developed on a need-based approach that facilitates access to basic services and livelihood development of the poor and marginalized people. MSD Approach focuses on the relevancy, opportunity, and feasibility to stimulate change in the market system for the potential pro-poor.

Private Sector Development (PSD) component of UKAID funded, Post Earthquake Recovery Project (PURNIMA), is tasked with working with 200 Small, Medium and Micro (MSMEs) enterprises in construction sector for generating economic growth and improving livelihood. The PSD component has adopted a market systems development (MSD) approach in the design and implementation of activities. The approach seeks to identify the key constraints of the market and remove them through catalytic actions. It is setting up solution to generate ideas to improve the access of micro, small, and medium enterprises (MSMEs) to finance, which has been identified as one of the key constraints. It has planned for a quick assessment of MSMEs in Nuwkaot and Dhadhing districts.

1An Act Made to Provide for reconstruction of Earthquake affected structures with legal provision on the establishment of National Reconstruction Authority. 2 Forthcoming report of NDRI, UNOPS and DFID on titled “A Detail Study on Poverty and Vulnerability in Four Earthquake Affected Districts” 3 http://blogs.lse.ac.uk/southasia/2017/10/18/understanding-the-economics-of-inclusion-a-perspective-on-nepal/

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1.2 Objectives The overall objective of this study is to assess MSMEs of construction market in Nuwakot and Dhading districts. The specific objectives are: I. To map out existing MSMEs of construction market. II. To understand financial requirements and arrangements of MSMEs. III. To identify major constraints that are limiting the business of the MSMEs.

1.3 Scope of the Study The assessment covered the construction sector´s market MSMEs at the district level and local levels in urban and rural municipalities in Nuwakot and Dhading districts. The scope of this study was to map out MSMEs with information of total numbers and operational status, volumes of business transaction and expansion plan, needs of financial arrangements and requirements, and market constraints that limit to MSMEs for the development of construction market businesses. The industrial classification for the MSMEs according to Industrial Act, 2073 (first amendment) has following requirements:

Table 1: Division of MSMEs based on the fixed capital and other Micro Enterprise factorsSmall Enterprise Medium Enterprise - The fix capital used in the business - The enterprise which is - The enterprise which enterprise will be up to NRs. 500,000 other than micro and has of fixed assets of except the land and buildings. small enterprises and has amount from NRs. 100 - Entrepreneur himself/ herself involves fixed assets up to NRs. million (10 Crore) up in the operation and management of 100 million (10 Crore) of to NRs. 250 million enterprises. fixed capital. (25 Crore). - Maximum number of employees will be 9 including the entrepreneur - The annual transaction of the enterprise will be less than NRs. 5 millions. - Maximum level of energy consumption will be less than 20 KW for those which uses the machinery or equipment in the enterprise

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CHAPTER TWO RESEARCH METHODOLOGY

Market system development approach was administered by NDRI to map out MSMEs in Dhading and Nuwakot districts. Construction market players were surveyed to identify the existing situation of MSMEs and map them in terms of their business volume in Nuwakot and Dhading districts. We explored complex market realities, more specifically, the structural constraints and impediments in the market incentive mechanisms. Local economic situation, trade linkages, factor market environment and goods and services of the construction industry were taken into considerations (For more details, please see the Annex-I & II). The respondents were the owners of micro and small enterprises working in the supply side of construction materials in Dhading and Nuwakot districts. In addition, NDRI conducted a quick quantitative assessment survey with sample MSMEs of construction market. NDRI developed format (For more details, please see the Annex-III) and organized the Key Informant Interviews (KIIs) with ward chairperson of each ward of five municipalities sites in Nuwakot and Dhading districts. In addition, information were gathered from other relevant informants such as business leader of the market participants, municipality officials, and representatives of professional organizations, including the respondents of bank and financial institutions and cooperatives, etc. (For more details, please see the Annex-IV)

2.1 Method and Tools a. Desk Review Prior to field plan, scope of study was identified based on desk review of market polices guidelines, commodities act, program documents of Mott Macdonald, and information related to the construction market in Nuwakot and Dhading districts. Based on review of market system development approach and earlier practices in Nepal, an analytical framework, preliminary research hypothesis, and a general checklist were developed. Both inductive and deductive approaches were adopted to explore in-depth insights on real market players and information on the construction materials at the major market, minor market, and rural market in the districts. b. Site Selection NDRI in consultation with the team of Mott Macdonald purposively selected sample municipalities (For more details, please see the Annex-V) to get information of the districts. Similarly, the markets were identified for research site after consultation in each district. With district´s information samples were collected from supply side market forces of construction industry. NDRI in consultation with the team of Mott Macdonald considered the participants of supply side market. Information of real market participants was also considered from the supply side forces. We randomly picked each respondent on their availability in each level of market.

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The research team employed probability proportional to sample size (PPS) tools to select required numbers of sample from each selected market area.

Table 2: Study tools and sample distributions Area Bidur Belkotgadhi Tadi Likhu Dupcheswor Total Questionnaire 35 5 11 4 2 57 Survey KIIs 5 2 2 2 2 12 Interview 2 1 1 1 1 6 Observation 1 1 1 1 1 5 Area Nilkantha Dhunibesi Sidhhalek Benighat Gajuri Total Questionnaire 21 14 11 13 10 69 Survey KIIs 5 2 1 2 2 12 Interview 2 1 1 1 1 6 Observation 1 1 1 1 1 5 c. Primary Data Collection 116 quick quantitative surveys were conducted within the supply side construction market players in the sample area. The research team considered the major and minor market areas of the sample districts. Survey was conducted in each district with producers and traders involved in the construction market. 10 qualitative interview with selected respondents of business and political leaders, market chain suppliers and 22 KIIs were conducted with the respondents from bank and financial intermediaries (For more details on format, please see the Annex-VII) who were involved in flowing out loan in each selected area. NDRI considered only those respondents who had in-depth understanding on both policy and practical barriers on the smooth function of market. Snow ball sampling approach was used to select the supply chain respondents. Not only linear marketing chain, research team conducted interview with other market intermediaries such as government local bodies, ward chairpersons, transport agencies, etc. d. Direct Observation Along during the survey, direct observation was conducted on the development of physical infrastructures, flow of migration and changes in market, development of the rural market centers, supply of construction materials including the enterprises trading construction materials as the producers, wholesaler and retailers. We observed position and prospects of those various supply side actors with the prospects and challenges of market expansion, and changes in economic and socio-demographic situation in near future (For more details on format, please see the Annex-IX). Quantitative data related to quality of stocks, availability and regularity were also obtained from direct observation and their internal documents.

13 e. Quick Survey: Quick quantitative survey of 116 MSMEs was conducted on the supply side informants such as hardware enterprises, crushers, brick suppliers/ Kilns, CSEB/HCB producers, stone cutters, sand extractor, furniture, transporter, contractor, and metal worker/griller (For more details on format, please see the Annex-VI). We considered urban and rural market areas in each of five municipalities in two selected districts. Based on discussion with Mott Macdonald´s team and scope of analytical framework, survey questionnaires were finalized. Each supply side actors of the construction market were interrogated on the defined question as developed in consultation with Mott Macdonald or as per availability and relevancy, and based on the scope of information. Simple random sampling was utilized in each of the market to select the respondents. In order to revive gender disaggregated data, survey were administered with female respondent as far possible. f. Key Informant Interviews: KIIs were conducted with selected informants of supply side actors to inform on the supply of construction materials in terms of types, volume and location in Dhading and Nuwakot districts (For more details on format, please see the Annex-VIII). In addition, financial intermediaries were interviewed on the loan market. Quantitative data related to the MSMEs of construction market were obtained from direct field visits, observation and through their internal documents. With the mutual consent and understanding of Mott Macdonald, NDRI selected respondents from selected market, municipalities, FNCCI, FNCSI and respondents who had in-depth understanding on construction market suppliers including their volume with municipality level disintegration in Dhading and Nuwakot districts. Policy and practical barriers for smooth functioning of market were explored. The information received on KIIs was verified in the field level experiences. Not only with the linear marketing chain, we conducted KIIs with other market intermediaries, such as financial institution to obtain information on access to capital, supply of loanable fund, problems of loan market, etc. 2.2 Field Monitoring, Management and Quality Assurance In order to refine the survey question, KII guidelines and interviewing technique, detail consultation within project team and research team was carried out. Pre-testing of research tools and finalisation: Pre-tesing of Questionnaire and checklist were conducted in Bidur Municipality area. The received feedbacks from pre-testing were incorporated in final questionnaires. Recruitment and Orientation Training to Research Team: We administered 4 qualified field researchers in each district for quick quantitative survey. One-day interaction session on 7th July 2017 was organized to orient about the research project to all field research team members. It covered overall plans, ethics and field data collection process, precaution to be taken during the data collection, and possible strategies to deal with the potential issues during the course of field research. Orientation also covered research ethics and do-no-harm policy topics. Altogether five experienced researchers were mobilized for KIIs and quantitative survey in the field.

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Field Work: The team was mobilized to collect data in the field during 01 – 12 July, 2018. The team comprises of 5 members consist of economist as leader and 4 field researchers. Quality assurance of survey process was ensured through data collection tool, monitoring and supervision, which were assessed right during data collection, etc. Since, data were gathered from different research tools, team leader/coordinator triangulated data and interpret findings. Leader cross checked information collected from enumerators through informal discussions, and critical observations on researchers’ interpretations4. Further, different entry points for research were adopted to get access to heterogeneous group of respondents to gather a wide range of data and perceptions.

2.3 Data Management and Analysis Plan Data systematizing: Since, the KIIs and interview were conducted in Nepali language, field notes recorded interviews and other information were translated into English language and the contents were edited. Translated and edited contents were categorized according to the identical themes and sub-themes. Those major themes were coded according to the survey objective and question through self-made tags to understand its content for analysis part. The important and powerful words, lines and meanings from the dataset were transformed as the topics, sections and themes for analysis. The refined data were shaped by identifying different alternative explanations and themes. These dataset were then interpreted based on literatures, contemporary issues, findings of past and the proposed concepts and practices. Quantitative data obtained from paper based questionnaire survey were entered into SPSS to check out the missing in the first phase. Analyzing data: Analysis was done from initial phase of fieldwork. We analyzed data set with the literatures on NRA guidelines, market system development approach, successful case- studies, policy gap and policy and practices in gaps in marketing of construction materials. All the analysis was presented and arguments were drawn for justifying the conclusion to meet proposed objectives of the assignment. When all these steps were carried out, data set was shaped through back and forth linkages, developing alternative ideas, preparing drafts, correcting and rewriting the content, backup by data and arguments and important cases. Finally, all analysis was transformed into understandable and meaningful interpretation and presented as output of this study. Based on available data, we conducted mapping of market suppliers based on their location, financial requirements and arrangements, business expansion plan including the business constraints.

Ethics of Research: All the ethical consideration was maintained throughout the research process and practices. Following considerations were taken into account:

4 Denzin, N. K., (1978). The research act: A theoretical introduction to sociological methods. New York: McGraw-Hill.

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I. Protection of the personal information: Personal information was not disclosed directly from the exact identification of the respondents, as the activities may hamper in the life and business of the respondents. Name and other identification were decoded to protect the confidentiality during the analysis as required.

II. Voluntary participation and informed consent: Mechanisms to guarantee that all participants chose to participate in the study of their will were established. They were fully informed about the procedures of the research project and any potential risks. Both verbal and written information were provided to the potential participants and written consent hall be sought, where possible. If written consent could not be obtained (due to the literacy status of the participants) verbal consent was sought. Additionally, it made clear that participants were not forced to answer the questions, if they were uncomfortable or they did not want to answer, and that they could stop their participation anytime. Full participation was encouraged nonetheless. Permission to audio-record the KIIs were sought with the participants.

III. Confidentiality and anonymity of the participants: Mechanisms to protect confidentiality and anonymity of the participants were established. The participants were de-identified. Codes, rather than participant’s details were used, to identify participants during data collection and analysis. During transcription it was ensured that any text/ content containing information that is pertained ‘identifying’ were de-identified or deleted as felt appropriate during analysis.

IV. Reliability of data: We mobilized highly qualified economist to monitor the activities and field researchers to collect the field data. Field researchers were exclusively trained to accurately measure the response of the respondents. We utilized the standard software SPSS or Excel to process and analyze the data collected from the field. 2.4 Deliverables and Timelines

The key deliverable of the assignment is the final report of findings summarized around the key thematic areas, disaggregated by gender, municipality, market, and districts. The assignment was completed within 4 weeks, starting from 27 June, 2018.

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CHAPTER THREE MAPPING OF SMALL ENTERPRISES The mapping of the business indicates the concentration of MSMEs in the districts. The chapter includes the construction materials and suppliers, development of markets, estimated number of small enterprises, registration of MSMEs, and source of investment of MSMEs. 3.1 Construction Materials and Suppliers Construction Materials: Overall imported and locally produced construction materials were available in Nuwakot and Dhading districts. Imported Construction Materials: Construction materials such as iron rod, Galvanized Iron Sheet, cement, and brick block, CSEB and aluminum were imported from manufacturing industry and mostly they were brought from outside of district and country. In addition, other supporting materials like painting enamel, electric, plumbing and sanitation wares were also brought from manufacturing industry. Locally Produced Construction Materials: Materials such as stone, timber, gravel, sand and pebbles were available in nearby areas. Either they were supplied by local suppliers or people used to directly bring it from source with certain payment of tax at local level. Construction Markets: Three types of markets existed in each district. Major markets were located at district headquarters, where there was a presence of large number of suppliers. Relatively small numbers but with a large scale of business transaction, construction materials suppliers were located around the high-way markets. Minor markets were located in seasonal roads (that often close in rainy seasons) which connect few rural municipalities and rural wards. Contractors: Based on the nature and area, study team observed two different types of contractors working in survey districts. The first type of contractors were registered contractors (For more details, please see the Annex-X) who usually contract for large scaled construction activities and frequently undergo through the tender process to get the bid; the second type of contractors included contractors who were not legally registered in any of authority but involved in individual´s home construction activities. These unregistered contractors were large in numbers in urban, semi-urban and rural areas. The unregistered contractors were migrated construction worker and locally available construction workers. They individually or in support with the local elites deal with local people for construction agreement. They have better skill for constructing rural home and can supply construction labors. However, they were not allowed to take part in tender process or contracting with government´s construction activities. The presences of migrated contractors were more concentrated in urban and semi-urban area while local contractors were limited in the rural level construction.

Material Suppliers: There are three major rivers cross Nuwakot district, namely, Trishuli River, Likhu and Tadi Rivers. Crushers and sand suppliers are largely located at the bank area of these rivers.

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Construction materials are largely produced in Trishuli River (in both districts), followed by Likhu and Tadi Rivers in Nuwakot district. At present, the previously available but unregistered crusher enterprises have been significantly reduced due to the strict regulation of local government authorities. Hardware enterprises: The hardware enterprises are highly concentrated in the district headquarters (market area). District´s headquarter is a strong base of institutional arrangements of government offices which set up for a large number of government line agencies. Even today, it is the only large business area to supply construction materials. The district level market structure connects to the semi urban and rural market area and municipalities. The semi-urban and rural markets, though they are emerging as local centers, are not reliable source of supply for import based construction materials. Therefore, hardware enterprises of local center as well as district market centers are supplying the import based construction materials. 3.2 Development of Markets in Nuwakot District

Figure 1: District Map, rivers, and road passes in Nuwakot District

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Bidur, the district headquarter of Nuwakot, is the major market area that connects small emerging market areas in rural municipalities. Nuwakot district has 3 major rivers called Trishuli, Tadi and Likhu and construction markets are concentrated around these rivers. More specifically, the local production of construction materials such as crushers, concrete stones, sands, etc. are broadly limited around these rivers, while imported raw materials such as hardware items and bricks are supplied from the district headquarters to local market centers which are being emerged at the main roads of district´s connection. These materials have been imported mainly from Kathmandu, Terai market, India, etc. Local market centers import hardware items and bricks from district headquarter and nearby cities. In addition to district coverage, the large scale hardware enterprises of Nuwakot supply their construction items to few municipalities of Dhading district and to a large segment of Rasuwa district. The major suppliers of construction sector market such as hardware enterprises, brick suppliers, etc. are located at the major road and major river side area. Development of emerging markets in Nuwakot district are therefore limited along with the roadside of the Trishuli River (Bidur municipality), Tadi Khola (Belkotgadhi, Kharanitaar), and Likhu Khola (Dhikure and Chhahare) and around the road connectivity areas. The distribution of MSMEs which are working on construction market is influenced by the land topography such as the hills, river basins, etc. Bidur, Urban Municipality, which lies in the district headquarters has more than 6 times higher MSMEs (584) in comparison to the MSMEs available in Dupcheswor Rural Municipality (89). However, emerging markets Likhu has a bit large number of MSMEs (234) and Tadi has 98 MSMEs (Table 3).

The number of MSMEs in some selected municipalities of Nuwakot district is presented in table 3, below:

Table 3: List of different MSMEs present in Nuwakot District MSMEs Dupcheswor Bidur Likhu Tadi Hardware enterprises 6 52 16 8 Crushers 0 2 2 1 Brick Kilns 2 27 0 5 Hallow Concrete Block (HCB) and CSEB producers 1 14 5 1 Stone Cutting enterprises 4 0 0 0 Sand extractor 7 5 0 1 Timber treatment/furniture enterprises 10 69 0 0 Transporters 28 216 87 35 Mini and Micro Contractors 31 194 103 24 Grill 0 5 21 23 Total MSMEs 89 584 234 98 Source: Ward Chairpersons of the respective municipalities in Nuwakot district, July 2018 According to the registered SMEs of Office of Small and Cottage in District, the number of SMEs have 247 enterprises based on the construction industry in Bidur municipality (For more details- please see the Annex-XI). The registered list however does not incorporate the number

19 of hardware enterprises, mini and micro contractor, and the transporters. While comparing the registered small enterprises (crushers, sand extractors, furniture, etc.) with information given by ward chairpersons of Bidur municipality, we found out a higher number registration in comparison with whatever observed by the ward chairpersons. 3.3 Estimated Number of Small Enterprises of Construction Market in Nuwakot District The estimate of MSMEs shows that the number Hardware enterprises, Crushers, Brick Kilns and suppliers, Hallow concrete block and CSEB producer, stone cutting enterprises, sand extractors, timber treatment /furniture enterprises, transporters, mini and micro contractors, and Grill enterprises are 149 (7%), 13 (1%), 54 (3%), 43 (7%), 4 (<1%), 22 (1%), 169 (8%), 773 (36%), 784 (37%), and 108 (5%) respectively in Nuwakot district. (For more details, please see the Annex-XII)

Estimated MSMEs in nuwakot district Crushers Hardware 1% Brick Kilns Stone Cutting enterprises 3% enterprises 7% 0% Hallow Concrete Block (HCB) and Sand extractor CSEB producers 1% 2%

Grill 5% Timber treatment/furniture enterprises 8% Mini and Micro Contractors 37% Transporters 36%

Figure 1: Estimated MSMEs in Nuwakot district

3.4 Development of Markets in Dhading District Dhading besi is the head-quarter of Dhading district. Similar to Nuwakot district, construction market is highly concentrated on headquarter market area and river bank of Trishuli River along the Prithvi Highway. Trishuli River in Dhading district crosses four rural municipalities- Benighat Rorang, Gajuri, Siddhalek and Galchhi, while the Prithvi Highway in Dhading district

20 crosses five municipalities, i.e., one additional rural municipality (Thakre municipality) in addition to those of 4 rural municipalities that are passed by the Prithvi Highway. The highway also locates MSMEs which supply locally produced as well as imported construction materials. Some local items such as bricks from the local kilns are produced in a few municipality areas of Dhading district, such as Dhunibesi Municipality. Locally produced construction materials are available at the bank of Trishuli River. The more we move towards Kathmandu valley the more concentration of locally produced materials in Dhading district. However, import based construction materials are available at the headquarter city- Dhadingbesi (Nilkanth Urban Municipality) and around the Prithvi Highway. The closer we move towards Kathmandu valley, we observe a large number of sand processors and crushers located around the bank of Trishuli River.

Figure 2: District map, rivers, and roads passes in Dhading district The data reveals that headquarter of the Dhading district- Nilkantha Urban Municipality (557) as well as Dhunibesi Urban Municipality (border of the Kathmandu valley) (629) have a large number of MSMEs in comparison to the MSMEs located in other rural municipalities. Benighat Rorang Rural Municipality have a large number of MSMEs as compared to the MSMEs in Gajuri Rural Municipalities.

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MSMEs in construction market in selected municipalities in Dhading district

13 Grill 28 16 31 167 Mini and Micro Contractors 186 299 237 84 Transporters 346 7 136 13 Timber treatment/furniture enterprises 0 61 8 Sand extractor 4 6 28 3 Stone Cutting enterprises 3 2 0 7 Hallow Concrete Block (HCB) and CSEB producers 4 6 24 2 Brick Kilns 38 1 11 Crushers 4 1 1 8 7 Hardware enterprises 16 15 28

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Dhunibesi Benighat Rorang Nilkantha Gajuri

Figure 3: MSMEs in construction market in selected municipalities The list of MSMEs which were registeredin Dhading at the district District Office of Small and Cottage reveals that 89 small enterprises are working in the field of Dhunibesi municipality5. Benighat Rorang, Gajuri, and Siddhalek municipalities have 47, 111, and 15 MSMEs respectively. The list does not incorporate the number of hardware enterprises, mini and micro contractor, and the transporters working in the survey areas.

Table 4 Different enterprises present in Dhading District Enterprises Dhunibesi Benighat Rorang Nilkantha Gajuri Hardware enterprises 16 15 28 7 Crushers 4 1 1 8 Brick Kilns 38 1 11 2 Hallow Concrete Block (HCB) and 4 6 24 7 CSEB producers Stone Cutting enterprises 3 2 0 3 Sand extractor 4 6 28 8 Timber treatment/furniture 0 0 61 13 enterprises Transporters 346 7 136 84 Mini and Micro Contractors 186 299 237 167 Grill 28 16 31 13 Total MSMEs 629 353 557 312 Source: Ward Chairpersons of the respective municipalities in Dhading district, July 2018

5 The hardware enterprises could be identified by the name they have as such in the register, while the mini and micro enterprises are not registered and the limited transporters are registered at the District Small and Cottage Office.

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There is a gap between those of registered MSMEs at the District Office of Small and Cottage and data collected through the source of ward chairpersons. (For more details, please see the Annex-XIII) 3.5 Estimated Number of Small Enterprises of Construction Market in Dhading District In Dhading district, the estimate of MSMEs show that number Hardware enterprises, Crushers, Brick Kilns and suppliers, Hallow concrete block and CSEB producer, stone cutting enterprises, sand extractors, timber treatment /furniture, transporters, mini and micro contractors, and Grill enterprises are 118 , 19, 54, 48, 11, 54, 178, 776, 2110, and 101 respectively. Of these MSMEs, transporters cover 50 percent followed by 13 percent mini and micro contractors, 11 percent furniture/ timber treatment enterprises, 8 percent hardware enterprises, etc. (For more details, please see the Annex-XII)

Total MSMEs in Dhading district

Hardware Crushers Brick Kilns Hallow Concrete enterprises 1% 4% Block (HCB) and 8% CSEB producers Grill 3% Stone Cutting 6% enterprises 1% Mini and Micro Contractors Sand extractor 13% 3%

Timber Transporters treatment/furniture 50% enterprises 11%

Figure 4: Total MSMEs in Dhading district

3.6 MSME Registration The MSMEs registration process generally takes place at the District´s Small and Medium Enterprise (SME) Office, a line agency of Ministry of Industry (MoI). In addition, registration processes are being started at municipality level. For the purpose of tax, MSMEs are also registered at the district line agency of the Inland Revenue Department. A questionnaire survey was administered to report on the registration status of micro and small enterprises of construction sector in Nuwakot and Dhading districts. The survey respondents include hardware enterprises, crushers, brick suppliers/ Kilns, CSEB/HCB producers, stone

23 cutters, sand extractor, furniture, transporter, contractor, and metal worker/griller. Almost of the entrepreneurs engaged in construction sectors, for example, are registered at their concerned local or national regulatory agencies. However, almost all of small contractors and very few hardware and furniture enterprises are supplying their services/outputs without registering their business. Those insignificant hardware and furniture enterprises which are not registered are mostly located in the rural and semi-rural area. There are some MSMEs which are not registered anywhere are supplying construction goods and services. Those enterprises which are supplying goods without registration are mostly the small and mini contractors and transporters (at the local level) in addition to the brick suppliers. On the other, there are also some MSMEs which are not supplying the construction goods and service though they have been registered at the SME office in the districts.

Number of registered and non-registered business

Yes No

Metal 14 3 Contractors 1 8 Transporter 9 0 Furniture 23 3 sand extractor 6 0 Stone cutter 1 0 CSEB/HCB 8 0 Brick suppliers/ Kilns 7 1 Crushers 2 0 Hardware enterprise 30 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 5: Number of registered and non-registered business Most of the respondents have registered their business in the government authority. However, few respondents from metal and furniture enterprises and most of the respondents from contractors are not registered in Nuwakot and Dhading districts. 3.7 Source of Investment for MSMEs in Construction Market Respondents were asked to inform about the source of capital for investment on their business. Half of the respondents (50%) reported that they used their old savings. This was followed by those respondents who sourced through the Bank and Financial Institutions including the cooperatives (30%), neighbors, friends and relatives (13%), business income of the entrepreneur (4%), and others (3%).

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Source of loan for business establishment by business

Metal 12 5 8 2 1 Contractors 7 0 1 0 Transporter 8 1 6 0 Furniture 22 11 9 10 Sand extractor 6 0 1 1 2 Stone cutter 0 1 0 CSEB/HCB 4 1 6 0 Brick suppliers/ Kilns 7 1 3 0 crushers 1 0 1 0 1 Hardware enterprise 20 3 17 3 2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Old Saving Neighbours and Friends Loan from Bank, Finance and cooperative Business Income Other

Figure 6: Source of loan for business establishment by business

Source of loan for business establishment by municipality

Tadi Rural Municipality 7 1 6 1 0 Siddhalekh Rural Municipality 1 0 1 Nilkhantha Municipality 18 2 9 0 Likhu Rural Municipality 3 0 2 0 1 Gajuri Rural Municipality 6 3 5 0 1 Dupcheshowor Rural Municipality 2 1 0 Dhunubesi Municipality 12 3 4 0 1 Bidur Municipality 23 8 19 7 1 Benighat Rorang 11 4 4 0 Belkotgadhi Municipality 4 0 3 0 1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Old Saving Neighbours and Friends Loan from Bank, Finance and cooperative Business Income Other

Figure 7: Source of loan for business establishment by municipality

Respondents who used old saving for busfiness were more in rural area in comparison to urban area.

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CHAPTER FOUR FINANCIAL REQUIREMENTS AND ITS ARRANGEMENT

The presence of the bank and financial institutions have a good coverage around the head quarter cities and in the few developed areas of the districts (For more details, please see the Annex- A). Equally there are a few rural municipalities which still have low access of financial resources for the MSMEs. Study team found the limited access of the resources to MSMEs even with presence of all categories BFIs- A, B, C, and D including the cooperatives. Most of those BFIs which are providing resources are serving loans to MSMEs as a consumer basis but in the form of business entity (For more details, please see the Annex-XIV). The interest rate charged for business entity in the Nepali banking industry is relatively smaller while it goes higher for consumer. Actually, rate of interest charged are based on the base rate plus premium value. The base rate covers overall operational cost of BFIs and the premium is additionally added which is usually based on the sectors of credit flow, associated risk, return on equity, collateral positions, etc. The presence of informal market for access of credit such as friends, neighbors, relatives are also found equally important source of fund for MSMEs. The proportion of these informal loans is still higher among the MSMEs in the districts. Issues are found on availability of collaterals, cost of capital, business and financial education, credit market infrastructures, development of physical infrastructures, etc. 4.1 Willingness to Expand Business

Willingness in Business expansion in near future

Metal 16 1 contractors 9 0 transporter 6 3 furniture 22 4 sand extractor 5 1 Stone cutter 1 0 CSEB/HCB 6 2 Brick suppliers/ Kilns 8 0 crushers 1 1 Hardware enterprise 21 9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

Figure 8: Business expansion in near future, by business 26

Respondents were asked to inform their willingness to expand business in near future. A very high majority of the survey respondents reported that they wish to expand their business. Eighty two percent respondents desired to expand their business while 18 percent did not have such wishes. Of those who were willing to their business were stone cutter and brick suppliers (100%), furniture enterprises (84%), non-registered contractors (67%), etc. On the other those who denied expanding their business in near future were crushers (50%), transporter (37%), hardware enterprises (30%), CSEB/HCB producers (25%), etc. Respondents who were from rural local market centers would like to expand their business in comparison to those who were from semi-urban or headquarters area of the district.

Business expansion in near future in municipality

Tadi Rural Municipality 8 3 Siddhalekh Rural Municipality 1 0 Nilkhantha Municipality 17 4 Likhu Rural Municipality 4 0 Gajuri Rural Municipality 7 3 Dupcheshowor Rural Municipality 2 0 Dhunubesi Municipality 11 3 Bidur Municipality 29 6 Benighat Rorang 12 1 Belkotgadhi Municipality 4 1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

Figure 9: Business expansion in near future in municipality

4.2 Utilization of Fund to Expand Business Respondent MSMEs reported that they were interested in utilizing the fund for purchasing of land to manage their working space. In addition respondents were also interested in procuring necessary materials, steels, Tayal, machinery and equipment, new transports, increase the stock of goods and services, build show room for display, develop new pillar boxes, warehouse management, etc. for business expansion. 4.3 Availability of Capital to Expand Business Respondents were asked to inform on the availability of capital to expand business in near future. An overwhelming proportion of respondent reported that they didn´t have their own capital to expand their business. Those respondents who did not have their own capital were more in rural area in comparison to the urban and semi-urban area. Most of the questionnaire survey respondents did not have their own capital to invest in for their business expansions.

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Own capital to expand business Yes No

30 Tadi Rural Municipality 0 27 Siddhalekh Rural Municipality 0 25 Nilkhantha Municipality 1 Likhu Rural Municipality 0 20 Gajuri Rural Municipality 0 15 Dupcheshowor Rural… 0 12 11 Dhunubesi Municipality 0 10 Bidur Municipality 2 16 5 Benighat Rorang 0 7 8 Belkotgadhi Municipality 0 4 2 4 1 0 0 0.5 1 1.5 2 2.5

Figure 10: Own capital to expand business Own capital to expand business by enterprises

Metal 0 16 Contractors 0 9 Transporter 1 5 Furniture 0 22 sand extractor 1 4 Stone cutter 0 1 CSEB/HCB 0 6 Brick suppliers/ Kilns 0 8 Crushers 0 1 Hardware enterprise 1 20

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

Figure 11: Own capital to expand business by enterprises

4.4 Source of Capital to Expand Business Respondents were asked to report possible fund suppliers for their business expansion. Most of the respondents (90.5%) reported that they shall be taking loan from BFIs and cooperatives while expanding their business in near future. Respondents who have planned to take loan from neighbors, friends, and family to expand their business are very low (5%). (Figure 13)

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BFIs source of loan for business expansion in near future

Tadi Rural Municipality 8 0 Siddhalekh Rural Municipality 0 1 Nilkhantha Municipality 15 2 Likhu Rural Municipality 3 1 Gajuri Rural Municipality 7 0 Dupcheshowor Rural Municipality 2 0 Dhunubesi Municipality 11 0 Bidur Municipality 26 3 Benighat Rorang 11 1 Belkotgadhi Municipality 3 1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Loan from Bank, Finance and Cooperative Yes Loan from Bank, Finance and Cooperative No

Figure 12: BFIs source of loan for business expansion in near future

Respondents who intended to use their own old saving while expanding their business were 22 percent only (Figure 14).

Old saving as a source of loan for business expansion in near future

Tadi Rural Municipality 3 5 Siddhalekh Rural Municipality 0 1 Nilkhantha Municipality 3 14 Likhu Rural Municipality 1 3 Gajuri Rural Municipality 1 6 Dupcheshowor Rural Municipality 0 2 Dhunubesi Municipality 4 7 Bidur Municipality 5 24 Benighat Rorang 3 9 Belkotgadhi Municipality 1 3 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes No

Figure 13: Old saving as a source of loan for business expansion in near future

4.5 Problems in the Source of Loan Respondents were asked to view the problems close to the source of capital while they are going to expand their business. 27 percent respondents reported that the interest rate is high, while 16

29 percent, 15 percent, 11 percent and 5 percent respondents reported that they had difficulty to pay the high interest rate, no reliable source of loan, difficult to pay loan installment, and cost of loan processing respectively. One fourth of the respondents (25%) reported that they had other problems (Figure 15).

Problems in the source of loan

3 3 1 0 3 7 Contractors 7 2 3 0 1 2 1 3 2 1 3 1 Furniture 4 5 3 2 8 11 0 2 1 1 3 1 Stone cutter 0 1 1 0 1 0 2 0 2 0 3 2 Brick suppliers/ Kilns 2 4 1 2 4 2 0 Hardware enterprise 3 3 2 1 13 9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No relaiable source of loan Difficult to pay interest Difficult to pay installment Cost of loan processing High interest rate Others

Figure 14: Problems in the source of loan

Problems in the source of loan

Tadi Rural Municipality 5 5 2 1 1 2 Siddhalekh Rural Municipality 0 1 Nilkhantha Municipality 3 4 4 1 9 8 Likhu Rural Municipality 0 1 1 0 2 Gajuri Rural Municipality 0 2 3 1 5 2 Dupcheshowor Rural Municipality 1 0 Dhunubesi Municipality 2 3 1 3 7 3 Bidur Municipality 7 5 10 12 9 Benighat Rorang 3 4 3 0 5 5 Belkotgadhi Municipality 1 0 1 0 3 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No reliable source Difficult to pay interest Difficult to pay installments Cost of loan processing High interest rate Others

Figure 15: Problems in the source of loan

While delving deep into the root causes, study team observed several challenges in access to finance for MSMEs, especially for those MSMEs who were from rural municipalities. Actually the challenges were found in the supply as well demand side of the loanable funds. The supply side challenges in summary

30 are: (a) increase the proportion of MSME business loan, (b) decrease the lengthy procedures of lending and documentation, (c) include rural social assets in risk mitigation measures- scoring matrix of BFIs, (d) enlarge the scope of assets in the list of collaterals, (e) reduce the cost of credit information among SMEs, (f) educate MSMEs on business development plan and strategies. On the other, the demand side challenges in summary are: (a) increase the payment capacity of MSMEs, (b) reform the credit transaction practice, (c) reduce the cost related to the business registration, audit reports and tax compliance (d) reduce the cut throat competition among MSMEs, (e) establish credit market infrastructures, (f) habituate MSMEs on market system and credit market information, (g) develop the local level physical infrastructures of development, etc.

Table 5: Loan capital requirements for MSMEs to expand business NRs. Frequency Percent 2 to 4 hundred thousands 4 4.2 4 to 6 hundred thousands 8 8.4 6 to 8 hundred thousands 5 5.3 8 to 10 hundred thousands 5 5.3 Above 10 hundred thousands 73 76.8 Total 95 100.0

The presence of the BFIs were largely concentrated in the urban area. Commercial banks which have a large proportion funding resources were found with limited interest in small size loans (NRs. 1 million threshold) because of higher operational cost. The presence of development bank and finance companies are limited even in the urban area of the study districts. The number of cooperatives in the rural areas is high but they remain closed due to no regular staffs in majority cases and were found with limited loanable funds. These cooperatives usually flow loan of very small size (mainly NRs. 25,000- 300,00.00) which in many extend do not cover the demand for construction MSMEs. 4.6 Required Size of Capital for Business Expansion

Average size of loan demand for MSMEs in rural and urban municipalities (%)

Rural Municipality Urban Municipality

8.82 10,100,000- 10,500,000 17.24 17.65 4100,000-10,000,000 17.24 8.82 2100,000-4000,000 10.34 20.59 1100,000-2000,0000 20.69 44.12 200,000-1000,000 34.48

Figure 16: Average size of loan demand for MSMEs in rural and urban municipalities 31

A large proportion of the respondents (77%) reported that additional loan capital requirements for them is more than 10 lakhs, while 13 percent respondents reported that they require about 6 lakhs loan, and 10 percent respondents reported that they are in need of 6-10 lakhs for expanding their business in near future.

However, majority of the respondents demanded for a loan size in the range between NRs. 1- 2 million. The credit requirements vary in between the nature of MSMEs in the districts, their family background, city they belong to, size of business they handle, and so on. Those who are from urban areas have demand of larger size credit compared to the MSMEs from rural areas.

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CHAPTER FIVE CONSTRAINTS OF MSMEs

The study team during the questionnaires survey asked them to put forth about their problems. The responses were collected under the following headings about the MSMEs. Industry: There are some policy issues about construction materials. For examples, judiciary and district administration office have conflicting statements - they have supported and ruled against extraction of sands and concrete from the rivers. The barriers are mainly in the quality of the construction materials, transportation system, price fluctuation of raw materials, local material scarcity, etc. The government has not proper supportive policies for MSMEs in the development of construction market. The cost of transportation is very high due to the difficult muddy roads and lack of road networks. The labor market is in problem mainly due to the shortage, dominance of unskilled and semi-skilled labors since they were available only for seasonal periods. MSMEs have problems of liquidity as most transactions were on credit basis. They recently have faced problems of high tax. There are problems occurred in time and again such as inconsistent supply of electricity, lack of raw materials, poor governance, unsupportive behavior of law enforcement personnel, forest office (for not letting allow to chop down the trees) and district administration, difficulties of road connectivity, market practices of the MSMEs, shortages of goods and services, collaterals for access to credit, low education and technical idea on business proposal development, limited market opportunities etc. Hardware: In lack of proper regular income of the consumers, entrepreneurs are compelled to practice of selling goods and services on credit. As a result, lack of cash liquidity complex relation with dealers and whole sellers. The competition among the enterprises in the local market is increasing. Increase in company price for the imported products led to rise in local retail price of goods in the market. However, consumers complained on the rising price of construction materials. Therefore, it is difficult to sale construction goods and services due to the high price. Internally, Hardware MSMEs also have problems of staffs (unavailability) and local level transportations. MSMEs also feel that government officials have not rightly monitored for market reform. With the unavailability of construction goods and service for months in a year, lack of sufficient space for investment due to the limited opportunity in the local market, the MSMEs expansion has been stagnated. Problems are also in the approach of banking valuation while taking loan from BFIs. Due to the transportation problems, goods arrive was very untimely in local market. Due to this, hardware MSMEs have been unable to meet the demands for goods and services in the rural area. They blame on the government policies and employees for taking charge of under invoices during the import and export of goods and demand transparent monitoring by the government officials.

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Brick suppliers / Kilns: The market is growing more competitive due to the large level of suppliers in the local market. Suppliers are selling bricks as per manufacturer´s cost and they are not even taking the marketing cost. The land for rent is going to be very expensive. They have used more unskilled or semi-skilled labors. Brick suppliers have taken high loan from the bank and financial institutions. As a result, brick suppliers are not being able to invest more in business. Some of the brick suppliers are not registered. Situations like increase in cost due to broken bricks and seasonality demand in the market have led the bricks suppliers difficult to sustain in the market. Halo concrete block and CSEB producers: These producers sale goods on credit and they delay payment had restricted further investment. As a result, they have problems to capitalize the resources. Also high price of raw materials made difficulty in the smooth sales. The banking service for taking loan has a very lengthy process. There is a lack of skilled labors. The demand for these goods and services is small. Transporters/ suppliers: The transporters have a seasonal market supply. The problems are created by the police administration and their bad governance. In addition, local road network is very poor to move on the roads to supply of goods in the rural areas. Also, credit transaction in local market has made the entrepreneurs shortage of liquidity, eventually having negative impact on the expansion of the service. The cost of capital is high due to the high interest rate. The suppliers also feel a lengthy banking process for taking loan even to the SMEs. In case of vehicle accident, they face problems from public people and feel difficulty (far distance) to reach at the local hospitals. Suppliers are facing problems in getting back the credit receivable amount from the market and the transactions are also very low due to seasonality market. Also, they think that VAT has increased expense cost. The vehicle servicing and maintenance are also difficult in the districts. Moreover, they face a tough competition among suppliers depending upon the seasonal variations. The shortage of raw materials and blockages of roads by the various groups is also the problems for transporters. The transporters also face difficulty in securing their vehicles as there is limited space available for parking. Mini and small contractors: Most of the mini and small contractors are Madeshi communities and they feel that biased and discriminatory behavior by some members of the community have made difficult to work. They are not legally registered but they are taking contract for constructing their homes. They have low capacity of investment to expand their business. Also, they don’t have collateral in most of the cases. They have to pay a high proportion of revenue for labor costs. They feel difficulty and expensive registration process. They also suffer from the poor roads networks, seasonal working of the labors, and problems in the supply of raw materials. Furniture/Timber treatment enterprises: They lack proper space for managing their raw materials and products. They also face problems in getting loan from bank as it was difficult to secure loan as per the size of their demands. They also sell goods on credit. Sometimes woods

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(raw materials) are damaged by termites and other insects. Because of seasonality and low annual transaction, they do not feel necessary in registering their enterprises on the Office of the Company Registrar. They are facing shortage of skilled and semi-skilled labor, and raw We are regulating locally produced construction materials. A large number of suppliers are involved in extracting the construction materials even without registration and paying any tax to the local government. Now, there is only one registered entrepreneur producing crushers required at the local level and paying royalty of concrete materials. Now we have to energize to such construction material producers for the support of constructing homes for the earthquake victims.

Construction materials are not extracted during these 3 rainy months, Ashad to Bhadra. There used to be problems from district level government structures on supply of construction materials. When new CDO and Police heads are come into the position, problems appear in the supply. Now we have settled these issues and problems have been solved in district. There are several small level suppliers to whom we are not regulating to those who do not use machinery and equipment to extracting sands and concrete materials from rivers. They are small holders and marginalized community people who need supports. We see shortages of raw materials in time and again. – Chairperson, Construction Regulation Committee, Bidur Municipality (Ward Chairperson), Ward No. 4 materials. The raw materials they use to produce outputs are becoming costly and it makes difficulty to compete among other suppliers in lack of proper stock. They also have credit transaction problems. They don’t have sufficient stock of money to invest in their business. They have dissatisfaction with government institutions regarding the registration and other issues. They are facing difficulties to import woods from other districts because of irregularities by the governing bodies. Sand extractors: They have policy level difficulty of extract sand. Problems are sometimes created by government administration. The market sometimes has lack of raw materials. Government complicated policies and illegal extraction and distribution of sands in the market has created further problems for Sand extractors. Crushers: Policy issues are at the regulatory levels. Local governments are being unable to take right decision to support on the reconstruction process.

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CHAPTER SIX CONCLUSION AND RECOMMENDATIONS 6.1 Conclusion The current reconstruction process is lagging behind due the market supply gap of construction sectors actors and problems in their services in Nuwakot and Dhading districts. Specifically in rural municipalities, supply constraints are observed on the supply of construction materials. The barriers that limit on the supply of construction materials and related services are not only due to the topographical difficulties but also on the market based incentives in lack of support from government institutions and private sectors. The presence of construction based MSMEs are highly concentrated around the headquarter cities and major roads around the rivers, while the presence of these MSMEs is very poor in the rural hilly area in the districts. The presence of construction based MSMEs are therefore largely affected by government structures in the districts and rivers flow which provides the local raw materials, and development of roads. The study team projected 2119 and 3469 number of MSMEs in the construction sector in Nuwakot and Dhading districts respectively. The disintegrated data showed MSMEs working are Hardware enterprises (7%), Crushers (<1%), Brick Kilns/suppliers (3%), Hallow Concrete Block (HCB) and CSEB producers (2%), Stone cutting Enterprises (<1%), Sand Extractors (1%), Timber Treatment/Furniture enterprises (8%), Transporters (37%), Mini-contractors (37%), Metal/Grill Enterprises (5%) in Nuwakot District. Similarly, the proportion of Hardware enterprises (3%) , Crushers (<1%), Brick Kilns/suppliers (1%), Hallow Concrete Block (HCB) and CSEB producers (1%), Stone cutting Enterprises(<1%), Sand Extractors(2%), Timber Treatment/Furniture enterprises(5%), Transporters (22%), Mini-contractors (61%), and Metal/Grill Enterprises (3%) among MSMEs in Dhading District. Of these MSMEs, a large presence of mini contractors who are not legally registered is very high due to the informal parts of the construction market. Of these enterprises which sourced their old saving for their business establishment were almost 50 percent. The outreach of BFIs and Cooperatives is very good in headquarter cities followed by a good presence on road access area and poor presence in the rural area. An overwhelming proportion of MSMEs respondents (82%) from the survey area reported that they wish to expand their business. However, they did not have as much funds of their own to invest in their business. Of those who had the wish to expand their business were almost in need of the financial requirements. Moreover, those entrepreneurs desiring of business expansion have a plan to take loan from BFIs and Cooperatives sources (90.5%). However, MSMEs see problems such as high interest rate (27% respondents), difficult to pay interest rate and installments, etc. in their possible loans sources. A very high majority of the respondents (77%) reported that they had a demand for more than NRs. 1 million to expand their business, while 13 percent and 10 percent respondents had in demand for less than NRs. 0.6 million and NRs. 0.6-1.0 million. The average

36 size of loan demand per entrepreneur is NRs. 7,031,522. On the supply side, majority BFIs have SMEs or similar types of product to flow out the loan. But they are not being able to flow loan to MSMEs due to the problems such as high cost of capital, insufficient source of income, inadequacy of collaterals, low financial literacy and business management, lack of proper business plans, etc. Overall BFIs are flowing out limited consumer loan to BFIs of business loan. Challenges on access to finance for MSMEs are in the supply as well demand side of the loanable funds. The supply side challenges are: (a) increase the proportion of MSME business loan, (b) decrease the lengthy procedures of lending and documentation, (c) include rural social assets in the risk mitigation measures- scoring matrix of BFIs, (d) enlarge the scope of assets in the list of collaterals, (e) reduce the cost of credit information among MSMEs, (f) educate MSMEs on business development plan and strategies. On the other, the demand side challenges are: (a) increase the payment capacity of MSMEs, (b) reform in the credit transaction, (c) reduce the cost related to the business registration, audit reports and tax compliance (d) reduce the cut throat competition among MSMEs, (e) establish the credit market infrastructures, (f) habituate MSMEs on business and credit market information, (g) develop the local level physical infrastructures of development, etc. The MSMEs barriers in the districts are in policy and operational levels. The locally produced materials are in need of the clear policy supports for the extraction of construction materials and the imposition of tax for those materials. In terms of determining prices and giving permission to the enterprises for extraction of these locally produced materials, bad governance issues are inter-related with district administration, police administration, and local government. Almost enterprises have problems on the under-developed physical infrastructures, towards the credit crunch position, requirement of funds to expand their business, and labor shortage issues. The internal issues of the MSMEs such as poor level business education and lack of creative competency, adequate financial literacy to prepare for business proposal to ask for MSMEs loan in their requirements, shortages of raw materials, stock management and seasonal supply of the materials, etc.

6.2 Recommendations Based on key findings, following policy and operational recommendations are suggested: (a) Recommendations for construction market development: Market supply gap on construction materials should be filled in support of government entities. Government and other authoritative bodies should provide subsidies to construction based MSMEs to expand the construction market. For this, policies should be amended accordingly on the relevant requirements of MSMEs. There is a frequent problems of high price and monopoly power exerted by the few suppliers working on the sand and concrete pebbles. The locally produced materials have to be extracted in such a balance that reconstruction as well as local construction will have an adequate balance in materials supply along with the protection of environment. Governments should have a balanced tax and royalty

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approach to address the local demand and for utilization of locally produced materials. Governance reform can be the better practice for the supply of local needs. Those enterprises which provide service at the local level should also be locally registered/informed. The registration of micro and mini contractors is registered at the local governments. The registration of transporters at the local level is also important. Local governments have to reduce the cost of registration by the minimum possible compliances and procedurals. Local level development affects positively on construction market. Therefore governments with no alternatives should have a plan of physical infrastructure development such as roads, electricity, communication, etc. to address the constraints of the rural area through the private sector. MSMEs have some institutional problems such as low level of education, business expansion. Governments have to address these problems through a broad based and inclusive market development approach.

(b) Recommendations on access to finance: Government bodies should plan incentives to establish new BFIs branches in rural areas. BFIs branches should focus SME loan to expand at the maximum possible level. The supply side reforms should be: (a) increase the proportion of MSME business loan, (b) adopt digital technologies such as cloud computing, distributed ledger technology, artificial intelligence that can reduce the transaction cost of BFIs significantly, (c) decrease the lengthy procedures of lending and documentation, (d) include rural social aspects in the risk mitigation measures- scoring matrix of BFIs, (e) enlarge the scope of assets in the list of collaterals, (f) reduce the cost of credit information among MSMEs, (g) educate MSMEs on business development plan and strategies. On the other, the demand side recommendations are: (a) increase the payment capacity of MSMEs, (b) reform in the practices of credit transaction of MSMEs, (c) reduce the cost related to the business registration, audit reports and tax compliance (d) reduce the cut throat competition among MSMEs, (e) establish the credit market infrastructures, (f) habituate MSMEs on business and credit market information, (g) develop the local level physical infrastructures of development, etc.

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Annex –I: Situation Analysis of Sample Municipalities and Market Area in Dhading

Situation of the infrastructures and business environment Nilkantha Municipality Siddhalek Benighat Gajuri Dhunibesi Municipality Types of Municipality Rorang Municipality variable Municipality Ward No 3 and wards Benighat, Majhimtaar, Dependent to Road line Road line wards –1, 2, 5, 6 Major touching Kathmandu way in Malekhu, Charaudi Nilkanth, wards – 1, 2, (Around 15 Kilometers of market roadside and road lines wards – Malekhu and 4, 6,8 highway) Places 5, 7, 8,9, 10, and 13 Gajuri Moderate quality black 1 highway 1 highway 1 highway 1 highway topped road only on ward (Kathmandu to (Kathmandu (Kathmandu (Kathmandu to Mugling/ No.3, major market area and Mugling/ Chitwan/ to Mugling/ to Mugling/ Chitwan/ pokhara) and way to Kathmandu. 3 roads pokhara) and rural Chitwan/ Chitwan/ rural hilly and difficult (which are totally closed in hilly and difficult pokhara) and pokhara) and roads rainy season for vehicles) roads rural hilly and rural hilly and Road also connect to rural hilly difficult roads difficult roads development area Flown from rural hilly areas flowing out to flowing out to flowing out to Insignificant Population Dhadingbesi and Kathmandu Kathmandu flow Kathmandu Presence of ABCD category & Only one branch office Very few Few branch Few in limited wards along BFIs cooperatives is being established branch offices offices the highway Yes, but power cutting Yes but limited to road Yes but but effective but effective in road areas Electricity experience observed by areas effective in in road areas supply MSMEs road areas Trishuli River (Benighat Trishuli River passes Trishuli River Trishuli River Trishuli River passes Rorang, Gajuri, Galchhi, and nearby passes passes Thakre rural municipalities) Rivers alongside of the Highway Trade Kathmandu, Highway and Kathmandu, Kathmandu Kathmandu Kathmandu and limited linkages and rural area Dhadingbesi and and limited and limited rural area

39

Market limited rural area rural area rural area connectivity Labor market Migrated labor More migrated labor More migrated labor and situation and few local labor few local labor Hilly area except Ward No. Most of the part is Hilly area Hilly area All wards are hilly 3 hilly, besides few road except the except the Topography and riverside area road line area road line area Urban Yes, but limited land supply Major road area only Highway Highway Highway Road area development Road area Road area prospects Development periodic plan, Local Not available Not available Not available Not available plan government MSME plan National plan National plan National plan National plan National plan

40

Annex – II: Situation Analysis of Sample Municipalities and Market Area in Nuwakot Situation of the infrastructures and business environment Types of Bidur Market Area Belkotgadhi Tadi Market Likhu Market Dupcheswor variable Market Area Area Area Market Area Major market Roadside Wards: 1, 2, 3,4 Roadside Wards: Roadside Roadside Places 7, 8, 9, 10 Wards: 3, 4 Wards: 6, 4 Narrow, black topped but poorly 2 major roads Mixed of black Mixed of black Difficult in developed roads in market place. 5 roads passes through it topped and topped and access of road (to Tarkeswor, Tadi/likhu, (connects gravel roads to gravel roads to networks to all Kakani/Tokha, Kolani/Deurali, Kathmandu from connect from connect from wards Betrawati/Meghang) passes to rural Kakani and district district municipalities area. Most of these roads Dhading from Headquarter Headquarter are underdeveloped though black Galchhi) topped. Three roads to connect to Kathmandu (Kathmandu-Galchhi-Bidur- Dhunche, Bidur- Dhikure-Chhahare- Road Kathmandu, Bidur- Kakani- development Kathmandu). Flew in from rural hilly areas flowing out to flowing out flowing out flowing out Population Kathmandu and flow downside roads ABCD category & cooperatives Limited in road Very limited Very limited Few in limited Presence of those 2 major presence presence wards BFIs road sides Electricity Yes, but power shedding exist Limited along the Limited along Limited along Not access to supply road sides the road sides the road sides all wards Passes along road Passes nearby Passes nearby Rivers side Trade linkages Kathmandu and rural markets from the Limited rural area Limited rural Limited rural Tadi and Bidur and Market district and Kathmandu area and area and connectivity and Dhading Kathmandu Kathmandu Labor market More migrated labor and few local labor More migrated Mix of migrated Mix of migrated Mix of

41

situation labor and few labor and local labor and local migrated labor local labor labor labor and local labor Hills with limited plain land Most of the part is Mostly hilly, Mostly hilly, All wards are hilly, besides few besides road besides road hilly road and riverside and riverside and riverside Topography area area area Yes, but limited land supply Ward No 7,8,9 Road and Road and Limited in Urban and 10 that passes riverside area riverside area ward 4, 6, 7 development Tadi river and (Samundratar prospects major road Shikharbesi) Development 5 year´s periodic plan, Local Not available Not available Not available Not available plan government MSME plan National plan National plan National plan National plan National plan

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Annex – III: Data Collection Format in Municipality and District

Types of Enterprises No. of MSMEs in Wards, ………………………………, Municipality 1 2 3 4 5 6 7 8 9 10 11 12 13

Hardware enterprises Crushers Brick Kilns Hallow Concrete Block (HCB) and CSEB producers Stone Cutting enterprises Sand extractor Timber treatment enterprises Transporters Mini and Micro Contractors

Number of MSMEs in ……………………….. District

Types of Enterprises Hardware enterprises Crushers Brick Kilns Hallow Concrete Block (HCB) and CSEB producers Stone Cutting enterprises Sand extractor Timber treatment enterprises Transporters Mini and Micro Contractors

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Annex – IV: Area of Data Collection and Respondents in Districts - Ward chairpersons, municipalities of Dhading and Nuwakot - MSMEs working in the various area of construction market - Rural/Urban Municipality Offices - Association of Contractor, District Chapter - FNCCI and FNCSI Office, District Chapter - Association Office of MSMEs - Office of the District Coordination Committee - Small and Cottage Office, Districts - Construction Supply Regulation Committee, Bidur Municipality - Bank and financial institutions (BFIs) and Cooperatives

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Annex – V: Sample Respondents in Districts Sample Size of the Questionnaire Survey Total District Urban Market Area Rural Market Area (municipality) Remarks Samples (municipality) Nuwakot Bidur Belkotgadhi Tadi Likhu Dupcheswor Hardware enterprises 10 0 1 1 1 13 Crushers 0 1 0 1 0 2 Brick suppliers/ Kilns 3 1 1 0 0 5 Hallow Concrete Block Construction 3 2 0 0 0 5 (HCB) and CSEB producers material Stone Cutting enterprises 0 0 0 0 0 0 producers/suppliers Sand extractor 2 0 0 0 0 2 Timber treatment 7 1 2 2 1 13 enterprises Transporters 0 0 3 0 0 3 Mini and Micro Contractors 2 0 3 0 0 5 Metal Enterprises 8 0 1 0 0 9 Total 35 5 11 4 2 57 Dhading Nilkantha Dhunibesi Sidhhalek Benighat Gajuri Hardware enterprises 7 4 2 5 1 19 Crushers 0 0 1 0 0 1 Brick Kilns 0 3 1 0 0 4 HCB and CSEB Producers 1 1 1 0 1 4 Construction Stone Cutting enterprises 0 0 1 0 1 2 material Sand extractor 1 0 1 0 3 5 producers/suppliers Timber treatment 1 14 4 3 4 2 enterprises Transporters 4 0 1 1 1 7 Mini and Micro Contractors 1 1 1 1 0 4 Metal Enterprises 3 2 1 2 1 9 Total 21 14 11 13 10 69

45

Annex VI: Quick Survey Questionnaire for Supply Side Actors

;fgf, demf}nf tyf n3' pBdLsf nflu ;f]lwg] k|Zgkq

A pQ/bftf;+usf] cg'dlt kq lk|o pQ/bftf, g]kfndf e"sDk kl5sf] k'g{nfesf nflu cGt/fl{\i6«o ljsf; ljefu o"s]sf] cfly{s ;xof]udf ;+rflnt kl/of]hgfsf] nflu lgdf{0f If]qsf] af/]df yk hfgfsf/L lngsf nflu tkfO{+nfO{ of] cWoogdf ;xeflu u/fpg rfxG5f}+ . lgdf{0f jhf/ नेपाल बिकास अनुसꅍधान प्रतिथान k|0ffnLnfO{ Joal:yt ug{ s;/L ;lsG5 eGg] s'/f yfxf kfpg of] cWoog dxTjk"0f{ 5 . o; cWoogdf ;xeflutfsf nflu nueu !)—!% ldg]6 hlt ;do nfUg]5 . ;e]{stf{n] tkfO{+n] lbPsf k|To]s k|Zgsf] pQ/x?sf] /]s8{ klg ug{ ;Sg]5g eGg] s'/fsf] oxfFnfO{ hfgfsf/L u/fpb} tkfO{+n] lbg'ePsf pQ/x?sf] /]s8{ uf]Kotfsf ;fy /flvg]5 . ;xof]usf] nflu wGojfb .

B. JolQmut hfgfsf/L pQ/bfttsf] gfdM M lnË M k'?if dlxnf녍य녍सायको नाम t];|f] lnlË pQ/bftfsf] k]zf M 7]ufgf M ufpkflnsf gu/kflnsf

6]lnkmf]g÷df]jfOn M वार्ड न c. ;fgf, demf}nf tyf n3' pBdLsf] ca:yf dfkg

1 tkfO{n] cfˆgf] Joj;fo btf{ u/fpg' ePsf] 5 < 1=5 2=5}g 2 olb 5 eg] s] df btf{ u/fpg' ePsf] 5 < 1=d"No clej[l4 s/ -Eof6_ 2= Kofg 3= gu/kflnsf÷ufpFkflnsf 4= 3/]n' tyf ;fgf pBf]u 5= cGo -v'nfpg'xf];_ 3 tkfO{n] jflif{s ;/b/ slt /sdsf] sf/f]jf/ ug'{x'G5 < jflif{s ;/b/ -?_ 4 tkfO{n] clxn] ;Dd cfˆgf] Joj;fodf s] slt k"Flh nufgL ug'{ ePsf] 5 < 5 tkfO{sf] o; Joj;fodf nufgL ePsf] k"lhsf >f]tx? 1= Joj;fosf] cfo s] s] x'g < 2= k"/fgf] jrt 3= 3/ l5d]s, ;fyLefO{ cflbjf6 C0f lnPsf] 4= a}+s, ljlQo ;+3;+:yf, ;xsf/Ljf6 C0f lnPsf] 5 = ;Dklt ljlqmjf6 cfPsf] /sd 6 = cGo -v'nfpg'xf];_ 6 tkfO{n] olb C0f lng' ePsf] 5 eg] To;;+u ;DalGwt s] s:tf ;d:ofx? 5g <

46

D. ;fgf, demf}nf tyf n3' pBdLnfO{ ljlQo cfjZostf / To;sf] Joj:yfkg

1 tkfO{ cfˆgf] Joj;fo a9fpg O{R5's 1= 5' x'g'x'G5 < 2=5}g -olb 5}g eg] ;]S;g E df hfg]_ 2 olb tkfO{ Joj;fo j[l4 ug{ O{R5's x'g'x'G5 1= ! nfv ;Dd eg] slt yk k"lh cfjZos k5{ < 2= ! nfv b]lv @ nfv ;Dd 3 = @ nfv b]lv $ nfv ;Dd 4= $ nfv b]lv ^ nfv ;Dd 5 = ^ nfv b]lv * nfv ;Dd 6= * nfv b]lv !) nfv ;Dd 7= !) nfv b]lv dfly 3 olb tkfO{nfO{ yk k"Flh cfjZos k5{ eg] s] sfdsf] nflu cfjZos k5{ <

4 tkfO{sf] Joj;fo j[l4 ug{sf] nflu tkfO{;+u 1=5 cfˆg} k"lh 5 ls 5}g < 2=5}g 5 tkfO{nfO{ Joj;fo j[l4 ug{sf] nflu cfˆg} k"lh k|of{Kt 5}g eg]] slt C0f lng' k5{ < 6 tkfO{n] cfˆgf] Joj;fo j[l4sf] nflu yk 1= 3/ l5d]s, ;fyLefO{ cflbjf6 C0f lng] cfjZos k"lhnfO{ s'g >f]tjf6 h'6fpg' 2= a}+s, ljlQo ;+3;+:yf, ;xsf/Ljf6 cflbjf6 C0f 'x'G5 < 3 = k"/fgf] cfˆg} jrt 4= cGo -v'nfpg'xf];_ 7 tkfO{n] cj lng] C0f;+u ;DalGwt 1= C0f k|fKt ug]{ e/kbf]{ >f]t 5}g ;d:ofx? s] s] xf]nfg < 2= Jofh ltg{ ufx|f] 5 3 = ls:tf ltg{ ufx|f] 5 4 = C0f lng w]/} vr{ nfU5 4= Jofhb/ w]/} 5 5= cGo -v'nfpg'xf];_

E. ;fgf, demf}nf tyf n3' pBdLsf ljsf;df /x]sf afwfx?

1 tkfO{sf] cfˆgf] Joj;fodf yk c? ;d:ofx? klg 5g <

47

Annex VII: KIIs for Financial Intermediaries

a}+s, ljlQo ;+3 ;+:yf / ;xsf/Lx?;+u ul/g]] k|Zgkq !=;+:yfsf] C0f nufgLsf k|fyldstfx? s'g s'g If]qdf 5g < @= n3' ;fgf tyf demf}nf pBdLnfO{ nlIft u/]/ k|bfg ug]{ C0f ;DalGw ljz]if sfo{qmd 5g ls 5}gg< #= olb 5 eg], k|lt Joj;foL C0f nufgLsf cf}ift cfsf/ slt hlt 5 < $= n3', ;fgf tyf demf}nf pBdLdf ljt/0f ePsf] dWo] slt k|ltzt lgdf{0f If]q;+u cfa4 C0f 5 < %= n3', ;fgf tyf demf}nf pBdLnfO{ C0f lbOPsf] 5}g eg] lsg / s] sf/0fn] lbOPsf] 5}g < ^= n3', ;fgf tyf demf}nf pBdLnfO{ C0f k|bfg ul/G5 eg] cem j[l4 u/fpgs] s:tf ;d:of 5g <

48

Annex VIII: KIIs Questionnaires for Municipality ] k|Zgkq प्रतितनधध 녍यािसायीर न.पा./गा.पा. प्रतितनधधसग गररने

pQ/bftf;+usf] cg'dltkq

lk|opQ/bftf, g]kfndfe"sDk kl5sf] k'g{nfesfnflucGt/fl{\i6«o ljsf; ljefuo"s]sf] cfly{s ;xof]udf ;+rflnt kl/of]hgfsf] nflulgdf{0f If]qsf] af/]dfykhfgfsf/L lngsfnflutkfO{+nfO{ g]kfn ljsf; cg';Gwfg k|lti7fg of] cWoogdf ;xeflu u/fpg rfxG5f}+ . lgdf{0f jhf/ k|0ffnLnfO{ Joal:ytug{ s;/L ;lsG5 eGg] s'/f yfxfkfpg of] cWoog dxTjk"0f{ 5 . o; cWoogdf ;xeflutfsfnflunueu !)— !%ldg]6 hlt ;do nfUg]5 . ;e]{stf{n] tkfO{+n] lbPsfk|To]s k|Zgsf] pQ/x?sf] /]s8{ klgug{ ;Sg]5g eGg] s'/fsf] oxfFnfO{ hfgfsf/L u/fpb} tkfO{+n] lbg'ePsfpQ/x?sf] /]s8{ uf]Kotfsf ;fy /flvg]5 . ;xof]usf] nflu wGojfb .

JolQmut hfgfsf/L

pQ/bfttsf] gfdM M

lnËM k'?if dlxnf녍य녍सायको नाम t];|f] lnlË pQ/bftfsf] k]zf M xfn /x]sf] 7]ufgf M ufpkflnsf gu/kflnsf

6]lnkmf]g÷df]jfOn M वार्ड न

tkfO{sf] gu/kflnsf÷ufpkflnsfdf s] slt k|s[ltlsf lgdf{0f If]qsf Joj;foL 5g < btf{ ePsf btf{ gePsf s|+= Joj;foLsf] gfd n3' ;fgf demf}nf n3' ;fgf demf}nf ;+= pBd pBd pBd pBd pBd pBd 1 हार्डवेयर 녍यािसायी 2 क्रसर녍यािसायी 3 4 इटा녍यािसायी हालो कंक्रक्रट 녍लोक र सी एस इ बि

5 उ配पादक

6 ढुंगा का絍ने मेससनका녍यािसायी

7 िालुवा तनका쥍ने 녍यािसयी

8 काठको काम गने 녍या녍सायी

9 यािायाि 녍यािसायी

10 सुक्ष्म िथा साना ठेकेदार अꅍय (खलु ाउनहु ोस)

tkfO{sf] gu/kflnsfdf n3' pBd tyf k"jf{wf/ ljsf; ;DalGw s] s:tf of]hgfx? 5g < olb s'g} of]hgf 5g eg] jtfO{ lbg' x'G5 ls<

49

Annex IX: Observation Notes on Market Prospects

cjnf]sgstf{sf] cjnf]sg नोट s_ jhf/sf] cj:yf != jhf/ ;+/rgfdf dfu / k"lt{sf] cj:yf @= jhf/df k|ltikwf{sf] ca:yf

v_ Joj;foLsf] jhf/ lx:;f != clxn]sf] Joj;flosf] cj:yf @= Joj;flos /0flgtLx?sf] k|of]usf] cj:yf

u_ jhf/df :yflgo>d / k"Flhsf] kl/rfng != >d / k"lhsf] dfusf] ca:yf @= >d / k"lhsf] cfk"lt{sf] cj:yf #= ;+u7g / e"ld ljsf;sf] cj:yf

3_ Joj;flos jftfj/0f != cj;/ @= r'gf}tLx?

ª_ Joj;flos ;x'lnot÷;'ljwf / bLuf]kgf != ;/sf/L s/, ;'/Iff, :yflgo lgsfosf] ;xof]u, jf6f]3f6f]sf] ljsf; / jhf/ lj:tf/ @= Joj;fo lj:tf/df cGo cfjZos ;xof]u

r_ cGo M != hg;+Vofsf] cj:yf, a;fO {;/fO{, jhf/ Ifdtf @= k"jf{wf/ ljsf;sf ;+efjgf / r'gf}tLx?

50