Feasibility Study of Integrating MEDEP Modality in the ...

Integrating MEDEP Modality in the Mainstream Poverty Alleviation Programme 1

Submitted to: Micro-Enterprise Development Programme (MEDEP – NEP/97/013) Ekantakuna, Lalitpur, Nepal

FEASIBILITY STUDY OF INTEGRATING MEDEP MODALITY IN THE MAINSTREAM NATIONAL

POVERTY ALLEVIATION PROGRAMME

(FINAL REPORT)

Dr. Prahlad Kumar Thapa Sushil Ram Mathema

December 2001

____________________________________ _________ Executive Summary

Integrating MEDEP Modality in the Mainstream National Poverty Alleviation Programme

2


EXECUTIVE SUMMARY

Introduction Micro-Enterprise Development programme (MEDEP) was started in 1998 to

support achieve the Ninth Plan's objective of reducing poverty through the

creation of micro-enterprise. MEDEP is in the third year of its implementation. It

has been observed that MEDEP model is effective and cost efficient as well in

poverty reduction through micro-enterprise development. Some government

programmes have already adopted some elements of 'MEDEP Methodology'.

However, MEDEP has yet to have a significant and broad policy impact. This

has been the observation of the mid-term review mission as well. In order to

verify this observation and evaluate the feasibility of replicating MEDEP model

of poverty reduction through the development of micro-enterprises, this study

was undertaken.

Methodology MEDEP modality has been evaluated in relation to its twin goals (developing

sustainable micro-enterprise for low income families and capacity building of

service delivery mechanism) to be achieved. Hence, level of poverty,

employment creation, income generation, and sustainability has been included

as the key variables to evaluate the MEDEP model. Employment creation is

examined in line with Ninth Plan's objective of creating one employment per

family. Income generation and poverty alleviation is examined in line with the

net income per enterprise and the increased income per family. Sustainability is

examined in line with the graduation of entrepreneurs and capacity building of

service delivery organisations. Finally, an effort has also been made to

evaluate the income behaviour of the enterprises using income function.

The main source of information for this study is the primary data that is

available in the sample EDF's dairy obtained from the MEDEP. There were 345



3

sample enterprises included in the study. Other sources of information for this

study were MEDEP's monthly M&E reports of the programme districts for the

month of November, and annual report for the year 2000.

Summary of Findings Followings are the summary of findings and conclusions drawn from the

attempted study.

(i) There were more than 1.6 persons per enterprise (1.76 in the sample

study) being employed. This has clearly surpassed the objective of the

Ninth Plan in creating at least one employment per family.

(ii) The enterprises under the programme were very effective to make a

net income of more than Rs17,000 per annum per enterprise. Adding

this income to the average baseline per capita income (which is

Rs4600) of the participants under the MEDEP programme, it is clearly

revealed that the programme has helped significantly to alleviate the

whole family of the entrepreneur from poverty.

(iii) Education is not necessarily the deciding factor to take up an enterprise

as more than 50 percent (56.0 percent) of the total entrepreneurs

taking up enterprises under MEDEP were illiterate and just literate.

(iv) Loan is not a necessary condition for taking up an enterprise as 70

percent investment has come from the entrepreneur’s equity with only

30 percent from loan.

(v) The result shows that rate of repayment is very high with overdue

amount to be very low. It was found that overdue amount is just 8

percent of total lending and 7 percent of total borrowers.

(vi) Group and individual savings has helped in mobilising the group

activities, and lending to its members as well with this kind of total

savings increased substantially to around Rs0.7 million and average

saving per member standing at Rs2,429.



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(vii) The variation in technical efficiency ranged from 6 percent to 100

percent showing that income earning can be increased through

improving the technical efficiency in the production process and the

management of the enterprises.

(viii) MEDEP market-led integrated enterprise development approach is

sustainable to that extent that the continued generation of income and

employment will help in aggregate to strengthen national savings in the

long run providing opportunity to the government to make best use of it

in investment.

Recommendations for Policy Implications On the backdrop of the above major findings and the conclusions drawn from

the study, following recommendations are made for policy implications.

ü The conventional approach adopted in micro-enterprise development

should be modified, as has been done by MEDEP, to follow the market-

led approach combined with the sequential delivery of an integrated

package of training and services for more effective micro-enterprise

development.

ü The conventional blanket recommendation of common programme for all

kinds of poor should also be modified and appropriate package

programme in accordance with the need and priorities of different strata

of income group people needs to be introduced.

ü Proper backward and forward linkages must be established before the

entrepreneurs assume graduation.

ü As the programme has been found to generate employment and thus

the income to alleviate the entrepreneur’s family as a whole from

poverty, it is suggested that MEDEP model be integrated in the

mainstream national poverty alleviation programme to have its macro

policy impact in the national economy through the development of

sustainable micro-enterprises.



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Integrating MEDEP Model in the Mainstream Micro-enterprise Development Program for Poverty Alleviation

The role of micro-enterprises in reducing poverty needs to be considered in the

context of overall economy. The poverty in the country has resulted out of

widely spread underemployment particularly in agriculture sector. In a situation

wherein gainful employment outside the agriculture is not growing in tune with

the rate of annually increasing labour force, there is bound to be an

accumulation of idle labour force. As the productive labour has to maintain a

large idle labour, there is an alarming rate of serious drain on its potential

savings, which, otherwise, could have been used in investment to generate

additional income and savings. The consequence effect is the perpetual

incidence of vicious circle of poverty. It would therefore be a Herculean task to

achieve either high growth or reduce poverty significantly unless the high

incidence of under employment is reduced and the continuing drain of potential

savings is restricted with the generation of productive employment

opportunities for idle labour.

MEDEP modality has rightly accommodated the strategic policy in capturing

those under-employed mass of people who have been lying in the form of

burden idle labour on land. Although the programme is been focused in 10

districts in the country with limited target of producing 6000 micro-

entrepreneurs in five-year period, its contribution towards the development of

micro-entrepreneurs has been seen highly sustainable when evaluated in terms

of change in attitude of the involved people other than the increase in their

income. There are many of the micro-enterprise development related

programmes running in the county, which have claimed their success on

account of additional income generation. But the income generation is not the

only criteria to evaluate the success of the programme. Apart from income

generation, creation of employment opportunity having both backward and

forward linkages thereby generating permanent entrepreneurs who will later

stood as the backbone in assisting the development process of the country's

macro plan is regarded as the crux of the micro entrepreneur development



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programme of MEDEP. Realizing the fact that there is little scope for expanding

productive employment within the agriculture sector, MEDEP modality has

chosen to create diversified number of entrepreneurs suited to the different

condition of local market demand. Besides, it has successfully broke down the

structural rigidities like cultural and traditional values which were hindering the

promotion of entrepreneurship development, and facilitated the potential

entrepreneurs with the cheapest appropriate technology available at hand.

The approach taken by MEDEP in the development process of micro-

enterprises has certainly contributed in producing an additional number of

micro-entrepreneurs capable of running more than one enterprise at a time.

These entrepreneurs will definitely be contributing to the national economy

through participating in productive activities. The change in attitude towards

involving in productive activities will help in promoting the micro-

entrepreneurship sector, which is by and large, being neglected so far.

Viewed in terms of macroeconomic aspects if investment is pushed through

foreign aid or deficit financing, it will run up against the inelastic supply of food

and other goods resulting in inflation and balance of payments crisis. Given the

situation that agricultural production cannot be increased on sustainable level,

there is a strong need for a development strategy which can be designed to

speed up investment and employment in the non-agriculture sector such as

micro-enterprises development. Micro-enterprise sector development is crucial

for the country's overall development process as it is known that small and

medium enterprises contributes nearly 12 percent in national GDP (1999) and

has provided employment opportunity to the level of 90 percent of total

employment in industrial sector of Nepal.

It is therefore of utmost importance that if the modality developed by MEDEP

for the promotion of micro-enterprises could be pursued at national level, the

contribution of non-agriculture sector in GDP can be remarkably increased and

employment opportunity can be raised to a larger extent from the present level



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of not more than 2 percent of the total labour force. The reality that major

number of micro-entrepreneurs falls under the below poverty line of 38 percent,

the promotion of this kind of MEDEP programme at national level will help

contribute towards downsizing of the number of people below the poverty line.

Ultimately, the growth of numerous micro-enterprise both in manufacturing as

well as services sector will produce the product to meet the huge chunk of

national aggregate demand thereby lessening the dependence on non-

sustainable imports. At a time when our exports are showing weak sign and

remittances from the workers working abroad are in a vulnerable situation, the

development of domestic micro enterprises will save, if not much, some portion

of our foreign exchange reserves thus contributing positively to the overall

balance of payments of the country. Besides, the higher growth expected from

the increase in growth in non-agriculture sector will not only contribute to the

higher investment and savings but also to the production of quality

entrepreneurs as MEDEP modality has been able to trigger its members to

modify their production technique as according to the market demand.

Thus, it is obvious that inclusion or adoption of MEDEP modality in the national

programme of poverty alleviation will prove an appropriate strategy to use idle

labour (self under-employed labour) of land, add value to the primary product

and in enhance the contribution of non-agriculture sector as a whole in overall

GDP along with the creation of employment opportunities among the people

living below poverty level through development of entrepreneurship among

them.

Chapter 1____________________________________ ______________ Introduction


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CHAPTER 1 INTRODUCTION

1.1 Background Information 1.1.1 Micro-Enterprise Development Programme

The Micro-Enterprise Development Programme (MEDEP) is an HMG

initiative started in 1998. MEDEP has been designed to support

achieve the Ninth Plan's objective of achieving poverty reduction

through the creation of off farm employment in the low-income families.

MEDEP is executed by the Ministry of Industry in collaboration with

UNDP and several other national partner agencies.

MEDEP is designed for a period of five years (1998-2003). The

programme is in the third year of its operation and implemented in ten

districts. Since it is a pilot programme, the districts have been selected

in a manner of regional balance. Two districts from each development

region have been selected including four districts (40%) from the Terai

and six districts (60%) from the hills. Districts are prioritised based on

the potential for poverty reduction through micro enterprise

development and gender perspective. The programme has been

implemented in a phase-wise manner covering ten districts distributed

over five development regions of the country (Table 1.1)

Table 1.1: MEDEP Programme Districts

Districts Phase

Year

Number of districts covered

Hills Terai

Phase I 1998 3 Nuwakot, Parbat Nawalparasi

Phase II 1999 4 Tehrathum, Baitadi Dhanusha, Sunsari

Phase III 2000 3 Pyuthan, Dadeldhura Dang

Total 10 6 4



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Enterprise development at the district level has focused on creating

horizontal linkages and networking among the local agencies

concerned with micro-enterprise development. In order to constantly

support the development, consolidation and expansion of the micro-

enterprises, MEDEP aims to concentrate on building up sustainable

partnership among government organisations, local government

bodies, non-government organisations, private sector institutions and

local people. 1.1.2 Main Goals of MEDEP

The twin goals of MEDEP are to:

Æ develop sustainable micro-enterprises for low-income families

as a means to reduce poverty in Nepal, the focal point being

low-income families, unemployed and under-employed people

and self-employed micro-enterprise owners in rural areas, and Æ help in capacity building and development of service delivery

mechanism to promote micro-enterprises.

The specific twin goals of the programme to develop and promote

sustainable micro-enterprises are:

Æ poverty reduction of low-income families

Æ capacity building of service delivery organisations 1.1.3 Target beneficiaries of MEDEP

MEDEP focuses mainly on three target beneficiaries.

• Low-income families at the grassroots level.

• Unemployed youths and under-employed men and women

• Self-employed proprietors and micro-enterprise owners



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1.1.4 MEDEP Strategies

• Demand Driven Approach Programme intervention and entry are based on the thorough

understanding and study of the resource potential, people's need

and market demand for products and services. MEDEP

intervention is focused on the intersection of these three broad

areas as shown in Figure 1.1

• Sustainable Enterprise Partnership The programme aims to strengthen the network of vsarious

partnership enterprises at the local level to support the

development of micro-enterprises in Nepal.

• Building Local Capacity

Programme activities under the project are focused to strengthen

the capacity of local businesses, institutions and organisations to

promote and develop micro-enterprises and employment

opportunities. The programme also helps them in the process of

capacity building for planning and implementation of micro-

enterprise development projects.

Market Demand

Resource Potential

People's Needs

MEDEP Intervention Area

Figure 1.1: MEDEP Intervention Area



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1.1.5 Sequencing of Service

In its programme implementation, MEDEP has the following sequencing

of the services.

• Market analysis

• Entrepreneurship training and entrepreneurial competency

development

• Appropriate technology and product development

• Skill training and technology transfer

• Credit (if required)

• Quality control and compliance to rules and regulations

• Market promotion and business counselling

• Regular follow-up • Monitoring and Evaluation

1.1.6 Special considerations

• Besides aiming to reduce poverty through the development of

micro-enterprise, MEDEP is in line with the declaration of the

World Summit, 1995 for environment-friendly development.

• It has adopted gender and development approach.

⇒ It aims to ensure that at least 70 percent of the

beneficiaries are women.

⇒ Integration of gender perspective will be emphasised in the

programme including gender sensitisation of all MEDEP

staff members, partner organisations, and target

beneficiaries.

1.2 Recommendation of the Mid-term Evaluation Though MEDEP is a five-years' pilot programme, it aims to develop and

demonstrate an approach to rural micro-enterprise development and

poverty reduction that is effective and cost efficient. Notwithstanding,



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MEDEP is for five years (1998 – 2003), the budget have been allocated for

three years with UNDP inputs. The programme has completed two years

in June 2000. Given the fact that UNDP embarked on a result-based

management approach for all its programmes, it was found essential that

MEDEP be evaluated to ensure that its performances are consistent with

the objectives it is expected to achieve and in addition, have proved its

capacity to produce results and impacts to justify the resources invested.

A four-person mission including two international consultants, one

national consultant, and one representative of HMG performed the

midterm evaluation of the MEDEP between 23 November and 15

December 2000. Upon its evaluation, the team has drawn the following

conclusions (excerpted from the mission report, 2000).

1. Success of the Integrated Methodology

The market-led, integrated approach to micro-enterprise creation is

by all indications to date a stunning success. One striking fact is that

due to the advance market surveys, the enterprises created thus far

have no difficulty in marketing their products. This is in strong

contrast with the common situation where donor assisted,

production-oriented micro-entrepreneurs are unable to sell their

products. Also important is the surprising sophistication of these new

entrepreneurs regarding marketing strategies. many are already

actively diversifying their products and market outlets. this bodes well

for the survival and expansions of the new enterprises in the future.

Finally, the integrated approach is effective and cost efficient.

2. Partnership Approach Works

The district level partnership approach is effective in utilising existing

institutional resources to deliver the components of the micro-

enterprise development programme. Despite the challenges of co-

ordinating the activities of a diverse set of institutions, these public



13

and private sector district-level organisations, under the co-ordinated

guidance of the DDC, ca deliver the needed services to would be

micro-entrepreneurs.

3. Little Policy Impact to Date

MEDEP has yet to have a significant and broad policy impact,

although some government programmes have adopted elements of

the "MEDEP Methodology". In part this is because until the success

of the pilot approach was proven, an aggressive policy dissemination

element would have been premature. Also, with its strong district-

level implementation focus, MEDEP has relatively low visibility at the

central level. Additionally, the programme document provided little

emphasis on the important policy dissemination element. MEDEP

has now an important story to tell one with positive implications for

how a wide range of government programmes could more effectively

achieve their objectives of enterprise promotion and poverty

reduction.

Based on the major conclusions drawn form the evaluation of the

programme, the team has made the following recommendations for policy

implications. 1. MEDEP should be for the full five years originally foreseen in the

programme design and still expressed in all of the programme

targets and phasing as in the body of the programme document.

Though the funding for the current programme for three years was

arranged from the UNDP funding, MEDEP never did and does not

make sense as a three-year programme. 2. During the remaining two years, MEDEP should focus on preparing

the districts (DDC, LTFB, and partner organisations) to take over

fully the continued operation of support to micro-enterprises and to

continue micro-enterprise development and expansion. This



14

preparation should also include development of mechanisms for

providing more varied and complex types of business counselling

and advising for the enterprises as they face the inevitable

challenges of growth and competition.

3. MEDEP should include a new third immediate objective that

specifies the series of required output and activities of

comprehensive policy development and dissemination component.

This component would include revising the programme monitoring

system so that it more easily provides compelling and convincing

information on the programme's impact on poverty reduction, the

sustainable and growth of enterprise, the expanding market

linkages, and so forth. It would work closely with, or serve as a

secretariat for, a government committee to explore what government

regulations, practices, and laws might need revision on order to

implement the now proven effective approach to enterprise

development and poverty reduction. It would provide information

materials and organise events to disseminate widely the results of

the MEDEP pilot.

4. MEDEP, UNDP, and the government should prepare for scaling-up

the MEDEP-type activities to operate in additional districts, following

the completion of the current MEDEP pilot programme.

5. UNDP, as part of the preparatory process of its programme for the

next cycle (2002-2006) should plan on developing a broad

enterprise development programme that combines the lessons

learned and foundations established by various UNDP programmes.

From the overall evaluation of the programme, the team has suggested

that the government may follow-up MEDEP approach to embrace this

programme on poverty alleviation through enterprise creation as one of

the key 'flagship' projects in their forthcoming tenth development plan.



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1.3 The Need

It has been observed that MEDEP model is effective and cost efficient as

well in poverty reduction through micro-enterprise development. Some

government programmes have already adopted some elements of

'MEDEP Methodology'. Some of such implications are 1) inclusion of

MEDEP procedures in the programme planning for development and

expansion of cottage and small industries, 2) inclusion of MEDEP modality

in the 'youth self employment programme of HMG, Nepal', partial use of

MEDEP developed participant selection criteria by district level units of

CSIDB and DCSI, inclusion of micro-enterprise development in DDC

programme in MEDEP districts, and so forth. However, MEDEP has yet to

have a significant and broad policy impact. This has been the observation

of the mid-term review mission as well. However, these observation need

to be verified by a detailed study and lead to the development of replicable

poverty reduction programme through the development of micro-

enterprises. 1.4 Objectives of the Study

• To review overall income generating programmes in line with the

objective of poverty alleviation

• To review poverty alleviation oriented rural credit programme for

income generation

• To analyse the MEDEP Model in relation to poverty reduction

through micro-enterprise development

• To evaluate the income behaviour and examine the production

efficiency among the entrepreneurs, and

• To identify the possible areas for integrating MEDEP Model in the

mainstream of national poverty alleviation programme



16

1.5 Limitations of the Study

This study is heavily based on the information available on the EDF diary

and MEDEP's quarterly monitoring and evaluation (M&E) reports.

Regarding the M&E reports, all ten such reports for the month of November

were studied. In case of EDF diaries, as one diary is maintained for each

enterprise, there were more than 1500 diaries. Due to time and resource

limitation, complete enumeration of the EDF diaries was not possible.

Hence, only some sample enterprises were studied.

As MEDEP is operating in ten districts, it was not possible to visit all the

programme-districts for verification. Hence, only three sample districts were

visited to get insight of the micro-enterprise development programme in the

field.

Due to limited number of enterprises in case of many kinds of enterprise like

leather and shoe products, fruit processing (making jam, candy, etc), dairy

processing, and so forth, fitting the frontier regression model to evaluate the

income behaviour was not possible. Hence, the model was estimated by

taking all sorts of enterprises in common for both dependent and

independent factors. The technical efficiency of the entrepreneurs was also,

therefore, estimated in common for all sorts of enterprises.

Chapter 2 Methodology


17

CHAPTER 2 METHODOLOGY

2.1 The Approach

A lot of income generating programmes has been executed in Nepal. Some

programmes are credit-driven and rely exclusively on the provision of micro-

credit. In this approach, credit provision works out on feasible projects. This

approach assumes that credit is the most powerful stimulant of micro-

enterprise creation and thus a very little attention is given to the subsequent

technical assistance to the borrower.

Some programmes are training-driven. Even though training is a necessary

condition to start a micro-enterprise, it is not sufficient to take-up micro-

enterprise as a business. There ware needs of subsequent services on non-

technical matters like financial management, access to raw materials and

credit, and so forth.

Some programmes rely more on social mobilisation for the creation of

micro-enterprise. However, they must be connected with the rural market

system for income generation. From the lessons learned form different

approaches of micro-enterprise development, it has been proven in many

parts of the developing world that market-led approach to micro-enterprise

development combined with the sequenced delivery of an integrated

package of training and services is the most effective way to create

enterprises. However, it has not previously been widely applied in Nepal,

and MEDEP is a pilot programme to test the applicability of this

methodology in rural Nepal. MEDEP has adopted a well-integrated

approach in sequencing a set of services in micro-enterprise creation. It has

demonstrated that the approach works to create micro-enterprise. This

study has analysed the MEDEP's approach in developing a sustainable

micro-enterprise in line with its feasibility of expanding to other areas and

districts.



18

2.2 Evaluation of MEDEP Modality MEDEP modality has been evaluated in relation to its twin goals (poverty

reduction of low-income families and capacity building of service delivery

organisations) to be achieved. Hence, level of poverty, employment

creation, income generation, and sustainability has been included as the

key variables to evaluate the MEDEP model. Employment creation is

examined in line with Ninth Plan's objective of creating one employment per

family. Income generation and poverty alleviation is examined in line with

the net income per enterprise and the increased income per family.

Sustainability is examined in line with the graduation of entrepreneurs and

capacity building of service delivery organisations.

2.3 Income Function Analysis

In order to evaluate the income behaviour, various models were evaluated

and tested. However, the results showed that the independent variables

were not independent in determining the income from the sale of produce of

the micro-entrepreneurs. It was noticed that such independent variables

were having some kind of interaction with the other variables. In order to

include such interacting relations as well in determining the behaviour of

income from the sale of produce, a stochastic translog (transcendental

logarithmic) frontier income function of the following type was used.

)1(jjk

n

1i

m

1kki

ji

n

1i

n

1jij2

1k

m

1kk

n

1iii0j

XlnE

XlnXlnEXlnlnYln

ε∑ ∑α

∑ ∑α∑α∑αα

++

+++=

= =

= ===

Figure 5.5: Enterprise by Income Group

17

3429

6457

34

103 2

010203040506070

< 22-33-44-55-66-77-88-9> 9Income

Group (Rs'000)

εj = vj + uj (2)

where Yj = income from the sale of products and services by enterprise j;

Xi = level of independent variables i;

Ek = dummy variables affecting income from the sale of produce;

εj = disturbance term consisting of two independent elements, vj and uj ;

Comment:



19

vj = random variation in output due to the factors outside of the control of entrepreneurs;

uj = technical inefficiency relative to the stochastic frontier.

The random symmetric disturbance term vj is assumed to be independently

and identically distributed as N(0, σ2v). The inefficiency component uj is

also assumed to be independently and identically distributed half normal as

N(0, σ2u). Hence when uj=0, then the income of the particular enterprise

lies on the frontier. By the same token, when the uj<0, then the income of

that particular enterprise lies below the frontier, indicating the level of

technical inefficiency.

In the estimation procedure, the decomposition of the disturbance term (ε)

into uj and vj can be done by following Jondrow et al (1982) and Aigner et al

(1977). Then the conditional distribution of u given ε gives the enterprise-

specific technical efficiencies as follows.

F ig u re 5 .6 : C o s t o f M a t e ria ls a n d T ra n s p o r t a t io n

9 7 %

3 %

C o s t o f m a t e ria lsC o s t o f t ra n s p o rt a t io n

(3)

where σ2* = (σ2u. σ2v) /σ2

σ2 = σ2u + σ2v

λ = σu /σv (4)

f(.) = standard normal density function

F(.) = standard normal cumulative distribution function.

There are standard procedures of estimating technical efficiency. One of

such procedures is the frontier regression. Frontier regression directly

measures and gives the estimated values of technical efficiencies of the

individual firm.



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An example of technical efficiency is shown in Figure 6.1. The Yaverage is the

average function while Ymaximum is the maximum function (also known as a

frontier function), which envelops all the observations. Hence, Ymaximum is the

technically feasible maximum attainable income for a given technology.

Hence, all the observations fall below the frontier function and there can be

no observation above the frontier line. For example individual A is using X1

level of input and is getting Y1 level of income. As given by average

function, individual A1 is below the average function and individual C is

above the average function. But the maximum technically attainable income

at the same level of input is Y3 as individual C is obtaining. Hence, as

compared with C, that is the maximum technically attainable income,

individual A and B are technically less efficient than C. A's technical

efficiency, thus, is Y1/Y3 and that of B is Y2/Y3. Similarly, their technical

inefficiency is given by (1 - Y1/Y3) and (1 - Y2/Y3), respectively. 2.4 Sources of Information

The main source of information for this study is the primary data that is

available in the EDF's dairy obtained from the MEDEP. As there were a

large number of enterprises established by the time of study (and thus the

large number of EDF diaries - exceeding 1500), this study has used only the

sample enterprises for analysis. The sample was determined as follows.

* A

* B * *

* *

X1 0

Y1

Y2

Y3

* * * *

* C *

Output

Input

Yaverage

Ymaximum

* *

* *

* * * * *

* *

Figure 2.1: Technical Efficiency

A



21

There are 12 categories of enterprises being classified. 1. FB: Food products and beverages 2. TX: Textiles and clothing 3. WT: Wood and timber products 4. BP: Bamboo products 5. FL: Footwear and leather products 6. PP: Paper and paper products 7. CC: Chemical and chemical products 8. NM: Non-metallic mineral products 9. ME: Non-metallic engineering products 10. RS: Repair services 11. OS: Other services 12. O: Other products

With the help of DPMs, a random sample of ten percent enterprises was

drawn from each category of enterprise from each district. However, if the

total number of enterprises under any category were less than 20, then two

samples were included for the study. Other sources of information for this

study were MEDEP's monthly M&E reports of the programme districts for

the month of November, and annual report for the year 2000.

2.5 The Sample Enterprises The sample enterprises included in the study are presented in Table 2.1.

There were 345 enterprises in the sample. Out of this, there were 325

enterprises (94%) operated by individual entrepreneurs and 20 enterprises

(6%) operated in-group.

2.6 Field Visits

In order to study cases, examine the social life style, and verify the

secondary information, a short field visit was also organised (Appendices 1

and 2). Nawalparasi and Dhanusha among the Terai districts and Parbat

among the Hill districts were visited for this purpose. The information

collected from such visits has been used to supplement the information

available in the EDF diary and to support the findings of the study.



22

Table 2.1: Distribution of Study Sample Enterprises by District and Type of Enterprise

Enterprise Sample Enterprises in the Districts (no.) Total

Notation

Description N

awal

para

si

Dad

eldh

ura

Nuw

akot

Parb

at

Tehr

athu

m

Dan

g

Suns

ari

Baita

di

Dha

nusa

Pyut

han

Num

ber

Perc

ent

FB Food products and beverages 13 2 14 11 6 8 15 11 15 13 108 31

TX Fibres, textiles and clothing 13 3 7 6 8 2 16 12 2 69 20 WT Wood and timber products 2 1 2 2 3 2 3 15 4 BP Bamboo products 11 2 4 2 4 6 2 31 9 FL

Footwear and leather products 2 2 1 1 1 3 10 3

PP Paper and paper products 2 1 1 4 1 CC

Chemical and chemical products 2 5 2 2 1 1 2 2 17 5

NM Non-metallic mineral products 2 2 4 1 ME

Metal and engineering products 4 2 2 2 1 6 2 19 8

RS Repair services 3 2 1 2 1 2 11 3 OS Other services 1 2 2 2 1 1 3 2 14 4 O Others 8 5 3 2 5 1 17 2 43 12

Number 59 15 42 33 25 15 26 45 60 25 345 100 All category Percent 17 4 12 10 7 4 8 13 18 7 100

Chapter 3 Review of Poverty Alleviation Programme in Nepal

Integrating MEDEP Modality in the Mainstream National Poverty Alleviation Programme 23

CHAPTER 3 REVIEW OF POVERTY ALLEVIATION PROGRAMME IN NEPAL

3.1 Poverty in Nepal

3.1.1 Backdrop

In recent years, poverty issue has received global attention. Efforts to

break the poverty trap have been pursued both at national as well as

international level. Various agencies including bilateral and multilateral

are found to actively involve in assisting the poverty reduction

programmes of the various countries in the world. However, despite

the commitment made by the respective governments to reduce

poverty, and the support from international forum, desired results are

yet to be achieved.

Poverty in Nepal is deep rooted, pervasive, largely chronic and spread

over all dimension of social as well as human development. Nepal

Living Standards Survey (NLSS) 1996 estimates the level of poverty

at 42 percent, a decline by seven percentage points from the1992

level of 49 percent. The size of absolute poverty is thus declining over

time on account of emphasis being put on by HMG/N for alleviating

poverty since the early period of 1950’s. The government emphasized

on making it mandatory to incorporate special programme designed

for reduction of poverty in the country in each Five Year Development

Plans. This strategy has been better addressed in the Ninth Five Year

Plan.

3.1.2 Status of Poverty among the SAARC Countries

The average growth in per capita GNP in Nepal is 3.1 percent slightly

higher than the population growth of 2.37 percent. The average

expected age of a Nepali is also relatively short although it has

increased from around 45 years in 1953 to 58.1 years in 1998. Infant

mortality per thousand has declined from 142 in 1980 to 109 in 1999.



Maternal mortality per hundred thousand is 1500 in 1997. As of 1999,

adult illiteracy rate in Nepal is also high (60 percent) and the gap in

illiteracy rate between male and female is as high as 35 percent.

Besides, there is a strong relationship between the poverty and the

status of women. Gender disparity still exists in the country. Females

put in substantially longer work hours with the average workload being

about 77 hours per week. Females, on average, have about 40

percent more workload than males. Likewise, the overall primary

school enrolment rate is 80 percent among boys compared with 61

percent for girls. Among the SAARC countries, Nepal is almost at the

bottom line in major socio-economic indicators.

Table 3.1: Indicators of Poverty in Nepal and Selected Poor Countries

Description

Nep

al

Bang

lade

sh

Indi

a

Paki

stan

Sri L

anka

GNP per capita US dollar 2000 220 380 460 470 870

Average annual growth (%) in GNP

1999-2000

3.1 3.8 3.9 3.4 4.2

1980 132 132 115 127 34

Infant mortality (per 000') 1999 109 89 90 126 19

Life expectancy 1999 58 61 63 63 73

Maternal mortality (per 100000 live births) 1990-97

1500 850 440 340 30

Adult illiteracy (%) 1999 60 59 44 55 9

Calorie intake per capita daily 1992 1957 2019 2395 2316 2275

Malnutrition (%) under five (1992-97) 47 56 53 38 38

Adult female illiteracy (%) 1997 79 73 61 75 12

Per capita commercial energy consumption (kg.oil) 1996

320 197 476 446 371

Source: The World Development Report 1999-2000, and The Human Development Report 2001.



3.1.3 Level of Poverty

A comprehensive micro-level data that indicates accurately the scale

and magnitude of poverty in Nepal is difficult to trace out. This limits to

rely upon macro information used by different agencies. National

Planning Commission (NPC) estimated Rs210 and Rs197 (at 1988/89

prices) per person per month (equivalent to US $ 8.24 and US $ 7.73,

respectively) in the hills and Terai respectively as poverty income lines

for Nepal. With this definition World Bank study estimated headcount

index of absolute poverty for 1998/99 as 40 percent of the total

population. However, using an internationally accepted poverty line

income of US $ 150 per person per year (or US $ 12.5 per person per

month) in 1998/99 prices, the estimate of poverty incidence is as high

as 71 percent for all Nepal and 78 percent for rural hills. Table 3.2

shows the level of poverty based on different income concepts for

Nepal.

Table 3.2: Incidence of Poverty Under Different Poverty Line Incomes in

Nepal (Percentage of population below poverty line)

Terai Hills All Nepal Poverty Line Rural Urban Total Rural Urban Total Rural Urban Total NPC 29 17 28 55 13 42 42 15 40 US $ 150 69 51 68 78 32 74 74 52 71 M. Lipton 70 50 68 65 52 64 68 51 66 Note: US $ 150 is considered to be an acceptable international definition of

absolute poverty (World Bank, 1991).

Lipton considered the poor to be those whose food expenditure

absorbs 70 percent or more of total expenditure (World Bank, 1991).

Based on the above, the trend estimates of poverty incidences in

Nepal shows that it has increased from 36.2 percent in 1976-77 to

42.6 percent in 1984/85 to 49.0 percent in 1992-97 while it is found to

drop to 42.0 percent in 1996 as revealed from NLSS Survey 1996 on

the basis of consumption expenditure required to consume 2124 kcal



per person per day. This income was computed to be Rs4404 at 1996

prices. NPC has followed this minimum income level to define the

poverty in the Ninth plan (1997-2002). Hence, the targeted baseline

people by the poverty alleviation programme in the plan were also 42

percent.

Table 3.3: Trends in Poverty Incidence (1985, 1992, 1996) Source Year Rural Urban Nepal NPC Survey 1976 -77 1977 37.2 17.0 36.2 MPHBS (1984/85) 1985 43.1 19.2 41.6 NPC Eighth Plan (1992-97) 1992 ----- ----- 49.0 NLSS Survey, CBS (1996) 1996 44.0 23.0 42.0 Source: 1. National planning Commission, Employment Income Distribution and Consumption patterns

in Nepal, 1977. 2. Nepal Rastra Bank; Multipurpose Household Budget Survey (1984/85), 1989. 3. Nepal Living Standard Survey, 1996.

However, the achievement of the Ninth Plan (1997-2002) towards

poverty alleviation has not been satisfactory. The mid-term evaluation

of the Ninth Plan has shown that poverty has declined to 38 percent

against the target of reducing it to 32 percent by the end of the Ninth

Plan.

3.1.4 Areas of Poverty

Nepal's poverty is basically rural. It is estimated that 95 percent of the

poor live in rural areas where 89 percent of the population lives. Out of

these rural poor, four-fifths are either agriculture self-employed or

agriculture labourers with or without tenancy. The fact that as much as

93 percent of all rural poor belong to the category of small and

marginal /landless farmers indicate that areas of poverty is mainly

concentrated on the marginal/landless farmers in the rural areas. The

NLSS survey has also revealed that of the 42.0 percent population

under the poverty line, 24.9 percent and 17.1 percent are categorized

under poor and ultra-poor. Similarly, the ecological classification

shows the highest incidence of poverty in mountain (56%) followed by



41% in the Hills and 42% in the Terai. Ultra-poor in Mountains is as

high as 26.7 percent followed by 19.7 percent in the Hills and 13.3

percent in the Terai.

Besides, the ultra-poor households who make up 17.1 percent of the

total population generally comes from socially and economically

backward, deprived and weak communities. Poverty is therefore, not

merely on economic issue but it is also related to human dignity. The

dimension of poverty according to household characteristics group

shows that proportion of ethnic group below poverty line is relatively

higher: Kami- 68%, Damai-67%, Limbu-71% and Sarki-65% in

contrast to Brahmin-34%, Newar-25%.

Another dimension of poverty is on the gender disparity. Women often

constitute a relatively more deprived group because of intra household

as well as social and legal discrimination between the two sexes. As

explained above, in addition to household chore, women put in

substantially longer work hours (10.8hrs/day) compared with men

(7.5hrs/day) (Acharya and Bennette, 1982) and they are far less than

men in earnings, wages and formal employment. Cultural and social

customs prohibit their greater participation outside the subsistence

sector, which is more prevalent in rural areas. Therefore, women's

overall welfare is substantially below that of males revealing more

poverty in the women group.

Recently, a clear distinction has been sought between income poverty

and human poverty. As income poverty captures only one dimension

of poverty, the broader concept of poverty known by the name of

human poverty has been claimed more representative, realistic and

broader as it captures apart from income status, other aspects of

human capabilities such as literacy, health, etc. According to the

Human Development Report 1998, the values of Human Deprivation



Measure (HDM) reveals that nearly 44 percent of Nepal's total

population is under deprivation of necessary capabilities. And this

deprivation ratio for the rural areas is more than double compared with

that of urban areas.

The above scenario exhibits that the high poverty concentration is in

backward remote pocket with backward-ethnic groups and

communities and therefore, in order to alleviate poverty in the rural

areas, emphasis should be laid on development of agriculture, agro-

based industries, agro-trade, community development, etc.

Table 3.4: People Under the Poverty Line

Population below the Poverty line (%) Region wise Description Total Poor Ultra-poor

A. According to geographic region Mountain 56.0 29.3 26.7 Hills 41.0 21.3 19.7

Terai 42.0 28.7 13.3

B. Urban and rural areas Urban area 23.0 13.2 9.8 Rural area 44.0 26.4 17.6

C. National average 42.0 24.9 17.1 Source: The Ninth Plan (1997-2002).

3.1.5 Issues on Poverty Alleviation

The issue in poverty alleviation has stood as a strong challenge to

Nepal. The income and consumption level and overall living standard

of the people have remained very low. Notwithstanding the planned

development efforts for over four decades and explicit poverty

alleviation programmes/projects for about two decades, poverty in

Nepal could not be reduced as desired because of the following major

casual factors:



(a) Economic factors: Sluggish economic growth, stagnant

agriculture, high population growth, massive underemployment,

unequal distribution of income and productive resources, lopsided

dualistic development process and lack of access to institutional

credit.

(b) Political and socio-cultural factors: Lack of good governance,

inefficiency, rampant corruption and rent-seeking, gender bias,

ethnicity, weak social services (level of educational and health

care very low), low human development and cultural and

traditional practices, weak and unstable government.

(c) Geographical factors: Poverty in aggregate resources, land-

locked between giant neighbours, long open border with

underdeveloped states of India, extremely difficult topography,

poor infrastructure and environmental degradation.

(d) Administrative factors: Centralized administration, lack of effective

decentralization, centrally focused planned development, non-

clarity in Act and Regulation and lack of skilled and trained

manpower.

The effectiveness of policies to alleviate poverty is judged by the

number of people that fall out of the poverty. The policies addressed

to eradicate poverty have not been effective in Nepal as there are no

signs that poverty is on the decline despite many years of investment,

aid and loans in the related programmes. Agricultural sector has

received the top most priority in almost all the Five year plans, but this

sector has not shown sustainable growth. Even despite the years of

investment in irrigation, fertilizer and credit subsidies and other

facilities to the sector, they have not been simply effective to raise the

livelihood of the people. And again, the government's efforts in the

development of small scale and cottage industry have been



inadequate in the recent past development plan. As a result, the

incidence of poverty is more pronounced in rural areas (40 percent of

total households) and ecologically highest in mountains (63 percent).

The ratio of rural/urban incidence of poverty is reported to have gone

up to 2.60 in 1996 from 2.20 in 1977. The foregoing analysis entails

that the poverty trend has not much improved in spite of adoption of

economic reform programmes by the country.

In order to raise the living standard of the people living below the

poverty line, a viable framework is, therefore, needed under which,

apart from agriculture, emphasis should be laid on development of

micro-enterprises and small businesses by integrating skill training,

business literacy programme, credit and technology services. In

addition, women are to be encouraged for the assumption of

ownership or play the role of sole operators of micro-enterprise and

small businesses.

3.2 Overview of Poverty Alleviation Programme 3.2.1 Poverty Alleviation Programme in the Periodic Plans

Until the Eighth Plan (1992-1997), poverty alleviation was implicit in

the regular development plans. It was only in the Eighth Plan, poverty

alleviation has appeared as a separate policy of the development

plan. There were 49 percent people living on abject poverty in the

beginning of the Eighth Plan. The Eighth Plan examined that the attempts made in the past for

poverty alleviation were faulty in principle and weak in implementation

and the general public could not benefit from such programmes as

expected. It was further examined that different materials and services

provided by the government as grants or at subsidised rates were

utilised either by the relatively well-off ones or by the comparatively

better-off groups among the poor. The situation was found to be such



that the households living in the condition of abject poverty and

backwardness, both socially and economically, did not either know at

all about the services delivered by the government or they were not

able to utilise such services. In light of this evaluation, the Eighth Plan

was claimed to be formulated and implemented in such a way that the

relatively well-to-do families will not be able to grab these benefits and

the real poor ones will benefit directly or indirectly. On the ground that

the poverty alleviation task is of multi-sectoral in nature, all the

sectoral programmes were directed towards poverty alleviation. However, when the achievements of the Eighth Plan were evaluated

to formulate the Ninth Plan it was accepted that the poor communities

could derive only a minimum benefit out of the investment on

development of social and physical infrastructure and various

economic activities. The review of the Eighth Plan revealed that

poverty alleviation efforts have not been broad, effective and focussed

on the poor and the ultra poor. The size of the poor covered by the

targeted programmes was found to be minimal. The main reason

accorded for this was that as real poor could not be identified and

those programmes could not reach areas with high poverty ratio. Due to ineffective implementation of the Eighth Plan regarding poverty

alleviation, the level of poverty remained at 42 percent at the end of

the plan period and the Ninth Plan took it as the baseline poverty level

for its planning purpose. By then, there was a 20-year long-term vision

made about planning. The vision has envisaged reducing poverty

down to 10 percent in next 20 years. The Ninth Plan aimed to reduce poverty down to 32 percent level by

the end of the plan period - 2002. The plan aimed to - gradually raise

the living standard of the people below the poverty line by reducing

the poverty; launch special area and various targeted programmes to

uplift the living standard of ultra-poor household which is without any



means of production as well as income; socially and economically

empower the backward, deprived and weak communities; and reduce

the concentration of the existing poverty in backward and remote

areas by developing physical, social and economic infrastructure.

However, the mid-term review of the Ninth Plan has shown that there

is still 38 percent of the population living in poverty. The review has

also mentioned that it is not possible to reduce poverty below 38

percent in the remaining period of the Ninth Plan. The poverty level of 38 percent has been taken as the basis for

poverty reduction planning in the Tenth Plan (2002-2007). The

approach paper of the Tenth plan has envisaged reducing poverty to

30 percent by the end of the plan period.

3.2.2 Poverty Alleviation Programme in Agriculture and Cottage

Industry Sectors The Ninth Plan aimed to step up the aggregate economic growth

making the distribution system effective through providing employment

to people living below the poverty line. For this, the plan emphasised

the successful implementation of the Agricultural Perspective Plan.

Stress was laid on intensive agriculture, agricultural diversification and

commercialisation, livestock and other agri-business, which bring in

high returns. Nevertheless, in the beginning of the implementation of the Ninth

Plan, there has been no separate programme for poverty alleviation in

agriculture sector. The entire programme on agriculture was reported

as programme for poverty alleviation. Under the Department of

Agriculture (DOA), there are no such programmes as poverty

alleviation programme. It is said that the programme has given

emphasis to poor regarding training, entrepreneurship development

and value added production.



Under the Department of Livestock Services (DLS), there are some

programmes named like poverty alleviation programme, income-

generating programme, programmes for disadvantaged ethnic groups,

and so forth. In the implementation part, there were blanket

programmes designed in the name of poverty alleviation and no

distinction was made on the programmes for various categories of

poor. Similarly, in the cottage and small industry sector, stress was given on

expanding cottage and small industries, labour-intensive techniques

for employment generation through expansion of agro-based

industries and evolution of inter-relationship of industry and

agriculture. For the promotion and enhancement of micro-enterprises

and cottage and small-scale industry, market-oriented skilled

development training programme on various income-generating

programme was also envisaged. In the enterprise development sector,

the Ninth Plan aimed to initiate a micro-enterprise development

programme in ten districts of the country and create a total of 7000

new micro-entrepreneurs under the assistance of UNDP.

3.2.3 Matching of the Poverty Level and the Development Programmes

There has been a severe definitional problem in the planning and

implementation of annual programmes on poverty alleviation. This is

because; the programme has treated all the poor as a homogenous

group. This has led to the planning and implementation of uniform

types of poverty alleviation programmes for all kinds of poor. This has

not considered the improvement in the living condition of the poor as a

result of the programme even if they have not been alleviated from

poverty. The objective of poverty alleviation programme is not only to

just elevate the poor form the poverty line, but also to elevate the

living condition of the people gradually over time.



For example, if the objective of the programme is and only poverty

alleviation, then the programme may consider that people near the

poverty line income (say the one with annual income of Rs4403) will

not need more than an egg per year to be alleviated from poverty.

Whereas, the people at the bottom of the poverty line income (say the

one with annual income of Rs2403) will require at least a goat to be

alleviated from poverty. But programmes are not designed in this line.

As a matter of fact, people with lower income below poverty line need

higher paying enterprise and people near the poverty line need lower

paying enterprise for simple poverty alleviation. Higher paying

enterprises involve higher risk as well whereas the lower income

group people, by an established fact, are risk averters. This clearly

indicates one fact that the poverty alleviation programmes thus should

not be designed as a blanket recommendation but needs to be

designed according to the needs and priorities of the people at

different depths of poverty. In most of the poverty alleviation

programmes, this aspect has been overlooked.

Realising this fact, MEDEP programme has identified the people at

different depths through income ranking. It has developed the micro-

enterprises that best fit the needs and priorities of these people at

different depths of poverty.

3.3 Micro-finance and Micro-enterprise Development nexus in Poverty Alleviation 3.3.1 Micro-finance as an Access to the Rural Poor for Productive

Resources

Nepal has already completed eight economic development plans and

the ninth is underway which will be completed by next year. It is

inevitable to note that despite the widespread realization of growing

incidence of poverty in rural areas, specific poverty related targets



have occupied a limited space in the development plans.

Government’s efforts to reduce poverty incidence started from as early

period as 1950’s with a “multi-sectoral” approach called Village

Development Programme that initiated in the country in 1952.

However, policies towards introducing rural micro-finance as a part of

accessing the rural poor to productive resources goes back to three

decades ago in 1970’s wherein the concept of priority sector lending

was introduced, to a larger extent, to accelerate the utilization of the

basic resources by the rural poor. Recently, a broader concept of

micro financing has emerged under which the activities such as

availing small scale loan, generating and mobilizing the savings by

beneficiaries, carrying out income generating activities or micro

enterprises or insurance activities are being undertaken in line with the

linking up with other social sector development activities such as

training to the beneficiaries, literacy, health and other related

programmes. With the participation of both formal and informal sector,

the access to micro-finance programme for the rural poor has though

increased in due course of time, the share of institutional sector in

availing loan to rural households is very low as compared with the

non-institutional sector. The 1991/92 rural credit surveys by Nepal

Rastra Bank indicates that only 20 percent of borrowing rural

households were institutional borrowers as against 80 percent non-

institutional borrowers.

3.3.2 Micro-finance for Development of Micro-enterprises

As mentioned earlier, the history of micro financing was started in

1956 with the establishment of 17 cooperative credit societies. Soon,

the Cooperative Bank was established in 1959 and to invigorate the

availing of financial resources to the cooperative societies and

individual farmers Agricultural Development Bank was established in

1968. The Agricultural Development Bank has still remained the

foremost rural and agricultural financing institution and accounted for



55 percent of the total rural institutional credit. Commercial banks are

the second biggest institutional sources for rural micro-finance

accounting 43 percent of total rural credit. The role of Five Grameen

Bikas Banks (GBBs) in rural micro-finance has increased recently but

their share in total outstanding rural institutional credit was less than

two percent. With the liberal financial policies pursued after the

restoration of democracy in Nepal, a big changes as well as

challenges in the financial sector was perceived with the increased

share of financial intermediary NGOs and the Savings and Credit

Cooperatives (SCC) in the total rural micro-finance. Most of the

poverty reduction programmes of the government, which are run in

collaboration with multi-lateral development agencies, have been

linked with the financial institutions for having access to required credit

for the overall income generating micro-enterprise development

activities. With the recent entry of “ The Financial Intermediary

Societies Act 1998” and promulgation of by-laws, NGO’s and INGO’s

working in the development of income generating programmes are

expected to have their attention towards more professionalism in their

activities. Following is the chronology of the major micro-finance programmes

running at present targeted to benefit the disadvantaged group and

poor people which suffices its importance in attaining sustainable

livelihoods for the rural poor in the country. (a) Priority Sector Credit Programme

Priority Sector Credit Programme was introduced in 1974 for the

implementation of which, two major commercial banks (Nepal

Bank Limited and Rastriya Banijya Bank) were entrusted to

provide credit to agriculture, cottage industry and services. Under

this programme, the entrusted commercial banks were required to

invest at least five percent of their liabilities to the sector identified



as Small Sector at preferential rate of interest. This nomenclature

was re-designated as Priority Sector in 1976, which mainly

comprises agriculture, cottage industry and services. A new

lending programme called 'Intensive Banking Programme (IBP)'

was introduced in 1981, which was policy wise relatively more

comprehensive and target oriented. The programme is based on

the principle of area approach, viability of the project and regular

monitoring and supervision. At present, three banks are financing

priority sector credit under the IBP while the remaining

commercial banks are financing the priority sector under their

separate individual credit programme. Since 1990, all the

commercial banks are directed to finance at least 12 percent of

their total loans and advances under this programme out of which

3 percent is required to be financed in the deprived sector failing

this mandatory requirement, the commercial banks are penalised

for the shortfall amount. Priority sector credit, which was

delivered through 46 branches of two commercial banks in over

27 districts, has now been extended to 75 districts of the country

with the total outstanding loans amounting to Rs10493.7 million

as at mid-April 2001.

(b) Small Farmers Development Programme (SFDP)

To fulfil the demand for micro-finance for the rural poor,

Agricultural Development Bank of Nepal launched special target

oriented credit programme called "Small Farmers Development

Programmes" since 1976. It is considered as the first poverty

focused credit programme of the country. Small farmer's groups

comprising of 10 to 15 members are formed with the objectives of

providing institutional support for income raising activities. SFDP

was launched with soft loan support of IFAD in 30 districts in

1981, SFDP II was funded by IFAD and ADB/Manila financed

SFDP III.



After almost 24 years of implementation, SFDP through its 414

number of branches has been able to cover only 600 village

development committees (VDCs) out of almost 4000 (VDCs) in

Nepal. It has served about 2,50,000 small farm families of the 9

to 10 million people living below the threshold. Till 1997/98, the

member farmers have entertained a loan amount of Rs4.82

billion.

(c) Production Credit for Rural Women

In 1982, a credit programme specially meant for facilitating credit

to the rural women was introduced by HMG/N as a socio-

economic programme in coordination with UNICEF and Nepal

Rastra Bank. Better and active participation of the rural women in

income generating activities thereby empowering the rural women

was the main motto of this gender focussed credit programme.

NBL, RBB and ADB/N were the three participating banking

institutions and NRB's role as a responsible fund management

agency was realised when 90 percent of the total financial

resources were made available by IFAD since 1988. The

community development component (identifying the target group,

formation of group of 4 to 10 poor women, select viable project,

monitor and supervise and other infra-structural development)

was handled by Women Development Section of the government

while the credit component management role was entrusted to

the NRB. As in SFDP, group guarantee was the crucial option

regarded as collateral pledged for loan. This programme is

considered one of the most successful one in terms of raising

socio-economic status of the rural women. Under PCRW

programme, a maximum amount of Rs. 30,000 per head is

availed as loan to a female member for undertaking both on farm

and off farm activities The programme was initially started in 5

districts, which increased to 67 districts by the end of 1998 and



has disbursed loan amounting to Rs 369 million to 46 thousand

beneficiaries. Altogether 114 branches of NBL, RBB, and ADB/N

are involved in this programme.

(d) Micro-Credit Project for Women (MCPW)

The Micro-Credit Project for Women was initiated in 1994 by the

Ministry of Local Development of HMG/N in close coordination

with NRB, NBL and RBB and the assistance of Asian

Development Bank. It is a first micro-finance project in which

financial intermediaries are involved in a public sector credit

programme. It is also regarded as the improved extension of

PCRW as beneficiaries of this programme are solely women. A

loan amount per borrower not exceeding, Rs.30,000 for

agriculture, Rs. 40,000 for micro-enterprise and Rs.2,50,000 for

urban-based small business are liable to be disbursed under this

programme. Under MCPW, as of mid-January 1998, a total of

Rs.159 million has been disbursed to about 13 thousand women

borrowers in 12 districts of the kingdom.

(e) Rural Self-Reliance Fund

Realizing the growing entry of non-governmental organizations

and/or self-help groups in rural community development including

rural lending, HMG/N established a corpus fund of Rs20 million in

1991 to access credit to NGOs or Savings and Credit

Cooperatives for on-lending to the rural poor for assisting them in

improving their standard of living through income generating

activities. The fund provides a small loan of Rs15,000/- per

beneficiary and a maximum of Rs5,00,000/- per institution at the

rate of 8 percent for a period of 3 years. By mid-February 1999,

the fund has provided loan to 84 NGOs and SCCs amounting to

Rs22.3 million and covered 33 districts of the kingdom.



(e) Deprived Sector Credit

Growing importance of engulfing as much number of

disadvantaged group of people as possible in facilitating net of

rural micro-finance was felt with the increase in population growth

rate and number of people living below poverty line. Deprived

sector credit was therefore launched by NRB in 1991. Under this

credit programme, NRB directed the commercial banks to utilize

specified share of priority sector credit to the rural poor and

deprived sector. The share specified was fixed at different levels

for different commercial banks depending upon their experiences,

branches in rural areas and level of fund available for rural

lending. As of mid-July 1998, a total amount of Rs300.6 million

has been disbursed to rural poor under this scheme.

(g) Banking with the Poor (BWTP) Rastriya Banijya Bank (RBB) in Gundu Village Development

Committee of Bhaktapur district launched the Banking with the

Poor (BWTP) in 1991 as a poverty reduction programme. The

main objective of the programme is to establish grass-root level

organizations of the poor as Self-Help Organization (SHO)

through which services and financial resources are channelised

on a sustainable basis with the aim to improving the living

standard of the poor. The bank provides credit to SHOs at the

market interest rate while the SHOs lend without collateral.

h) Grameen Bank Financial System A concept of Grameen Bank replication was evolved in 1992

when the HMG felt the need for establishment of a separate

organization which would take sole responsibility after financing

the rural poor and supplement to some extent, the rural micro-

finance activities of the previously established institutions. The

aim of the Grameen Bikas Banks thus established in five number



between 1992 and 1996 is to engross the targeted rural poor with

the appropriate credit delivery mechanism and on group liability

basis. Training as an entry point of banking has been introduced,

as a new specialized banking system by Grameen Bikas Bank.

As of mid-July 1999, these banks have altogether disbursed loan

of Rs.2,867 million to 151 thousand borrowers through 140

numbers of branches in all five-development regions of the

country.

(i) Rural Micro-Finance Development Centre On February 21, 1999, a loan agreement of US $ 20 million has

been signed between HMG/N and Asian Development

Bank/Manila to implement the rural finance project in 26 districts.

For this, the Rural Micro-finance Development Centre (RMDC),

the apex Developing Banking Institution is established with the

equity participation of NRB, all the 13 commercial banks and few

other financial institutions including a NGO with total paid up

capital of Rs. 80 million. RMDC is to operate as the wholesale

financial institution and will on-lend ADB/N funded loan to all the

Grameen Bank Replicators, SCCs and financial intermediary

NGOs who fulfil its eligibility criteria for funding. With the

establishment of RMDC, it is expected to pave the way for better

flow of micro-finance to the rural poor. 3.4 Training as Vital Services for Development of Micro-Enterprises

3.4.1 Review of Micro-Enterprise Development Training Considering the large number of micro-enterprises to be supported as

contemplated in the national plans, training for entrepreneurship

development has been recognized for one and a half decades as an

essential ingredient in the development of small and micro-enterprises

in Nepal. The available statistics reveal that between the span of nine

years (FY 1991/92 and FY 1999/2000), an average of 7761 number of



cottage and small-scale industries have been registered each year

indicating the need to generate adequate number of training

institutions to produce efficient entrepreneurs both at government and

non-government levels. Currently, several organizations are engaged

in entrepreneurship development programmes providing training to

about 1500 persons annually. That is, the present established training

institutions are capable of catering only about 19 percent of the

current level of average number of total proprietors (assuming one

entrepreneur/proprietor in one industry). Nevertheless, it is mentioned

elsewhere that about 35 percent of the trainees produced from such

organizations/institutions have been able to set up enterprises. In this

respect, it is worth mentioning here to make a brief review on the

major agencies that provide training in entrepreneurship development.

Entrepreneurship development particularly in the cottage and small-

scale industry (CSI) sector is a recent phenomenon in Nepal. At

present, various government, semi-government and private agencies

are involved in training programmes to produce entrepreneurs for

micro-enterprises. Some of these agencies are reviewed here.

(a) Cottage and Small Industry Development Board (CSIDB)

The CSIDB was established in 1982 with an aim to develop,

expand and strengthen cottage and small industries in the country.

With the main activity as providing skill development training, it has

also been engaged in other promotional activities such as

exhibition of CSI products, industry and industry sub-sector

development study and so on. The CSDIB, at present, operates 50

different types of skill training programmes in about 48 districts of

the country. While the services of CSIDB is concentrated in hills

and mountain regions of the country, the Department of Cottage

Small Industries (DCSI) provides skill development training

services in 27 districts mainly located in the Terai region.



(b) Industrial Enterprise Development Institute (IEDI) IEDI, a semi-autonomous body under the Ministry of Industry has

developed out of the Small Business Promotion Project (SBPP), a

joint project of HMG/N and the GTZ in 1984, with a view to

promoting entrepreneurship and small businesses in the country.

The SBPP project has developed several approaches towards

introducing effective methods of micro, cottage and small industries

development in the country. Few to mention are entrepreneurship

development training, industrial potential study and research and

technical advisory and consultancy services. With the development

of IEDI, it has given a new dimension to improving the service

delivery in the small enterprise sector based on the SBPP approach

to enterprise development. The IEDI, in fact has gained the status of

a national level institution in the field of entrepreneurship and

management skill development.

(c) Women Development Division (WDD) A special programme focussed on raising the status of rural women

was introduced in the Sixth Plan (1980-85), which eventually led to

the establishment of the Women Development Division in the

Ministry of Local Development. The activities of WDD was focussed

mainly on institution building, training, income-generating activities,

community development, environment protection and appropriate

technology. The activities of WDD became more pronounced with

the launching of Production Credit for Rural Women Project in 1982.

Training was one of the main components of the activities of PCRW

and thus WDD has been providing training on skill development and

entrepreneurship development to rural women.

(d) Federation of Nepal Cottage and Small Industry (FNCSI) The FNCSI was formed in 1990 with the aim of protecting and

promoting the interest of cottage and small industries (CSI)

entrepreneurs by providing various promotional and industrial



extension services. Its main focussed areas are providing

trainings, conducting seminars, symposiums and rendering

consultancy services, information and business services and

sale’s promotion services. FNCSI has conducted various

programmes on entrepreneurship development, management and

technical skill for CSI entrepreneurs. At present, FNCSI has over

20,000 general members grouped under district committees in 60

districts and 13 institutional members.

(e) Women Entrepreneur’s Association of Nepal (WEAN) WEAN was set up in 1987 by a group of women entrepreneurs

with a primary objective to assist women entrepreneurs to enable

them to be actively involved in economic activities through service

package of training, information and networking and marketing

and credit.

WEAN set up a Cooperative in 1992, which does the marketing

activities for promotion of products made by Nepalese women

entrepreneurs. It has more than 100 members who are mainly

involved in handicraft production as well as food processing and

other agro-based productions. WEAN carries out different types of

trainings for women entrepreneurs in skill development, technical

skills, entrepreneurial development and marketing strategy. But its

activities are mostly concentrated in Kathmandu Valley and the

surrounding rural areas.

3.4.2 Constraints in Micro-Enterprise Development through Training Many factors determine the effectiveness of a training programme.

The entrepreneurship development programme (EDP) training

assumes that entrepreneurship can be developed through proper

training and guidance. The effectiveness of the training is judged by

the utilization of knowledge, skills and competence, and in the

behavioural changes that individual trainees gain through the training



process. But the above-mentioned institutions for various reasons

have been able to meet the training objective only to a limited extent.

The installation ratio is as low as 30 percent that is, only about 30

percent of those trained set up an enterprise. This indicates that a

mere increase in the number of entrepreneurship training programmes

has not served the national purpose. Moreover, small entrepreneurs

are found to suffer despite having training in EDP, as they could not

implement their business plan mainly because of lack of post-training

support and guidance. It has been experienced in Nepal that the EDP

is often run as a routine activity to meet a set target of numbers to be

trained without due regard to improving effectiveness through

necessary changes in programme contents and methods and post-

training support. There is no proper assessment of locational factors,

such as resource potential, skills, markets, prerequisite infrastructure,

local agencies and NGOs, and support institutions such as banks,

while planning EDP training programmes (Gurung, 1999). Mr. Gurung

in his study report has recommended that EDP should look into all

such aspects as the prevailing socio-economic situation, resource

potential, physical infrastructure and its condition, existing institutions

and local NGO support, skill availability and potential, market centres,

and the existing and potential economic opportunities. Institutional services are to be strengthened to provide post training

guidance and support services in an integrated and coordinated

manner to produce genuine efficient entrepreneurs who will then be

able to run enterprise more efficiently. In this context, the proposed

scheme for development of Rural Financial Markets (Nepal Rural

Credit Review, 1991/92 - Nepal Rastra Bank, 1994) to facilitate

development of entrepreneurship in cottage and small-scale industries

is commendable, which has emphasized on the need to identify

various requirements of the entrepreneurs sequentially apart from

training in skill development.



3.5 Current Issues in Sustaining of Micro-Enterprise Development Programme The historical record thus reveals that rural credit programme has been

considered as one of the strong component of poverty reduction programme

and policy of the government. However, it is also the reality that financial

viability is a must for the long-term sustainability of a micro-finance

programme. It has been realized over the period that the poverty reduction

oriented rural credit programmes of the government could not perform at

expected level because of following inherent limitations of the formal credit

sector:

• Their scope is much wider than the customary scope and functions of the financing banks,

• They are not able to focus and provide greater attention at micro-level,

• Geographical confinement of the target-oriented loan, • Complex cumbersome and time-consuming procedures and

formalities, • Inaccessible to consumption and social loan, • Unrealistic and highly complex collateral system, • Budget- constraint and purpose-specific system, • Indifferent attitudes of bank employees and excessive

bureaucratisation, • Prevalence of unethical practices, • Pyramidal organizational structure and overly centralized

decision-making system, • Bank lending mechanism not adoptable to the rural conditions

and realities, • Lack of coordination between banks and line agencies, • Lack of effective supervision and trained personnel, • Lack of market orientation for the product, • High operating cost of the financial institutions and, • Inefficient use of group approach

The weaknesses observed in the formal credit sector and the liberalization

policy adopted by the government opened the scope for the entry of



informal sector in the development of micro-enterprises. This informal sector

came into the form of many of domestic intermediaries as well as

international NGO’s, which led to the growth of income generating

programmes widely in the country. But the participation of semi-

government, non-governmental agencies both domestic and international

donor agencies in addition to government agencies has created problem in

generating effective modelling of the programme. It has been observed that

there is absence of linking the objective with the mode of programme for

poverty alleviation, which has unnecessarily generated non-targeting and

miss targeting at the implementation level. Moreover, inadequate

prioritisation of such programmes without having any strong authority to

monitor its impact on rural poor has misguided the essence of achieving

goal of poverty alleviation in most of the related projects including donor-

funded ones.

Recent experiences revealed that different participating agencies are

experimenting with different modules in the name of sustained income

generation through the development of micro-enterprises. Growing concern

is also on the card that some poverty alleviation programmes totally

dependent on foreign fund seem unlikely to sustain once the aid is phased

out. Most of the income generating programmes in which micro-enterprise is

the core component have been suffering from various issues such as

incidence of overlapping of programme location areas, high operating costs,

high interest bearing loan and mushrooming of different micro-enterprise

development modules at an alarming rate. A national consensus is,

therefore, needed to come up with an appropriate module of the micro-

enterprise development programme, which is adequately designed in

accordance with the local need, people’s genuine participation, their

absorption capacity to income generating activities including loan utilization

capacity in terms of their educational standard and health status and finally

the self-regulated and supervisory environment as done by MEDEP.

Chapter 4 MEDEP Modality of Micro-enterprise Development


CHAPTER 4 MEDEP MODALITY OF MICRO-ENTERPRISE DEVELOPMENT

4.1 MEDEP's Process of Market Analysis and Development

MEDEP has followed a set of procedures for micro-enterprise development. MEDEP's

initiative regarding the creation of micro-enterprise development is based on the needs of

the low income-families (target participants) to improve their sources of income, and the

demands of the market for products, particularly off-farm businesses. It has a particular

focus on meeting the needs of the unemployed youth, and self-employed women. It creates

an enabling environment for female entrepreneurs. It should be sustainable both from the

environmental and the social perspectives. It should take into account the impacts on all

the household members and the communities affected by the business by including the

environmental and social criteria. The detail of micro-enterprise creation and development

is presented in Figure 4.1.

Identi ficatio n o f P ossible P rima ry

Custo mer fo r Micro

E nter prise P roduc ts

P roduc t Develo pme nt Ideas fo r Mic ro

E nter prise Develo pme nt

Logical Network o f the Micro -En terp rise C reation and Developmen t Process o f MEDEP

D istrict Lev e l Su rvey(So cio eco n o mic, A rea Po ten tia l, an d Mark et su rvey )

Selec tio n o f Mark et Cen ter s an d Prog ramme Lo catio n

So cio -Eco n o mic A sp ect Reso u rce/Sk ills /A p p .Tech n o lo g y Asp ect Mark et A sp ec t

Fo r m D - Cu sto mer Su r v ey

Cu sto mer D atab ase th ro u gh Reg istry

Sy stem

Par tic ipant selec tion and determining their needs and potential

MEC/S Y IB Tr ainin g a nd S t rat egic B u siness an d M ark et planni ng (E ntr ep ren eur ship awa ren ess, motiv atio n, oppo rtu nity nee ds a nalysis, m arke ting sur vey and

busin ess sel ectio n a nd sc he me pre par atio n)

Sk ills Tra in in g /U p g rad ingq u ality fo cu s

D issemin ation and Ad ap tation o f A pp rop r iate Tech no log y

Micro -cr edit (as p er nee d in gr oups )

Implementation of Mark eting Plans /Mark et Intervention Strategies

Qua lity control o f produc ts

Bu sin ess co u n selin g an d M&E

P articip ator y Ru ral A p prai sal( Res ourc e ve rifica tion, ro ad ma ppin g an d p ove rty map ping )

- Ide ntific ation of P oor Hous ehol d wit h th e h elp o f th e co mm unity

For m A : B a selin e Surv ey-V erific ation of P RA i denti fied po or h ous ehol d th ro ugh

socioec ono mic base line surv ey and pe r ca pita c alcula tion- Ide ntific ation of i nte rest ed pote ntial pa rticipa nts

For m B : S c ree ning of ent rep ren eu rial c har acte r-S cre enin g of ent rep re neu rial c har acte ristic of p ote ntial par ticipa nts

For m C: Fo r E xisti ng E n tre pre ne ursIdenti ficatio n o f su ppo rt s eekin g exis ting ent er prise s an d

entr epr en eurs -2 5% of t he total ta rget

A nalysis o f av ailable reso urc es, skills and ap p.

Tech nolo gy

Need analy sis a nd s electi on viable pro duct ide as

Figure 4.1: MEDEP Process of Micro-enterprise Development



4.2 Implementation Sequence

The phase-wise processes are implemented in ten steps in sequence as

follows.

I. Phase One

Phase one involves Steps 1 to 5. The business environment is examined

in these steps. This is to facilitate the selection of Programme Locations

and prioritise sectors with opportunities for growth of micro enterprises.

This also facilitates the selection of participants. II. Phase Two

In this phase, a viable product or micro enterprise for which to formulate a

business and market development plan with the appropriate interventions

to overcome constraints and take advantage of the opportunities is

identified. Phase two involves Step 6. Feasibility of prioritised sub-sectors

and enterprises is assessed in this step. III. Phase Three

This phase involves Steps 7 to 9. These steps involve micro enterprise

planning and development. This is to ensure a customer-oriented strategy

in order to have a profitable and sustainable venture. IV. Phase Four

This phase involves Step 10. This step involves pilot testing and follow-up

monitoring. This is to minimise risks and ensure that the enterprise

remains competitive and has no negative impacts.

These step-wise processes are summarised in Table 4.2



Table 4.2: District Implementation Sequence for Market Analysis and Micro-Enterprise Development

Phase I

Step 1

DISTRICT OVERVIEW (area and market survey) Collection of data from secondary sources on the socio-economic status of the district population and on market

opportunities and constraints

Phase I

Step 2

ANALYSIS OF RESULTS Participatory Action Research to identify priority sectors

Phase I

Step 3

COMMUNITY SURVEYS Selection of programme locations, hiring of EDF

Phase I

Step 4

PROGRAMMELOCATION SURVEY Interests and skills of men and women, resources and market

opportunities

Phase I

Step 5

SELECTION OF PARTICIPANTS Group formation, preliminary study by participants to identify

enterprise ideas within selected sub-sectors

Phase II

Step 6

FEASIBILITY STUDIES Collection of market information on potential enterprises (local, district, national and international levels), cost/benefit analysis,

ranking final selection of enterprises

Phase III

Step 7

FORMULATION OF BUSINESS AND MARKET DEVELOPMENT PLANS

Marketing strategy, resource management strategy, production strategy, enterprise management, financing, social strategy,

strategic alliances

Phase III

Step 8

ENTERPRISE DEVELOPMENT Identification and delivery of capacity building in resource

management, production skills, entrepreneurship development, marketing strategy and enterprise management

Phase III

Step 9

IMPLEMENTATION OF BUSINESS PLANS Obtaining financing, pilot phase, implementation,

Follow-up support

Phase IV

Step 10

MONITORING IMPACT OF MARKETING STRATEGIES Analysis of lessons learnt and development of

annual marketing plans



The process of micro-enterprise selection and development is supported by

guidelines that follow.

Table 4.3: Guidelines for Market Analysis and Micro-Enterprise Development Areas of Development for Micro Enterprises Market/Economy issues include

Ø start-up investments, Ø projected sales and estimated returns of the product, Ø financing sources, Ø market environment such as market chains, market trends,

competition and distribution, product mix, and Ø marketing-mix (research and development, promotion, customer

needs, inventory and so on).

The impact the product will have on the economy of the individuals in the target group and the capacity building, which is necessary for the entrepreneurs, are also assessed.

Ecology/Environment issues include Ø availability, management and improvements in the use of raw

materials, Ø common property issues, and Ø impacts the enterprise might have on the environment.

Social/Institutional issues include

Ø the perception which the local society will have of the enterprise, Ø cultural constraints which might affect the development or sales of the

product, Ø legislation which will impact development and marketing of the

product, and Ø institutions which can assist the producers both at the local and

national levels. Science/Technology issues include Ø the technology which exists for the product and improvements

needed, Ø the institutions which can assist in the development of new product,

and the training of producers with new technology and quality assurance.



4.3 Capacity Building of Partner Organisations MEDEP has focussed its activities to strengthen the capacity of local

businesses, institutions and organisations to promote and develop micro-

enterprises and employment opportunities. MEDEP works in partnership

with District Development Committees and other organisations that are

engaged in creating local level employment. The programme also helps

them in the process of capacity building for planning and implementation of

micro-enterprise. In delivering the packages of services, MEDEP's focus is

centred on the following building blocks in sequential order.

ü Entrepreneurial competency development ü Skill development ü Management information system development ü Micro-credit support development ü Appropriate rural technology and product development ü Market promotion and business counselling

As a part of its capacity building initiatives MEDEP has been continuously

providing training and other supports to its own staff and the staff of partner

organisations in the programme districts to upgrade their capacity. The

major activities for capacity building of the programme and partner staff are

as follows.

ü Orientation on MEDEP process, principles and strategies, ü Orientation on conducting household surveys, ü Orientation and discussion on micro-credit policy and procedure ü Micro-enterprise creation and development training of trainers ü Social mobilisation and gender sensitisation training ü Computer training ü Workshops and seminars ü Exposure visits

4.4 Backward-Forward Linkages

The enterprise must have a backward linkage with the primary production

for fair competition and sustainability of the enterprise. The entrepreneurs

must have knowledge of the production pocket or the source of raw

materials. Similarly, in case of marketing, entrepreneurs must have

knowledge of the production pockets and the primary producers.



This can help the entrepreneurs to prepare their long run production and

marketing plan with respect to the kind of produce and the targeted market.

This is more specific when the primary production is seasonal and the

enterprise has to run over the years as in the case of pear jam in Nuwakot

and plum jam in Parbat. Insofar, this has not been practised in Nepal. Similarly, forward linkage has also not been properly established in

poverty alleviation oriented micro enterprise development programme.

Micro-entrepreneurs are usually very small-scale entrepreneurs and they

need longer time to acquire marketing skill on their own. Hence, they

need to be trained in marketing with special reference to marketing skill,

marketing margin analysis, account keeping, etc. In addition they need

access to credit as well to run the business. On the other hand there are

various such agencies in the district that provide such services. These

agencies claim that they are providing such services to the micro-

entrepreneurs as needed. However, the services are provided in one

package at once rather than in a series as and when needed.

As the MEDEP modality considers the resource-base and demand-driven

approach for micro-enterprise development, a proper backward-forward

linkage of the enterprise is must for its sustainability. As the rural

resources are mainly based on agriculture and forest products, and these

products are highly seasonal, backward linkage assures the regular

supply of primary product for the enterprise. On the other hand, as the

value added products of agriculture and forestry are mostly food,

beverage and textiles the demand for which is less elastic, the proper

forward linkage is must for assure the sell of the output. This important aspect of backward and forward linkages of the micro-

entrepreneurs has been well-taken care by the MEDEP. It has thus assured

the micro-entrepreneurs regarding the arrangement of raw materials and

production services as well as marketing of the produce. In addition,

MEDEP also assures enterprising skill being developed on them.



4.5 Graduation of the Micro-entrepreneurs MEDEP starts the programme and supports the entrepreneurs until they

graduate. The graduation time has been estimated on the basis of the

nature of enterprise and the enterprising skill being developed on the

entrepreneurs that enables them to carry-on the enterprise on their own.

The graduation of enterprise also takes into account the capacity building

of the partner organisations that would support the entrepreneurs later

on, after phasing out of the project.

Chapter 5 Status Analysis of Sample Enterprises


CHAPTER 5 STATUS ANALYSIS OF SAMPLE ENTERPRISES

5.1 Background

In order to analyse the status of the enterprises, a sample of 345

enterprises were studied in detail (see Chapter 2 for the sampling

procedure). The information available in the EDF diaries was analysed.

Depending on the nature of enterprise and the information available in the

diaries, there are varying number of enterprises in the analysis of different

parameters.

5.2 Entrepreneurs by Sex and Type of Enterprise

There were 325 enterprises (94%) operated by the individual entrepreneurs

and 20 enterprises (6%) operated by the entrepreneurs' in-group (Figure

5.1). Of the total 345 enterprises studied, there were 56 percent (192)

enterprises operated by men as compared with 44 percent (153) operated

by women. There were 42 percent individual women operated enterprises

against 58 percent operated by men (Table 5.1). In case of group-operated

enterprises, 80 percent were operated by women. This shows that women

have the ability to organise into groups by applying participatory approach

to make joint decision and men tend to take-up enterprise individually.

Figure 5.2: Newly Created and Existing (stunted) Enterprises

Existing32%

Newly created

68%

Figure 5.1: Individual and Group Operated Enterprises

Operated in group6%

Operated individually

94%



Figure 5.3: Type of Enterprise By Sex

116 119

235

76

34

110

153

345

192

0

50

100

150

200

250

300

350

400

Male Female Total

Num

ber o

f Ent

erpr

ises

Newly created Existing Total

Out of 345 sample enterprises, 235 were newly created (68%) and 110

were existing (32%) enterprises (Figure 5.2). The existing enterprises are

the stunted enterprises that have been supported by MEDEP to further their

performance.

Among the existing enterprises, 69 percent enterprises were men operated

and 31 percent were women operated. However, among the newly created

enterprises, 51 percent enterprises were women operated. It shows that,

traditionally, women entrepreneurs are less as compared with their male

counterparts. But it does not mean that women do not like to take up

enterprise as men do.

As found in this study, when women were duly motivated to take up an

enterprise by the programme, there have been 51 percent women

entrepreneurs among the newly created entrepreneurs. It is a clear

indication, therefore, that gender equity in enterprise can be achieved if

women are duly motivated to take up an enterprise, and enabling

environment is created by taking into consideration of special needs of

women to participate in enterprise development.



Table 5.1: Distribution of Sample Entrepreneurs by Sex and Type of Enterprise

Type of enterprise (no) Newly created Existing Total enterprises Description of enterprise

Number Percent Number Percent Number Percent Male 112 52 76 70 188 58

Female 105 48 32 30 137 42 Individual enterprise

Total 217 100 108 100 325 100

Male 4 22 0 0 4 20 Female 14 78 2 100 16 80

Group enterprise Total 18 100 2 100 20 100

Male 116 49 76 69 192 56 Female 119 51 34 31 153 44

Total enterprises Total 235 100 110 100 345 100

5.3 Entrepreneurs by Age

When enterprise development was analysed with respect to age and sex of

entrepreneurs, it was observed that enterprising age of women is 20-40

years (Table 5.2). Of the women operated enterprises, there were 76

percent of the entrepreneurs in this age group. Whereas, in case of men,

the maximum enterprising age is 30-50 years where 64 percent of the

entrepreneurs fall in. It indicates that women take up some enterprise at

early age than men.

Table 5.2: Distribution of Entrepreneurs by Age and Sex

Total Age group Male Female No. Percent below 20 3 3 6 2.0

20-30 43 43 86 28.5 30-40 62 51 113 37.4 40-50 52 19 71 23.5 50-60 15 6 21 7.0

60 and above 4 1 5 1.6 All age group 179 123 302 100 Average age 37 33 35 Modal age 30 30 30

5.4 Entrepreneurs by Education

Distribution of entrepreneurs by sex and education shows that education is

not a limiting factor for taking up any micro-enterprise. There were 18.5

percent illiterate and 37.5 percent just literate entrepreneurs taking up an

enterprise in the sample (Table 5.3). Illiterate and just literate group



comprised 56 percent in the study sample. Though education level of

women entrepreneur is lower than men, the number of newly created

enterprises operated by women was 51 percent against 49 percent men.

Table 5.3: Distribution of Entrepreneurs by Sex and Education

Education level Description

Illiterate Literate

Primary education

Mid Secondary education

Secondary education

Above secondary education

Total number

Male 36 56 24 49 19 4 188 Female 24 66 12 30 3 2 137

Number 60 122 36 79 22 6 325

Total Percent 18.5 37.5 11.1 24.3 6.8 1.8 100

5.5 Enterprises by Type

There were 325 enterprises operated individually and the remaining 20

enterprises were operated in-group. Hence, while analysing the sex of

entrepreneurs by type of enterprise, it becomes more meaningful to analyse

the enterprise operated individually. Including the group-operated

enterprises also in this analysis, dilutes the meaning of the type of

enterprise versus sex of the entrepreneur. In a development process, food

and beverage sector develops first out of agriculture followed by textiles and

manufacturing sectors. The sample results of the MEDEP districts are

consistent with this established fact. Of the total enterprises, 33 percent

were in food and beverage sector followed by textiles (20%), bamboo

products (9%) and so forth (Figure 5.4).

Figure 5.4: Percentage Distribution of Enterprises

33

20

5

9

41

2 1

63 4

12

0

5

10

15

20

25

30

35

FB TX WT BP FL PP CC NM ME RS OS OType of

enteprises

Perc

ent



In the process of household survey, potential entrepreneur identification and

selection of entrepreneurs, people's needs and priorities are duly addressed

and their interest matched with their existing level of skill and potentiality to

improve their skill. Only then, the entrepreneurs are selected and an

enterprise established. In this study, 37 percent women entrepreneurs were

found in textiles and tailoring. The finding of this study corroborates with the

tradition that women entrepreneurs are found more in textiles and tailoring

and none in footwear and leather products (Table 5.4). MEDEP has shown

it clearly that selection of enterprise should be done carefully to fit the

interest of the entrepreneurs rather than just offering an enterprise

development opportunity to the people.

Table 5.4: Distribution of Enterprise by Type and Sex of Entrepreneurs

Male Female Total Enterprise notation

Description of enterprise No. % No. % No. %

FB Food products and beverages 58 54 49 46 107 33 TX Fibres, textiles and clothing 14 22 51 78 65 20 WT Wood and timber products 16 94 1 6 17 5 BP Bamboo products 22 79 6 21 28 9 FL Footwear and leather products 12 100 0 0 12 4 PP Paper and paper products 2 67 1 33 3 1 CC Chemical and chemical products 7 88 1 13 8 2 NM Non-metallic mineral products 2 50 2 50 4 1 ME Metal and engineering products 16 89 2 11 18 6 RS Repair services 9 82 2 18 11 3 OS Other services 7 58 5 42 12 4 O Others (honey based enterprises) 23 58 17 43 40 12 Total 188 58 137 42 325* 100

Note * Only enterprises operated by individual entrepreneur are included.

5.6 Entrepreneurs by Income Group

Unlike in other poverty alleviation programme, MEDEP identified the income

level of the participants by using an income ranking PRA tools.

Entrepreneurs by income group and sex were classified according to the

income group category used by MEDEP. The average income of the

entrepreneurs in the sample is Rs4600 with a very high standard deviation

of Rs1680 (Tables 5.5 and 5.6). The high standard deviation in the income

of the entrepreneurs shows that there is a high heterogeneity in the income



among the entrepreneurs. Distribution of entrepreneurs by income group

shows that the people below or around the poverty line income are not

homogenous group. Hence, a blanket recommendation of the enterprise for

the selected entrepreneurs does not work. As there was a very

heterogeneity in the income among the entrepreneurs, the entrepreneurs

were further classified into ten income groups beginning below Rs2,000 to

above Rs10,000 with an interval of Rs1,000 (Table 5.6).

Table 5.5: Distribution of Entrepreneurs by Income Group and Sex in Four Income Groups *

Entrepreneurs Income (Rs) Income group Number Percent Minimum Maximum Mean Standard Deviation Below Rs4,700 124 49 1108 4666 3273 981 Rs4,700 - 5,900 73 29 4700 5900 5203 358 Rs5901 - 7,000 42 17 5901 7000 6369 386 Above Rs7,000 12 5 7133 11800 8358 1409 All income group 251 100 1108 11800 4600 1680 Note * Income group category in this table is based on MEDEP's classification With this classification, each income group people became more

homogenous than before. The average standard deviation was Rs257.

MEDEP has covered wide range of people below the poverty line.

Homogenous income group entrepreneurs can take up similar type of

enterprise and thus the enterprise development training and other services.

There are 7 percent entrepreneurs having annual per capita income below

Rs2000 and 20 percent below Rs3000 (Figure 5.5). MEDEP has penetrated

deep into the poverty and reached down to the families having per capita

income as low as Rs1108 per annum and included in the programme.

Figure 5.5: Enterprise by Income Group

17

3429

6457

34

103 2

010203040506070

< 2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 > 9Income

Group (Rs'000)

Num

ber o

f Ent

erpr

ises



Table 5.6: Distribution of Entrepreneurs by Income Group and Sex

Male Female Total Entrepreneur Income Entrepreneur Income Entrepreneur

Income group* No. % Min Max Mean S.D. No. % Min Max Mean S.D. No. %

Below 2,000 12 71 1,108 1,973 1,610 287 5 29 1,333 1,900 1,676 241 17 7 2,000-3,000 22 65 2,125 2,990 2,594 235 12 35 2,123 2,896 3,528 241 34 14 3,000-4,000 19 66 3,000 3,956 3,403 270 10 34 3,050 3,991 3,528 308 29 12 4,000-5,000 36 56 4,000 4,970 4,469 286 28 44 4,000 4,900 4,451 275 64 25 5,000-6,000 30 53 5,000 5,971 4,469 286 27 47 5,000 5,940 5,441 332 57 23 6,000-7,000 11 32 6,000 6,954 5,398 304 23 68 6,000 6,957 6,356 340 34 14 7,000-8,000 7 70 7,000 7,571 6,380 236 3 30 7,000 7,700 7,233 404 10 4 8,000-9,000 - - - - - - 3 100 8,000 8,600 8,200 346 3 1

9,000-10,000 - - - - - - 1 100 9,250 9,250 9,250 - 1 0 Above 10,000 1 50 - 10,167 10,167 - 1 50 - 11,800 11,800 - 2 1

All income group 138 55 1,108 10,167 4,311 1614 113 45 1,133 11800 4952 1698 251 100

Note * Income group category in this table is based on the classification made in this study.



5.7 Nature of Entrepreneurs' Group Usually, lower income group people find it difficult to get credit to start up

the enterprise. As lower income people are risk-averters and taking up new

enterprise involves risk, they do not prefer to put collateral to take a loan.

However, if they are carefully selected and their interest identified, it can be

guaranteed that they really take up the identified enterprise and the

enterprise will pay. In that case, the entrepreneurs could be funded on

group guarantee basis. If so is done, the lower income group people, as

well, form their group and get access to credit for taking up an enterprise. In

this study, there were 85 percent such entrepreneurs (Table 5.7).

Table 5.7: Nature of the Groups the Entrepreneurs are Associated with

Nature of entrepreneurs' group Number Percent

Newly formed for the purpose of getting loan 244 85 Existing 44 15

Total 288 100

5.8 Entrepreneurs' Equity and Loan in Investment The investment made on establishing the enterprise was evaluated on the

basis of total equity and loan being used. The result shows that loan is not a

necessary condition for taking up an enterprise. There are 45 entrepreneurs

who have not taken any loan. And of the total investment, 70 percent

investment has come form the entrepreneurs' equity with only 30 percent

from loan (Table 5.8). Table 5.8: Share of Entrepreneurs' Equity and Loan in Investment

Entrepreneurs' equity Loan Total Investment Amount Percent Amount Percent Amount Percent

Fixed capital 1310541 57 990290 43 2300831 35 Operating capital 3284363 78 935057 22 4219420 65

Total 4594904 70 1925347 30 6520251 100



Box 5.1: Loan is not a Necessary Condition to take up an Enterprise

A Case of Ananda Soap Enterprise

Ghuran Mahato, Bengadabar, Dhanusha

Mr. Ghuran Mahato was making his livelihood from farming and was finding it difficult to support his family from farming. Nevertheless, he was very interested to take up some enterprise and was looking for a suitable enterprise for him and some external support to establish the enterprise. He saw that soap making could be done at home without much investment. When MEDEP people came in across with him in their income ranking PRA, he was identified as a potential entrepreneur. When he had a weeklong training on soap making and learned that he will be supported by MEDEP to establish both forward backward linkages, he decided to establish the enterprise. It was his interest area and got confidence when MEDEP encouraged him. He was helped by the MEDEP to evaluate the investment required, the cost of production and the selling price of washing soap. He found it would pay him around Rs200 per day against his daily earning of Rs40-50 as a wage labour in agriculture. His scheme was approved and was recommended for financing. In fact, he wanted to start with a very small-scale enterprise to gain experience and confidence. His keen interest and confidence motivated him to invest from his own equity and thus he did not take any loan. Nowadays, he is producing making about 1000 pieces soap daily and gets a net income of about Rs200. He has experimented various processing techniques and combinations of ingredients. He feels confident that he has found one technique and combination, which produces the soaps meeting the quality at par with the popular brand of washing soap - Super Top. He has taken the market suggestion and started putting the brand name - Anand Soap, on his produce. He has a plan to wrap the soaps and promote market through an advertisement in a tempo with loudspeaker. By then, he has estimated that, he will make about Rs350 daily from his business. From this enterprise, Mr. Mahato has proven that loan is not a necessary condition to take-up an enterprise.

5.9 Loan Borrowers by Type of Investment and Security

Collateral is not a limitation to get loan if somebody wants to take up a

micro-enterprise. There is more than 90 per cent loan lent on the group

guarantee basis. What is needed is that the selection of the entrepreneurs

should be based on such a procedure that they are promising entrepreneurs

and they really take up the enterprise. Lending on group guarantee is not a

problem as the credit is put on the promising enterprise. Even to the credit

institutions, lending on group guarantee is not a problem as the group

members persuade the borrower-member to repay the loan.



Table 5.9: Distribution of Loan Borrowers by Type of Investment and Security

Borrowers Security Type of investment

Number

Percentage of total entrepreneurs

Collateral

Percent

Group guarantee

Percent

Fixed capital 149 47 12 8 137 92 Operating capital 125 39 11 9 124 91

Total number of entrepreneurs studied 325 5.10 Amount of Overdue Loan

There were many problems encountered in the analysis of overdue loan.

There were some diaries, which showed some amount of overdue loan as

well. This has been treated in this study as the overdue loan. However, to

arrive at the total loan to be paid at that point in time, the overdue loan was

added to the total principle and interest paid by the enterprise. Then, the

overdue loan was compared with the total amount that was due at that time.

The result showed that the rate of repayment was very high and the

overdue amount was very low. It was only eight percent of the total lending

and seven percent of the borrowers (Table 5.10). Nevertheless, this has

neither identified as a default nor as a bad debt. It has simply crossed the

date of repayment and has been termed as overdue loan. It may be repaid

later on with some additional penal charge.

Table 5.10: Amount of Overdue Loan in the Sample Study

Description Unit Amount

Total loan borrowed Rs 1,925,347 Total scheduled payment at the time of study Rs 831,666 Actual payment made as per schedule by the time of study Rs 767,283 Overdue amount by the time of study Rs 64,382

Percentage of overdue amount as of scheduled payment percent 8

Number of transactions number 279 Overdue transactions number 19 Percentage of overdue transactions percent 7



Unlike in other credit programmes, the borrowers are strictly monitored by

the EDFs to ensure that the credit is properly invested and the borrowers

comply with the date of repayment. It clearly reflects that if the enterprise

selection is correct, entrepreneur is properly selected, and the borrower is

strictly monitored as in the MEDEP programme, the loan is invested on the

really potential area and there is high return with very high rate of

repayment of loan. 5.11 Group and Individual Savings

The group saving was made mandatory by MEDEP when the entrepreneurs

joined in-group for the purpose of taking up an enterprise. The objective of

this kind of saving was to create an adhesive force in the group for the

group members to remain close to each other. This was also expected that

it would help the financial institutions to get the loan repaid as the group

members put the moral pressure on the borrower to repay the loan as per

schedule. In addition, the saving of the group can be mobilised for the group

activity and lending to its members as well. This kind of saving has

increased significantly under the MEDEP programme and has shown that

the saving from all programme districts could be mobilised to establish a

micro-entrepreneurs' cooperative bank.

Table 5.11: Group and Individual Savings

Description Magnitude Total groups the entrepreneurs are associated with (no) 288 Total group members (no.) 1,835 Average members per group (no./group) 6.4 Total group saving (Rs) 699,646 Average saving per group (Rs) 2,429 Average saving per individual (Rs) 381

5.12 Entrepreneurs by Number of Product Depending on the nature of enterprise, some enterprises are found

producing more than one product. There are 28 percent entrepreneurs

producing two products and 16 percent producing more than two products

(Table 5.12). In case of enterprises like bamboo products, wood and



timbers, and so forth, there is more than one product being produced by the

enterprises. Demand for product diversification needs additional skill in the

entrepreneur. Such needs are also worked out by the MEDEP and are

backed up stepwise. This has helped the entrepreneurs to diversify and

produce new products for existing as well as new markets. Table 5.12: Value of Produce by Product Number

Number of products being produced

Number of entrepreneurs involved Value of produce (Rs)

1 330 9,456,197 2 94 827,645 3 53 216,000

Total 330 10,499,842 5.13 Creation of Employment

The sample enterprises have given employment to 1.76 persons per

enterprise. Of the total persons being involved in the enterprises, 45 percent

are fulltime and 55 percent are part-time employed (Table 5.13). In the total

employment, 47 percent employment has been taken by women and 53

percent by men. Of the total, 90 percent of the employment has been taken

by the family labours and 7 percent by the hired labour. There are 1.59

persons being involved per family per enterprise. Because there has been

no reduction in the existing production of the family even after taking-up of

the enterprise, it has directly helped to increase employment and thus the

family income. In addition to solving the underemployment problem of the

family labour, it has also helped to reduce unemployment problem. Solving

the problem of unemployment and underemployment helps not only in

economic empowerment by augmenting family income but also in social

empowerment as employment is taken as a prestige issue in rural poor

community. Considering an average family size of 5.38 members, each

enterprise seems to have given employment to 30 percent of the family

members. It has fulfilled the Ninth Plan's policy of giving one employment

for one family.



Table 5.13: Employment Created (as of study time)

Full-time Part-time On pay Without pay On pay Without pay

Total

Description of employment Fem Male Total Fem Male Total Fem Male Total Fem Male Total Fem Male Total Family members (no) 14 49 63 77 111 188 21 17 38 143 118 261 255 295 550 Employees' on pay (no) 7 13 20 0 0 0 14 9 23 0 0 0 21 22 43 Employment created in the ancillary business activities (no) 1 4 5 0 0 0 6 4 10 0 0 0 7 8 15

22 66 77 111 41 30 143 118 283 325

88 88 188

188 71

71 261

261 608

608

Total (no) 276 (45%) 332 (55%) 608

Box 5.2: Though the Daily Earning is Lower than the Wage of a Labour, Regular Employment is Much Better

A Case of Bamboo Rack Enterprise

Min Maya Magar, Bote Tole, Gaindakot – 2, Nawalparasi Mrs. Min Maya lives in Sukumbasi tole (squatters' area) in Gaindakot –2 of Nawalparasi. Before getting associated with MEDEP, she used to work as a coolie and agricultural wage labour. She was getting a wage of Rs60 per day. However, the work was not regular and was very much uncertain. Hence, the earning to meet the daily requirement for livelihood was also uncertain. After getting associated with MEDEP, she got training on bamboo rack making. She was forwarded to ADB by MEDEP for financing and she got a loan of Rs5000 to start the enterprise. She started producing racks immediately after the training. She was able to make about Rs40-50 per day. Though this earning is lower than the going market wage rate, she found it worth paying on monthly basis, as the work was regular. These days she sells about 20 racks per day. She has contracted out the production and there are three workers (one male and two female), the workers make about 6-8 racks per day and make a margin of Rs40-50 per day. Min Maya arranges the raw materials and also makes racks during her free time. By doing so, she makes about Rs40-50 daily. She found the rack making work as a guaranteed and a regular type of work as compared with the coolie and the wage labour. She feels that her neighbours treat her now differently (with due respect) than ever before. Mrs. Min Maya has now a small one room concrete block made zinc sheet roofed house. The income from the enterprise is regular and thus she does not fear about tomorrow's hand to mouth problem.



In some cases, it has given employment to even more than two persons per

enterprise. If the rate of return per labour from the enterprise is compared

with the going market wage rate, it may be lower than such rate. Yet, the

entrepreneurs like it as it gives them, unlike in wage labour, a regular

employment and an assured income. The ultimate impact of such an

opportunity is the upliftment of the living standard of the people alleviating

them from poverty. Regarding employment creation, there are subsidiary enterprises also being

created in the backward link of the enterprise if the enterprise taken up is

successful. The subsidiary enterprise not only directly adds income, but also

creates employment in other sector as well. As an example of such impact

on other subsidiary enterprise development, a case of Bhattarai Dairy

Enterprise, Triveni, Nawalparasi is presented in Box 5.3.

Box 5.3: Impact of Micro-enterprise on the Growth of Other Subsidiary Enterprise

A Case of Bhattarai Dairy Enterprise Shyam Sunder Bhattarai, Mahalwari, Triveni, Nawalparasi

Mr. Bhattarai worked in Bombay, India for about 15 years before 2055. He learned many things about dairy processing there. Nonetheless, he could not earn much and returned home in 2055. He started farming at home and kept a buffalo for milk. However, he found it very difficult to meet the daily requirements of the family and sending the children to school. Mr. Bhattarai came in across with the MEDEP EDF and got encouraged to take-up a dairy enterprise. He attended a MEC training and started the dairy enterprise. Mr.Bhattarai took a loan of Rs5,000 from the ADB on MEDEP's recommendation. He started producing khua from 30 litres of milk at the beginning. After two months of the business, he started collecting 70 litres of milk to produce khua. After another two months he scaled up the business to 150 litres and in 8 month's time he reached to 200 litres. He repaid the first loan of Rs5000 and took a second loan of Rs10000, repaid that also and now has a third loan of Rs30000. He has diversified his enterprise and now he is producing ghee from the cream separated from the milk. The cream separated milk is sold to the tea stalls. Now, he has one fulltime paid labour and two part-time milk collectors who work on commission basis. After Mr. Bhatarai started collecting 200 litres milk daily, there have been 35 buffaloes added in the village where from he collets milk. Buffalo milk production has emerged as a subsidiary enterprise due to Mr. Bhattarai's dairy enterprise. Including Mr. Bhattarai's family, this dairy enterprise has helped 38 families to raise their income and get relief from abject poverty.



5.14 Market Advice to the producer and their Products In order for enterprises to be successful, it needs to be built on the strengths

of a community, exploit the local comparative advantages, establish and

maintain marketing and technological linkages with businesses and

institutions in other areas. That is, an entrepreneur must know the quality

and type of produce being demanded in the market. Hence, the

entrepreneur must be receptive towards market demands.

In order to match the product with the market demand, MEDEP has helped

to collect the market suggestions on each type of product being produced

and marketed by the each and every micro-entrepreneurs. The suggestions

given by the market are taken as a guideline to line-up the production in the

future. For example, some of such important market on the product of

micro-entrepreneurs are summarised here.

• Improve the quality like the gum in tika • Use brand name like in soap • Price is high, reduce price as in Dalmoth, soap, etc. • Improve attraction of the product through attractive packaging • Modify product as in sweaters - go for half, different designs, etc. • Improve finishing of the product like in shoes, tailoring, etc. - the

produce should have good finishing • Improve packaging as in Dalmoth • Reduce cost of production to compete in price • Adjust/Change with time as in tailoring - adjust with the recent

vogues • Diversify product as in lapsi candies • Make the products clean • Sell in densely populated/crowded areas like in the school areas • Give attention to hygienic packaging and bottling • Take order before producing as in shoes • Have patience in working to improve quality • Modify the designs as per the market demand in bags • Match the product with the local demand • Watch/evaluate the market demand constantly and adjust

accordingly as in tailoring and haircut



Analysis of market suggestions and demand is an integral part of micro-

enterprise development programme of MEDEP. Further arrangements are

also made to expose the entrepreneurs to acquire additional knowledge as

and when necessary. This process has directly helped the entrepreneurs to

adjust their production according to the market demand. A typical case of

Dalmoth enterprise in Janakpur is presented in Box 5.4.

Box 5.4: Market Quality and Demand Evaluation is Needed to Modify the Technology of Production

A Case of Dalmoth and Chulthe Mithai Enterprise

Shova Karna, Lohana, Janakpur

Mrs. Shova Karna was working as a housewife and was supporting her husband in farming. She had a little idea about Maithili painting as well as tailoring. However, as she was not very skilful in the work and the work was also not regular, she was not able to use such skills and earn something to support the family. Shova Karna came in across with the MEDEP people and attended a MEC training workshop. She learned that she can have training on Dalmoth making and establish a Dalmoth making enterprise. She attended one week's training on Dalmoth making and started her enterprise immediately. She started a small shop in her own house. She started selling Dalmoth from her own shop and to the retailers in the local market.

Shova's Dalmoth was rated as a good quality one in the market and the retailers. However, Shova's price was higher and could not compete in the market. She was helped by MEDEP to workout on the problem of higher price. She was advised by the market to reduce price. She was advised to modify the production process and combination of incredients. She was helped by the MEDEP to have an exposure visit to various market in Janakpur. Shova studied the market and consumer demand. She found that the Dalmoth sold in the market is of poorer quality than her production. Then she experimented with different levels of combination of raw materials for Dalmoth. She increased the proportion of chiura and bhujia (bitten rice and puffed rice) and reduced the proportion of peanut and gram. This increased the volume and reduced the cost as well. Even selling on weight basis, Shova found that consumers look for higher volume of Dalmoth than the solid ingredients contained in it. Shova has now started making Dalmoth on order. She evaluates the orders on the basis of unit price expected and the market the order has come from. She modifies the production technology and the combination of ingredients. She used this enterprising idea and has started producing chulthe mitahi as well. She is running the enterprise very well.

She works fulltime in the enterprise and is being helped by her husband and mother-in-law. She makes about Rs250 per day, which, she says, is enough to support her family of five members and send three children to school as well.



Analysis of market suggestion leads to need identification. On the basis of

such identification, the entrepreneurs are constantly monitored by MEDEP

staff. The entrepreneurs are then given proper counselling to help solve the

problem. One of such examples of problem identification and counselling is

presented in Table 5.14. The constant monitoring and counselling has helped

the entrepreneurs to solve their problem and manage their enterprises better.

Table 5.14: Problems and Counselling in Beekeeping

Problem identification Need identification Counselling

Ant attack, queen-less condition of the colony

Needs to control ants and have queen in the colony

Keep the hive on the stool kept on the pots containing water, use modern hive, use queen's gate

Cutting honeycombs in open Refining of honey Refine honey before sale Week management, scarcity of food

Needs to improve management

Use improved hives, give food during the lean flowering season, consult the technicians

Week management, old combs

Needs to use improved hives

Use improved hives

Attack from enemy, scarcity of food

Needs to chase the enemies

Technician will be consulted and techniques conveyed later-on

Hive was empty, attack from disease

Needs to transfer the colony and give antibiotics

Transfer the colony, give antibiotics

5.15 Sale of Product by Market

The product of the micro-entrepreneurs has been sold mostly in the local

market (70%) followed by sale in the district (17%), outside the district

(12%) and export (1%). The export items were "stone made Silouta",

"turmeric powder" and "Supo" from Nawalparasi. Selling has been mostly on

cash. Of the total sale, about 27 percent (Table 5.15) has been sold on

credit and almost all credit sales has been recovered. Table 5.15: Sale of the Product by Market

Description

Sold in the local market

Sold in the district

Sold outside the district Exported

Total

Cash 4001278 984772 742233 59900 5788182 Credit 202901 45546 3550 0 251997 Total 4204179 1030318 745783 59900 6040179



5.16 Cost of Materials and Transportation

The enterprises are based on locally available materials. There are only few

enterprises using raw materials purchased from the distant markets. Of the

total cost of production, 97 percent was the cost of materials alone. The

cost of transportation is only 3 percent. As MEDEP's strategy, the

enterprises are found using the locally available materials. Use of locally

available materials means the availability is guaranteed and the cost of

production will remain relatively low. This is one of the important aspects of

MEDEP to be successful in micro-enterprise development.

Figure 5.6: Cost of Materials and Transportation

97%

3%

Cost of materials

Cost of

5.17 Increase in income

Families that have taken up enterprises have raised their net income by

Rs21,863 per enterprise per family. Average life of the enterprises was 1.25

years. This shows that average net income per enterprise per year is

Rs17,490.

Including fulltime as well as part-time employments, there are 1.76 persons

involved per enterprise. Hence, there has been average net income of

Rs9937 per labour generated by the programme. With the average inflation

of 6.7 per annum from 1996/97, the poverty line income of 2001 becomes

Rs6,091. It, therefore, shows that each 100 enterprises have helped to

alleviate 176 persons from poverty.



Table 5.16: Costs and Incomes from the Enterprise

Description Amount A. Income A.1 Cash income

Rs.

A.1.1 Income from the sale of product 15,501,062

A.1 Sub total 15,501,062 A.2 Non-cash income A.2.1 Residual value of investment (25% of total investment) 575,208 A.2.2 Raw materials in stock (20% of the raw materials in stock 1,680,916 A.2.3 Product in stock (20% of the income from sale) 3,100,212 A.2.4 Individual saving 103,625 A.2 Sub total 5,459,961

A. Total 20,961,023 B. Costs B.1 Cash costs B.1.1 Fixed costs 2,300,831 B.1.2 Operating costs (raw material costs) 8,404,579 B.1.3 Other cost (rent, water, electricity, paid labour wages, etc) 1,515,245 B.1.4 Interest paid (15.5% of the loan) 298,429

B.1 Sub total 12,519,084 B.2 Non cash costs B.2.1 Opportunity cost of equity (5% of equity invested) 439,003 B.2.2 Depreciation (20% on fixed capital investment) 460,166

B.2 Sub total 899,169

B. Total 1,341,8253 Net income (excluding labour) (C = A - B) 7,542,770 Net income per enterprise (excluding labour) (D = C/345) 21,863 Average life of enterprise (years) (E) 1.25

Average net income per year per enterprise (excluding labour) (F = D/E) 17,490

No. of labour involved per enterprise (fulltime + part-time) (G = 608/345) 1.76

Net income per labour involved (H = F/G) 9,937

Adjusted poverty line income for the year for 2000/2001 (poverty line income of 1996/97 = Rs4,404, and average annual inflation = 6.7%)

6,091



By taking the average family size of 5.38 members as per 2058 census, and

the adjusted per capita income of Rs6091 for the years 2058, the average

poverty line income of the family becomes Rs32,770. The annual per capita

income of the entrepreneur from operating the micro-enterprise has been

computed to be Rs17,490. When this income is added to the average per

capita baseline income of the micro-entrepreneurs multiplied by average

family size (5.38 member/family), it becomes Rs42,238. That is, the whole

family has been alleviated from the poverty. This is what the MEDEP was

principally implemented for.

This cost and income analysis has been computed on the basis of all sorts

of cash and non-cash costs and incomes. The indirect costs and incomes

have also been included in the analysis. It shows that of the total income,

cash income itself was 74 percent (Figure 5.7).

Figure 5.7: Cash and Non-Cash Incomes and Costs

0

5000000

10000000

15000000

20000000

25000000

Icome Cost

Inco

mes

and

cos

ts (R

s'000

)

CashNon-cashTotal

Chapter 6 Frontier Function Analysis and Efficiency of Sample Entrepreneurs


75

CHAPTER 6 FRONTIER FUNCTION ANALYSIS AND

EFFICIENCY OF ENTREPRENEURS 6.1 The Estimating Model

The conceptual stochastic frontier translog income model specified earlier in

Chapter 2 was tested with all the variables in the full model. A lot of

combinations of explanatory variables were tried to find a better explaining

model. Depending upon the expected sign and significance of the estimated

coefficients, the significance of the estimated σ, λ, F, and adjusted R2, the

translog model was modified. The modified translog model used in this

study is as follows.

ln In = ln α0 + αa ln Age + αt ln Tiv + αf ln Fix + αm ln Mat + αp ln Pcy

+ ½ [αaa (ln Age)2 + αtt (ln Tiv)2 + αff (ln Fix)2 + αmm (ln Mat)2 + αoo (ln Oth)2]

+ αpt ln Pcy × ln Tiv + αpm ln Pcy × ln Mat + αcm ln Ct × ln Mat

+ γme ln Mat × Een + γpe ln Pcy × Een + γfe ln Fix × Een + ε (5)

where ij = ji as symmetric restriction, and αis, and γis are the parameters

to be estimated. The other variables are as follows.

Age : Age of entrepreneurs.

Tiv : Total investment made to establish and operate the enterprise.

Fix : Total fixed costs incurred.

Mat : Total material costs incurred.

Oth : Total other costs incurred.

Pcy : Per capita of the entrepreneur found in the baseline survey.

Een : Existing enterprise.

ε : The error term as defined in (2).

ln : Natural logarithm.



76

6.2 Results of the Frontier Income Function Estimates

Though the total enterprises in the sample were 345, there were some

inconsistencies in the data and such outliers were discarded for behavioural

analysis. There were net 225 samples included in behavioural analysis. The

model was estimated by using the William Green's Limdep-6 computer

package.

The stochastic frontier income function model was estimated by the

Maximum Likelihood Estimation (MLE) technique. The results of the frontier

regression are presented in Table 6.1.

The value of adjusted R2 was 0.630 and the computed F-statistic was

significant. This implies that the fitted empirical model is good enough in

explaining 63 percent of the variations in income from the sale of products

and services of the micro-entrepreneurs in the sample study.

6.3 Evaluation of the Frontier Function Estimates

The important indication of the model is that the squared term of total

investment is positive significant and the normal term of total investment is

negative significant. It reflects that the enterprises have made excess total

investment. Hence, additional total investment will not increase income but

will decrease the income significantly.

The squared term of material cost is positive significant and the normal term

is negative significant. Where as, though not significant, the squared term of

fixed cost is negative and the normal term is positive. These four

coefficients reflect that high total investment has been due to more

investment on material rather than on the fixed capitals. Hence, there

should be reduction in the materials being made available to the enterprise.

Per capita income is negative and significant. It shows that the

entrepreneurs with higher per capita income are less efficient in income



77

earning from the micro-enterprise. It reflects that the lower income group

entrepreneurs are more responsive and thus better manage the enterprise.

This result is further supported by the interacting variables of per capita

income and fixed as well as material costs being incurred. Both the

interacting terms are positive and significant. That is, higher per capita

income is associated with higher levels of expenses being made on fixed

capital as well as raw material.

Though the total cost of transportation of raw materials is very low (3%), it

has been found as a significant variable to reduce the purchase of raw

materials. In fact, it’s a rational behaviour that when cost of transportation

will increase, people would like to purchase less of that and thus the total

expenses on raw material will also decrease. This is reflected by the

negatively significant interacting variable the cost of transportation and

materials costs.

It is also an interesting finding that the existing enterprises are more of the

higher income groups under study. In fact, it is obvious as taking up an

enterprise involves risk and risk aversion is negatively related with the level

of income. It, therefore, also shows that the development programs should

help the lower income groups to develop skill to take such risks involved in

taking up an enterprise. This is consistent with the MEDEP's work that even

lower income group people have also taken new enterprises when they

have been supported by providing package of business development

services to operate enterprises.

It was argued that the high total investment was more due to higher

expenses made on raw materials relative to fixed capitals. It is interesting to

note here that such higher expenses on materials is more due to the

existing enterprises spending more on materials. This is reflected by the

negatively significant interacting variable - material costs and existing

enterprise, and the positively significant interacting variable - fixed costs and



78

Table 6.1: Stochastic Frontier Function Estimates of the Incomes from the Sale of Products and Services (2000/01)

Variable OLS Estimates ML Estimates

ln constant 37.387 *** 40.042 *** (8.246) (10.75) ln age - 0.209 ns - 0.208 ns (0.278) (0.299) ln total investment - 2.381 *** -2.329 ** (0.995) (1.316) ln fixed costs 0.040 ns 0.050 ns (0.085) (0.114) ln material costs -1.545 *** -1.810 *** (0.500) (0.521) ln per capita income -3.415 *** -3.594 *** (0.982) (1.256) (½) (ln age)2 0.156 ns 0.167 ns (0.147) (0.156) (½) (ln total investment)2 0.049 *** 0.050 ** (0.023) (0.028) (½) (ln fixed costs)2 - 0.022 ns - 0.022 ns (0.018) (0.023) (½) (ln material costs)2 0.114 *** 0.118 *** (0.014) (0.013) (½) (ln other costs)2 0.015 *** 0.016 *** (0.004) (0.004) ln per capita income × ln total investment 0.260 *** 0.252 ** (0.118) (0.150) ln per capita income × ln material costs 0.130 *** 0.157 *** (0.059) (0.065) ln cost of transportation × ln materials costs - 0.004* - 0.005 ** (0.003) (0.003) ln material costs × existing enterprise dummy - 0.156 *** - 0.128 *** (0.053) (0.056) ln per capita income × existing enterprise dummy 0.126 *** 0.103 * (0.063) (0.071) ln fixed costs × existing enterprise dummy 0.073 ** 0.057 ns (0.040) (0.048) λ = σu /σv - 2.123 *** (0.533) σ = √ (σv

2 + σu2) - 1.271 ***

(0.088) Value of σv

2 - 0.293 Value of σu

2 - 1.322 Adjusted R2 0.630 - F-value 24.83 *** - Log-likelihood - - 285.303 Number of observations 225 225

Note: *** , **, and * refer to significance at the 0.05, 0.10, and 0.15 levels, respectively. ns = not significant. ln = natural logarithm. Figures in parentheses indicate standard errors. Dependent variable = ln income from sale of produce (value in Rs).



79

existing enterprise. This may be explained by the fact that the existing

enterprises have more experience in production and they know the requirement

of materials and their scarcity at some lean periods which makes them feel that

they should have stocks of raw materials. This leads to purchase of raw

materials more than really required by the fixed capital to use that in the

production process. Hence, the tendency of stocking raw materials for

production should be avoided by proper evaluation of timing of production.

6.4 Technical Efficiency As given by equation (2), the disturbance in the model was due to inefficiency

reasons and random shock. The value of σ and λ is given by the computer.

Then, values of random disturbance term σv2 and the value of inefficiency term

σu2 are computed as follows.

σ2 = σ2u + σ2

v = 1.615

λ = σu /σv = 2.123

σv2 = σ2/(1 + λ2) = 0.293

σu2 = σ2/(1 + 1/λ2) = 1.322

The estimates show that 82 percent of the variation in income function was due

to inefficiency reasons. The random disturbances attributed 18 percent of the

variation in income. The significant value of lambda implies that a major

increase in income can be brought by improving efficiency in the production

process and management of the enterprises. MEDEP has established the

enterprises, however, all the enterprises have not achieved the efficiency in

production. There are some enterprises like the beekeeping groups in

Jukepani, Parbat who have not yet produced honey significantly but have

already incurred costs. Other enterprises like Tika-making and Aggarbatti-

making are also producing only a small amount of produce but have already

arranged all the materials required for production of Tika and Aggarbatti. Thus

such enterprises can improve their efficiency in production and increase income

with out adding to cost significantly. The computed technical efficiencies of the



80

individual enterprises obtained from the frontier regression model is

summarised in Table 6.2.

The variation in technical efficiency was from 6 to 100 percent with a very

high coefficient of variation of 59 percent. One of the reasons for high

coefficient of variation could be due to the fact that the entrepreneurs

included in the study are not homogenous. Mean technical efficiency was

49 percent. The results show that the entrepreneurs need continuous

technical support from the programme. The lower level of technical

efficiency among the entrepreneurs reflects that there is ample room to

improve the technical efficiency of the entrepreneurs and thus the income

from the enterprise. This can be done by improving the management of the

enterprise in terms of both production and marketing of output as well as

procurement and stocking of inputs.

Table 6.2: Distribution of Technical Efficiencies in the Income from the

Sale of Produce among the Entrepreneurs (2000/01)

Distribution of enterprises

Frequency Cumulative frequency

Efficiency range

Number Percent Number Percent

Less than 20 42 19 42 19

20 to less than 40 57 25 99 44

40 to less than 60 48 22 147 66

60 to less than 80 39 17 186 83

80 to 100 39 17 225 100

Minimum 6

Maximum 100

Mean 49

Standard deviation 29

Coefficient of variation 59

Chapter 7 Overall Performance and Integration of MEDEP Modality


81

CHAPTER 7 OVERALL PERFORMANCE AND INTEGRATION OF MEDEP MODEL

7.1 Overall Performance

7.1.1 Selection of Entrepreneurs

One of the necessary conditions for the success of any programme is

the correct analysis and determination of the intervention area. As

explained in the introductory section, MEDEP's intervention area is

based on the peoples' need, resource potential of the area to supply

the raw materials required for production, and the market demand of

the expected product from the envisaged enterprise. In a MEDEP's

methodology, as explained in Chapter 4, there is set procedure for the

selection of enterprise. Not all interested people are selected to be

included in the programme, but only those who have enterprising skill

and are promising are selected. For example, by November 2001,

MEDEP has surveyed 18944 households to develop the socio-

economic profile of the target group under the programme. Out of the

total target household socio-economic survey, MEDEP identified only

6510 (30 percent) people (Table 7.1) as the potential entrepreneurs

who may take up enterprise under the programme.

Table 7.1: Selection of Entrepreneurs

No. of Participants identified

No. of participants selected

Type of enterprise

No. of HH surveyed

No.

No.

Percentage of the HH

surveyed No.

Percentage of the participants

identified

New 18944 5682 30 1918 34 Stunted 828 516 62

Total 18944 6510 34 2434 37

Source: M and E Reports of Ten Programme Districts, MEDEP, November 2001

Among the total potential entrepreneurs, MEDEP further analysed the

potential participants and selected only 2434 (34%) promising

entrepreneurs who really took-up the enterprise. As MEDEP's



82

selection criterion is very strong and thorough, only the most

promising ones are selected and thus the rate of success has been

very high. It is one of the reasons why the rate of repayment of loan is

very high in case of MEDEP programme. The District Managers of

Agricultural Development Bank of the MEDEP programme districts

have also explained that the rate of loan repayment under the MEDEP

programme is very high and the percentage of defaulters is almost

negligible.

7.1.2 Penetration of the Programme into the Depth of Poverty

In a conventional poverty alleviation programme in Nepal, all people in

the poverty are treated as a homogenous group and thus the

recommended programmes for all kinds of poor at various depth of

poverty receive the same programme from the formal development

programmes. As it has been much discussed in the literature, the

people below the poverty line are not homogenous group. Hence, the

feasible enterprise that fits each income group also varies accordingly.

Interestingly, in a MEDEPs' methodology, the depth of poverty is

critically analysed. For analytical purposes, the participants are ranked

in four income groups (Table 7.2). Enterprises are matched then,

according to the income groups.

Table 7.2: Baseline Income Status of the MEDEP Participants

New Stunted Total Income group Male Female Total Male Female Total Male Female Total Below Rs4700 4275 2992 7267 467 224 691 4742 3216 7958 Rs4700-5900 1127 1070 2197 223 173 396 1350 1243 2593 Rs5901-7000 765 822 1587 110 68 178 875 890 1765 Above Rs7000 845 974 1819 116 63 179 961 1037 1998 All income group 7012 5858 12870 916 528 1444 7928 6386 14314 Source: M and E Reports of Ten Programme Districts, MEDEP, November 2001

As shown in Chapter 5, it was found in the sample study as well that

MEDEP has reached people with annual per capita income as low as

Rs1108. As MEDEP has penetrated deep into the depth of poverty, in



83

some instances, the participant may not be able to come out of

poverty immediately. Nonetheless, the number of people in the lower

ladder of poverty will decline slowly and concentration will increase

near the poverty line in the later part of the programme. It is also not

less important in the process of poverty alleviation and thus is

recognised as a success of a programme.

7.1.3 Level of Employment

One of the strong objectives of developing micro-enterprise is to

create employment. Since poverty is in rural area and rural economy

is based on agriculture, there are both unemployment and

underemployment problems to be addressed by the programmes.

There have been a total of 2434 entrepreneurs and 1487 others (as of

November 2001) being employed by the enterprises. That is, there

has been 1.61 number of employment being created per enterprise by

the programme.

Figure 7.1: Nmber of Employment Including Entrepreneurs

(as of November 2001)

1933 1988

3921

Male Female Total

Including the part-time employment, the total employment is even

more. Taking into account the part-time workers as well, the sample

study showed that the number of employment per enterprise was 1.76

persons. This can be treated as a successful achievement against the

Ninth Plan's objective of creating one employment per family.



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7.1.4 Graduation of Entrepreneurs Any enterprise development programmes like the MEDEP and so forth

cannot support the entrepreneurs always. Virtually the enterprises

have to be run by the entrepreneurs themselves. For the

entrepreneurs to be able to do so they must develop enterprising skill

on themselves and the supporting and/or the facilitating local level

service agencies should be build-up to provide such services. These

aspects have been well-taken care of by MEDEP through its

strategies like skill development of the entrepreneurs and technology

transfer, and capacity building of the partner agencies for micro-

enterprise development.

As discussed earlier, identification of the appropriated intervention

area and the selection of promising entrepreneurs are, in fact, based

on the market demand for the existing product in the local market.

Hence, product introduction and market identification is very sensitive

to click on the market.

As MEDEP has done, introduction of the existing product in the

existing market is the beginning of a new enterprise. As the

entrepreneur will have seen the product and the market absorbing the

product, there will be a kind of confidence on the entrepreneur and

s/he does not feel the enterprise much risky. As the entrepreneur will

proceed further, then s/he will find the need to enter into the new

market with the same product (see Table 7.3 for details). This will now

increase a perception of risk.

Similarly, later on, the entrepreneur finds the competition in selling the

existing product and finds a need to either modify the existing product

or enter into a new kind of production for the local market. This is a

third stage of production and marketing and thus entails more risk

than the earlier two stages. In the process, a new product will have to



85

enter a new market as well when the enterprise grows further. This

fourth stage is more risky than the other three stages of production

and marketing. The step-wise process of product introduction and

market identification entails increasing risk as shown in Figure 7.2.

Table 7.3: Product Introduction and Market Identification

Nature of market Nature of product Existing market (EM) New market (NM)

Existing product (EP) EP-EM EP-NM

New product (NP) NP-EM NP-NM

In the higher stages of product introduction and market identification,

entrepreneurs need to have a good enterprising skill such that they will

be able to identify when to introduce a new product or enter into a new

market. For this, they may also need some help from the facilitating

agencies. Hence, the graduation of entrepreneurs takes into account

the enterprising skill being developed in the entrepreneurs and the

capacity building of the line agencies. This has been well-taken care of

in the MEDEP programme and many enterprising families have

already qualified to be graduated.

Figure 7.2: Increasing Risk in Production Introduction and Market Identification

EPEM EPNM NPEM NPNM

Increasing value of risk

Entering into a new product and/ or market



86

Matching a product with the local market is a first criterion for the

success of the new enterprises. Such product-market matching needs

to evaluate the market demand and the quality of produce demanded.

In addition, there will be a need to modify the design and the look of

the produce according to the current vogues. The graduated

entrepreneur is able to achieve this as cited in Box 7.1. Such

graduated entrepreneurs can operate the enterprise on their own even

after the phasing-out of the MEDEP programme. This is one of the

strong reasons why MEDEP programme is sustainable.

Box 7.1: Matching the Local Demand Increases the Sale of Produce

Shoe Enterprise Punya Bahadur Nepali, Falebas, Devisthan (Campus Road), Parbat

Mr. Punya Bahadur Nepali was working in India in leather tanning factory. He was on home leave when he met the EDF and learned about the micro-enterprise development programme of MEDEP. He postponed his return to work in India and decided to take up a shoe making enterprise under MEDEP's guidance. After getting a shoe making and repairing training from MEDEP, he took a first loan of Rs6200 and started the business. He has opened his shop at a very strategic location - near the campus and school. He has built a small shed on a land rented at the rate of Rs100/month. These days he makes and sells about 20 pairs of shoes and gets a margin of Rs150 per pair. In addition, he makes about Rs150 from the repair works. That is, he makes about Rs8000 per month. Mr. Punya Bahadur has now developed in himself an excellent salesmanship. He knows how to handle the customers and match the produce with their demand. He says customers buy his products, as his products are modified as per recent vogue, cheap, guaranteed and are of good quality.

The graduating entrepreneurs also know what new product and/or

service to introduce into the market. As an example, a case of cycle

repairer in Dhanusha in presented in Box 7.2.



87

Box 7.2: Cycle Repairing Grew to Cycle Assembling

Mr. Lakshmi Narayan Sah, Tarapatti, Janakpur Mr. Sah was a simple cycle repairer. MEDEP identified him as a potential entrepreneur in repairing enterprise. He was motivated to take up cycle repairing and assembling enterprise. He took first loan of Rs8,000, second Rs16,000, and has now taken a third loan Rs24,000. He will be ready to repay the third loan as well in near future. From ordinary repairing of cycle punctures, he saw a scope of repairing bigger and has started repairing punctures of motorcycles as well as trucks and buses. As the enterprise grew further, he identified a need to introduce an air pump. Now, he has diesel machine operated air pump as well. He has started assembling the cycles and sell in the local markets. During weeding seasons he has been able to sell as high as 30 cycles. He has been able to assemble and sell about 50 cycles a year. Mr. Lakshman and his brother work fulltime and his two other younger brothers work part-time after the school. Including profit from the sale of assembled cycles, air pumping and repairs, he makes about Rs600 per day. It gives him about Rs150 per person involved in the enterprise. Just by this enterprise alone, he has been able to raise enough to support the family's food health and education needs. Including spare parts, air pumps, and other equipments and tools for repair, he has an asset of about Rs51,000.

7.1.5 Capacity Building of Line Agencies

In the MEDEP programme districts, MEDEP has prepared the line

agencies as well who would help the entrepreneurs in skill

development, entrepreneurship development, business counselling,

accessing micro-credit, etc. As shown in Table 7.4, MEDEP

conducted various training, workshop/seminars and visit programmes

for the partner organisations to prepare them to continue their services

to the entrepreneurs after MEDEP will phase-out. This is one of the

commendable efforts of MEDEP for the sustainability of the enterprise.



88

Table 7.4: Role of MEDEP Partners

Partners Roles Department of Cottage and Small Industries (DCSI)

Skill development training

Cottage and Small Industries Development Board (CSIDB)

Skill development training

Agricultural Development Bank of Nepal (ADB/N)

Micro-credit

Federation of Nepalese Chamber of Commerce and Industries (FNCCI)

Business counselling and follow up support and marketing

Federation of Nepal Cottage and Small Industries (FNCSI)

Business counselling and follow up support

Industrial Enterprise Development Institute (IEDI)

Entrepreneurship development training/business counselling

District Development Committees Micro-enterprise planning Local Trust Fund Board/DDC Micro-credit

7.1.6 Enterprising Skill for Demand Evaluation and Market Adjustment

The process of product introduction and market identification is

followed by the process of demand evaluation and market adjustment.

In the process of advancing from EPEM → EPNM → NPEM → NPNM,

the entrepreneur must be able to evaluate the market demand of the

produce in terms of quality and produce. Then the production needs to

be adjusted accordingly. This is possible only when the entrepreneur

develops sufficient enterprising idea. MEDEP makes sure that every

entrepreneur has such idea before qualifying the entrepreneur for

graduation from the programme.

Demand evaluation and market adjustment process requires also

some action research to be undertaken. In order to prepare the

entrepreneurs to do so, MEDEP conducts participatory action

research to find locally compatible solution to the identified problems,

which could be implemented with broad impact. The most important

aspect in action research is the participation of the community from

testing to application of appropriate technology who makes decision to

either accept or reject the technology tested.



89

As an example, one of such action research being undertaken by the

MEDEP is presented in Table 7.5. The action research is participatory

and the entrepreneurs directly experience from the research about its

output and applicability in solving the problems.

Table 7.5: Action Research on Solar Drier in Nawalparasi

Action Research

(AR)

Objectives of the AR

Outcome of AR

Action taken

No. of bene-

ficiaries

Collaborating organisation

Solar drier for ginger and other vegetable products

• Introduction of renewable energy technology reducing the negative environmental impact (deforestation and health hazard due to smoke) and production of high quality dried ginger and other vegetable products.

• Value addition to fresh product in the production area itself

• Reduce drudgery of rural women

• Adaptation of Solar drier for drying ginger

• Reduced pressure on forest resources and environment

• Production of dried ginger products meeting the mandatory standard as per the Food Act

• The output from the solar drier is low so drier with higher output is sought after.

• Disseminated and adapted solar drier for the production of dried ginger

• Developed linkage between entrepreneurs and business organisation for marketing

• Disseminated smaller units of solar driers in other districts for drying vegetables and spices

58 (Female 38, Male 20)

Research Centre for Applied Science and Technology (RECAST), TU, Kirtipur

Source: M and E Reports of Ten Programme Districts, MEDEP, November 2001

The problem for action research is identified on the basis of

entrepreneurs' experience. Hence, the solution is directly helpful. In

MEDEP's programme, action research has built-up even the

entrepreneurs to take up an action research by themselves. For

example, Mr. Dandapani Pathak of Rajhar 3, Nawalparasi found a

problem of poor lather in the washing soap he makes. He used various

materials for improving the foaming power of the soap. In his research,

he found the use of Chinese soap berry (Rittha) can give better results

and has decided to use Rittha in his succeeding productions.

7.1.7 Group Approach for Meeting the Economies of Scale

There are certain enterprises that cannot be run individually. There

must be a certain number of enterprises to meet the economies of

scale. MEDEP has well taken care such aspects as well and has



90

helped the entrepreneurs to achieve the economies of scale by group

approach in production. Though the enterprise itself is not group

operated in many cases, the entrepreneurs agree to operate the

enterprise and share certain equipments in the group to reduce the

cost of production. For example, beekeeping on individual basis by a

poor family cannot afford for honey extractor and bottling of honey for

distant markets. Hence, a group of interested people need to join in

such enterprise. This has been successfully achieved by MEDEP for

beekeeping in Jukepani area of Parbat district.

7.1.8 Effective Training through the use of Successful

Entrepreneurs as Trainers In a conventional classroom lecture and laboratory practice type of

entrepreneur development training programme, the trainees usually

raise a question as why the trainer is still hanging on as a trainer with a

small salary when he knows how to produce and market the product

profitably? Then, the training programme cannot give much impression

to the trainees that they should use the skill learned and take-up the

enterprise. However, MEDEP has emphasised the use of successful

entrepreneurs as trainers in the skill development training

programmes. When the real entrepreneurs are used as trainers, the

trainees believe by seeing the trainer's successful enterprise. Then,

the rate of development of entrepreneurs after the training increases.

This is one of the replicable efforts of MEDEP in successful micro-

enterprise development.

7.1.9 Loan Repayment

The rate of repayment was found to be very high (92%) in the sample

study. The loan amount of 8% has simply crossed the due date. The

overdue is after all an overdue and has not yet been identified as a

default or a bad debt. Hence, there can be repayment even later with

some penal charge. This was found to be meaningful when the



91

national level data from the national M and E data was analysed (Table

7.8). The rate of repayment was more than 97 percent. The overdue

was simply 2.6 percent. Still, this is simply an overdue and thus the

repayment rate may increase later.

Table 7.8: Percentage of Total Loan Overdue (as of November 2001)

Total loan disbursed (Rs) 11,315,029 Amount of overdue loan (Rs) 294,150 Overdue loan as percentage of total loans disbursed (%) 2.6 Source:

In its annual report for the year 2000, MEDEP has presented the rate

of default loan. Of the total loan disbursed (Rs4,030,511) under

MEDEP programme, only 0.89 percent (Rs36000) was identified as a

default loan. This rate is only 34 percent of the overdue loan. Yet, this

has not been identified as a bad debt. It entails that there is chances of

some more repayment in the following period as MEDEP constantly

monitors the entrepreneurs and help solve their problem.

The high rate of repayment of loan has been contributed by the

following factors working in the background.

– Identification of correct intervention area

– Proper screening of the participants

– Preparation of the participants through proper training like MEC, skill development, business management, and so forth.

– Identification of sustainable enterprise

– Spending of loan on the enterprise itself

– Proper monitoring by MEDEP to ensure that no consumption expense is made from the loan amount

– Proper follow-up by MEDEP to comply the entrepreneurs with the date of repayment

– Borrower member gets moral pressure from the group members to comply with the due date



92

These factors clearly indicate that the enterprise development effort

should be, of course, supported by a credit but the credit should be

programme based and not otherwise. In usual micro-credit

programme, the credit it arranged first and suitable programmes are

worked out later. It emphasises that arrangement of credit alone can

create enterprises significantly and thus they run credit based

programmes. Such programmes are weak in business skill formation

and entrepreneurship development. In lieu, in MEDEP's programme,

credit is just a supporting activity and thus any amount of credit that is

recommended is based on the programme that will be implemented.

MEDEP has shown already that credit is not a necessary condition to

create an enterprise (see Chapter 5 for detail argument).

7.1.10 Increase in Income

As presented in Chapter 5, the average net income per year per

enterprise (excluding) family labour was Rs17,490. Many of the new

entrepreneurs were within with in an average period of 1.25 years of

their business operation. Added to the baseline average per capita

income and an average family size of 5.38 members (Rs4,600 × 5.38 =

Rs24,748), this income (Rs17,490 + Rs24,748 = Rs42,238) is higher

than adjusted poverty line income (Rs32,770 taking annual average

inflation rate of 6.7%) by Rs9,468. The present level of production and

income has helped to directly alleviate the poverty of the

entrepreneurs' family as a whole. As explained in Chapter 6, the

average efficiency of the entrepreneurs is 49 percent. As

entrepreneurs will gain experience with the continuing support of the

programme, the production efficiency will increase. Even if such

efficiency is increased by another 25 percent and total efficiency reach

to 74 percent, the income per enterprise will increase from Rs17,490 to

Rs21,862. With such an increased income, there will be overall

significant economic upliftment of the family and personal

transformation.



93

7.1.11 Micro-Entrepreneurs Send Their Children to School

In a cursory observation and evaluation of MEDEP programme in the

field, one may see that entrepreneurs in the MEDEP programme are

using child labour in the production. Though it seems that enterprises

have used child labour, in fact, it is not, and has to be carefully

interpreted. The fact is that, when the poor families did not have any

enterprise, children were working with their parent full days to earn

something for livelihood. But after taking up some kind of enterprise,

parents have sent their children to school.

In the field visit conducted in this study as well, children were also

seen working with their parents for 2-3 hours a day. What the children

are seen as working in the enterprise for 2-3 hours during their off-

school hours cannot be treated as children being involved in the work,

but should be treated as the children's working hour has decreased

from almost 10 hours a day to 2-3 hours a day and they have started

going to school for 8 hours a day. This is one of the commendable

achievements of MEDEP.

7.1.12 Relieving Women's Drudgery and Economic Empowerment

It has been reported in many studies that rural Nepalese women wok

10.8 hours a day in addition to their household chore (Acharya and

Bennett, 1982). Most of their time is spent in drudgery type of works

like fetching water, fuelwood, fodder, and so forth. Because of the

drudgery, women in many cases are reported to like less paying but

light work than drudging for slightly higher pay. This was verified also

by women's expression during the field visits in this study. It was

expressed that fetching fodder, forage, litter to raise buffalo is very

hard as compared with the income from the sale of buffalo milk,

whereas, though the income is relatively less from operating a micro-

enterprise like aggarbatti-making, soap-making, etc., working



94

comfortably at home is much better. It is noteworthy at this point that

increasing income alone cannot be an objective of creating any

enterprise. It should also address the women's needs and priorities at

the same time, as MEDEP has done, for the success of newly

established enterprise.

7.2 Integrating MEDEP Model in the Mainstream

Micro-enterprise Development Programme

The role of micro-enterprises in reducing poverty should not be overlooked

for isolation case only but needs to be considered in the context of overall

economy. It is a proven fact in case of Nepal that Poverty in the country

resulted out of widely spread underemployment particularly in agriculture

sector. In a situation wherein gainful employment outside the agriculture is

not growing in tune with the rate of annually increasing labour force, there is

bound to be an accumulation of idle labour force on land, which is virtually

more or less fixed. As the productive labour has to maintain a large idle

labour including their of-springs, there is an alarming rate of serious drain

on its potential savings, which, otherwise, could have been used in

investment to generate additional income and savings. The consequence

effect is the perpetual incidence of vicious circle of poverty.

Unless the high incidence of under employment is reduced and thereby the

continuing drain on potential savings is restricted with the generation of

productive employment opportunities for idle labour on land, it would be a

Herculean task to achieve either high growth or reduce poverty significantly.

That is where the development of micro-entrepreneurs can play their role

significantly in order to break the vicious circle of poverty.

MEDEP modality has rightly accommodated the strategic policy in capturing

those under-employed mass of people who have been lying in the form of

burden idle labour on land. Although the programme is been focused in 10

districts in the country with limited target of producing 6000 micro-



95

entrepreneurs in five-year period, its contribution towards the development

of micro-entrepreneurs has been seen highly sustainable when evaluated in

terms of change in attitude of the involved people other than the increase in

their income. There are many of the micro-enterprise development related

programs running in the county, which have claimed their success on

account of additional income generation. But the income generation is not

the only criteria to evaluate the success of the program. Apart from income

generation, creation of employment opportunity having both backward and

forward linkages thereby generating permanent entrepreneurs who will later

stood as the backbone in assisting the development process of the

country's macro plan is regarded as the crux of the micro entrepreneur

development programme of MEDEP. MEDEP has been quite successful not

only in uplifting the income status of its members but has gone in too depth

to vitalize the empowerment of the neglected gender and class such as

women empowerment and accommodation of ethnic and backward groups.

MEDEP mode of operation has helped in bringing the group of deprived

people in the track of productive activities who, were considered self

unemployed in their land. Realizing the fact that there is little scope for

expanding productive employment within the agriculture sector, MEDEP

modality has chosen to create diversified number of entrepreneurs suited to

the different condition of local market demand. Besides, it has successfully

broke down the structural rigidities like cultural and traditional values which

were hindering the promotion of entrepreneurship development, and

facilitated the potential entrepreneurs with the cheapest appropriate

technology available at hand.

The approach taken by MEDEP in the development process of micro-

enterprises has certainly contributed in producing an additional number of

micro-entrepreneurs capable of running more than one enterprise at a time.

These entrepreneurs will definitely be contributing to the national economy

through participating in productive activities. The change in attitude towards

involving in productive activities will help in promoting the micro-



96

entrepreneurship sector, which is by and large, being neglected so far. It

would be worth mentioning here the sayings that " Drops of water make the

Ocean!" could be applied with the kind of development that MEDEP is

striving for.

Viewed in terms of macroeconomic aspects if investment is pushed through

foreign aid or deficit financing, it will run up against the inelastic supply of

food and other goods resulting in inflation and Balance of Payments crisis.

Given the situation that agricultural production cannot be increased on

sustainable level, there is a strong need for a development strategy which

can be designed to speed up investment and employment in the non-

agriculture sector such as micro-enterprises development. Micro-enterprise

sector development is crucial for the country's overall development process

as it is known that small and medium enterprises contributes nearly 12

percent in national GDP (1999) and has provided employment opportunity

to the level of 90 percent of total employment in industrial sector of Nepal.

It is therefore of utmost importance that if the modality developed by

MEDEP for the promotion of micro-enterprises could be pursued at national

level, the contribution of non-agriculture sector in GDP can be remarkably

increased and employment opportunity can be raised to a larger extent from

the present level of not more than 2 percent of the total labour force. The

reality that major number of micro-entrepreneurs falls under the below

poverty line of 38 percent, the promotion of this kind of MEDEP programme

at national level will help contribute towards downsizing of the number of

people below the poverty line. Ultimately, the growth of numerous micro-

enterprise both in manufacturing as well as services sector will produce the

product to meet the huge chunk of national aggregate demand thereby

lessening the dependence on non-sustainable imports. At a time when our

exports are showing weak sign and remittances from the workers working

abroad are in a vulnerable situation, the development of domestic micro

enterprises will save, if not much, some portion of our foreign exchange



97

reserves thus contributing positively to the overall balance of payments of

the country. Besides, the higher growth expected from the increase in

growth in non-agriculture sector will not only contribute to the higher

investment and savings but also to the production of quality entrepreneurs

as MEDEP modality has been able to trigger its members to modify their

production technique as according to the market demand.

Thus, it is obvious that inclusion or adoption of MEDEP modality in the

national programme of poverty alleviation will prove an appropriate strategy

to use idle labour (self under-employed labour) of land, add value to the

primary product and in enhance the contribution of non-agriculture sector as

a whole in overall GDP along with the creation of employment opportunities

among the people living below poverty level through development of

entrepreneurship among them.

Chapter 8 Conclusions and Recommendations


98

CHAPTER 8 CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusion This study was conducted with an aim to evaluate the feasibility of

integrating MEDEP modality in the main stream of national poverty

alleviation programme. For the purpose, a stratified random sample of 345

enterprises was selected and study was made on different aspects of social

as well as economic frontiers of the enterprise undertaken through MEDEP

initiation. Followings are the conclusions drawn from the attempted study.

(ix) It was found from the study that there would be more than 1.6

persons per enterprise (1.76 in the sample study) being employed.

This has clearly surpassed the objective of the Ninth Plan in creating

at least one employment per family.

(x) The enterprises under the programme were found to be very

effective to make a net income of more than Rs17,000 per annum

per enterprise. Adding this income to the average baseline per capita

income (which is Rs4600) of the participants under the MEDEP

programme, it is clearly revealed that the programme has helped

significantly to alleviate the whole family of the entrepreneur from the

original state of abject poverty.

(xi) It was also revealed that group approach or formation in undertaking

the enterprises is still considered best approach for motivating

entrepreneurs in harmonizing their entrepreneurship skill.

(xii) The structure of the Nepalese society, in general, is such that the

success of the micro-enterprise is much dependent on the liberty

bestowed to the women empowerment. MEDEP has wisely

accommodated this concept, as 80 percent of total enterprises

constitute women entrepreneurs under group-oriented enterprises.

(xiii) Group dynamics is the fundamental strategy for bringing the

entrepreneurs into interaction among themselves under the



99

programme such that the entrepreneurs get multiple chances to

upgrade their knowledge, share the experiences and correct their

past wrong doing with regards to the enterprises they are running.

(xiv) MEDEP’s modality is primarily based on local resources for the

access of raw materials to the enterprise focussing local market

demand for the marketing of the produce, development of

enterprising skill of the entrepreneurs to evaluate the market demand

and adjust the product quality accordingly.

(xv) Emphasis laid towards capacity building of the line agencies for

continued support to the entrepreneurs after phasing out of MEDEP

makes MEDEP modality a unique micro-enterprise development

programme in terms of its focus put primarily on long-term

sustainability of the entrepreneurs that it has produced.

(xvi) Another strong feature of MEDEP modality is the built-in

establishment of proper backward and forward linkages of the

entrepreneurs with the primary producers and the market. This has

helped not only in the smooth operation of the enterprise, but also in

the creation of employment both in primary and secondary market.

(xvii) Impetus given towards visit program among the homogeneous group

of entrepreneurs or entrepreneurs running the same kind of

enterprises has an additional impact in understanding of making

further improvement on the enterprises they are running.

(xviii) Child labour involvement period was substantially reduced in the

family who undertook running micro-enterprise for livelihood. As

children of such family got new access to go to school, it has implicit

impact on formation of human capital.

(xix) It was proved from MEDEP modality that graduation of the

entrepreneurs along with the establishment of proper backward and

forward linkages are a necessary phenomenon for the continuity and

the sustainability at the end of any entrepreneurship development.



100

(xx) The sample results of MEDEP districts shows that of the total

enterprises, most (that is 33 percent), were in food and beverage

sector followed by textiles (20%), bamboo products (9%), and so on.

(xxi) It was also found that literacy or education is not necessarily the

deciding factor to take up an enterprise as more than 50 percent

(56.0 percent) of the total entrepreneurs taking up enterprises under

MEDEP were illiterate and just literate.

(xxii) Although modal entrepreneur age is almost same for both the

genders, women’s average enterprising age is found to be 33 years

compared to 35 years as that of men indicating that women do take

up enterprises at relatively early age than men.

(xxiii) It was revealed those lower income groups are more prone to

form their group for availing themselves the loan on group guarantee

basis, which has come out to be 85 percent in this study.

(xxiv) Loan is not a necessary condition for taking up an enterprise as

70 percent investment has come from the entrepreneur’s equity with

only 30 percent from loan.

(xxv) The result shows that rate of repayment is very high with overdue

amount to be very low. It was found that overdue amount is just 8

percent of total lending and 7percent of total borrowers.

(xxvi) Group and individual savings has helped in mobilising the group

activities, and lending to its members as well with this kind of total

savings increased substantially to around Rs0.7 million and average

saving per member standing at Rs2,429.

(xxvii) The product of micro-enterprise has been sold mostly to the local

market (70%) followed by sale in the district (17%), outside the

district (12%) and export (1%) revealing that local market is the

suitable market for the product of micro-enterprise.



101

(xxviii) The translog model of income function shows that entrepreneurs

with higher per capita income are less efficient in income earning

from the micro-enterprise. Also, it was found that 82 percent of the

variation in income function was merely due to inefficiency reasons.

Income earning can be increased through improving the efficiency in

the production process and the management of the enterprises.

(xxix) The variation in technical efficiency from 6 percent to 100 percent

implies that the lower level of technical efficiency gives ample room

to improve the technical efficiency by providing continued technical

support to them from the MEDEP like projects.

(xxx) MEDEP market-led integrated enterprise development approach is

sustainable to that extent that the continued generation of income

and employment will help in aggregate to strengthen national savings

in the long run providing opportunity to the government to make best

use of it in investment. 8.2 Recommendations for Policy Implications

By following the major findings and the conclusions drawn from the study,

following recommendations are made for policy implications. ü Unlike conventional credit-based or training–based enterprise

development programme, the market-led approach combined with

the sequential delivery of an integrated package of training and

services is more effective in micro-enterprise development. Hence,

the conventional approach adopted in micro-enterprise development

should be modified to follow the integrated approach.

ü The conventional blanket recommendation of common programme

for all kinds of poor should also be modified and appropriate package

programme in accordance with the need and priorities of different

strata of income group people identified by the income ranking PRAs

needs to be introduced in the national programme of the government.



102

ü The entrepreneurs should be supported by a sequence of services

even after the establishment of enterprise, and proper backward and

forward linkages must be established before the entrepreneurs

assume graduation.

ü As the programme has been found to generate employment and thus

the income to alleviate the entrepreneur’s family as a whole from the

state of abject poverty, it is suggested that MEDEP model be

integrated in the mainstream national poverty alleviation programme

to have its macro policy impact in the national economy through the

development of sustainable micro-enterprises.

ü Savings schemes followed within MEDEP modality has been quite

successful in generating a substantial amount of fund, which could

be utilized for further production purposes. Hence, it is advised to

conceptually frame such schemes of MEDEP modality in the national

programme of developing micro-enterprise cooperative bank.

ü The national programme of the government should incorporate in

parallel the spatial market development program along with the

micro-enterprise development program to better capture the product

introduction and market identification process of sequential linkage

established from existing product to existing market, existing product

to new market, new product to existing market and new product to

new market.

ü An approach in the policy strategy of capacity building of line

agencies needs to be considered such that the partners related with

the micro-enterprise development programme should have the sole

objective of continued monitoring process of their target (in terms of

services as well as physical achievement) for an acceptable level of

period even after the discharge of their responsibilities at one point of

time.

References


103

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Heaton, Celayne. 1995. Preliminary evaluation of the Self-Help Banking Programme - A report submitted to the Centre for Self-Help Development (CSD). Kathmandu, Nepal.

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APPENDICES Appendix 1: Field Visit Schedule

November 2000

2 3 4 8 9 10

Personnel Friday Saturday Sunday Thursday Friday Saturday

Dr. Prahlad Kumar Thapa -- Dhanusha ----Nawalparasi------- ----------- Parbat --------------------

Mr. Sushil Ram Mathema -------------- Parbat ------------------

Appendix 2: List of Enterprises Visited

Enterprise Entrepreneur Address Cycle repairing Lakshmi Narayan Sah Tarapatti, Dhanusha Sweet and tea shop Dulari Devi Sah Tarapatti, Dhanusha Bangle making Lotani Devi Mahara Kachuri, Dhanusha Retail shop Janaki Mandal Lohana, Dhanusha Dalmoth and chulthe sweet Shova Karna Lohana, Dhanusha Making bamboo stick for ice-cream and aggarbatti

Damber Bahadur Moktan Bengadabar, Dhanusha

Ananda soap enterprise Ghuran Mahato Bengadabar, Dhanusha Adarsha Tika Udyog Arabinda Lama Bengadabar, Dhanusha Bamboo rack making Nanda Lal Neupane Gaindakot-2, Nawalparasi Bamboo rack making Min Maya Magar Bote Tole, Gaindakot – 2,

Nawalparasi Furniture making Ganga Ram BK Rajahar, Nawalparasi Soap making Danda Pani Pathak Rajahar, Nawalparasi Tea and snacks shop Dhana Maya Giri Bardaghat, Nawalparasi Dhaka making Khem Narayan Chaudhari Daunne Devi, Nawalparasi Dhaka making Bishnu maya Aale Daunne Devi, Nawalparasi Bhattarai dairy udyog Shyam Sunder Bhattarai Mahalwari, Tribeni,

Nawalparasi Aggarbatti making Shiva Shakti Aggarbatti

Group

Aggarbatti Jagreeti Women Group Bag making Meena Rai Sunwal, Nawalparasi Sabina Tailoring Reeta Poudel Sunwal, Nawalparasi Shoe making Chitra Bahadur Nepali Dimuwa, Parbat Electricity repairing Bhupendra KC Dimuwa, Parbat Beekeeping Basanta Bikram Timilsina Jukepani, Parbat Beekeeping Tika Ram Timilsina Jukepani, Parbat Tika udyog Ambika Ghimire Mudhikuwa, Parbat Tika making Dev Bandhu Regmi Mudhikuwa, Parbat Watch repairing Gopal Shrestha Falebas, Parbat Tailoring Lok Bahadur Nepali Falebas, Parbat Shoe making Punya bahadur Nepali Falebas, Devisthan, Parbat

References


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