KATHMANDU, Aug. 3: Former Finance Minister Rameshore Khanal has said that significant improvements in insurance, lending, and policy frameworks are necessary to revive micro, small, and medium enterprises (MSMEs), which were hit hard by the COVID-19 pandemic.
Addressing a policy discussion programme organized by the Society of Economic Journalists Nepal (SEJON), the Nepal Insurance Authority, and the United Nations Development Programme (UNDP) to launch the study report Risk Management in Nepal's MSMEs, Khanal said policy reforms are essential to protect and promote MSMEs facing economic challenges.
He pointed out that although MSMEs play a vital role in the economy, the sector has weakened due to inadequate risk management and limited access to finance.
The former finance minister suggested introducing innovative measures in the agricultural insurance programme, such as having the government initially cover 100 percent of the insurance premium for poor farmers and requiring them to pay their share only after receiving compensation. He noted that although the government provides a subsidy of up to 75 percent on insurance premiums, farmers have not been able to fully benefit from the scheme.
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"According to the report released today, only 10 percent of Nepal's nearly 900,000 MSMEs have access to insurance, while the remaining 90 percent remain unprotected against risks," he said. "Although sectors such as tourism and construction are gradually recovering from the effects of COVID-19, MSMEs remain in crisis, contributing to an increase in bad loans and non-banking assets in banks and financial institutions."
Speaking at the programme, Kalpana Shrestha, Joint Secretary at the Ministry of Industry, Commerce and Supplies, highlighted the need to expand insurance coverage by integrating various government programmes aimed at promoting micro, small, and medium enterprises.
She said that nearly 50 percent of Nepal's approximately 923,000 MSMEs operate in the informal sector and therefore remain outside the insurance system, limiting overall insurance coverage to about 10 percent. In response, she said, the government has been implementing programmes such as startup loans, the Micro Enterprise Development Programme for Poverty Alleviation (MEDPA), production-based incentives, and the National Enterprise Facility to promote entrepreneurship.
UNDP Nepal Resident Representative Kyoko Yokosuka said that although micro, small, and medium enterprises are the backbone of Nepal's economy, they are among the sectors most vulnerable to growing climate and economic risks.
She said UNDP, through its Insurance and Risk Finance Facility, is working with 39 countries, including Nepal, to strengthen financial protection against climate- and disaster-related risks. She also reaffirmed the organization's commitment to expanding access to affordable and appropriate insurance for MSMEs in Nepal.
Sushildev Subedi, Executive Director of the Nepal Insurance Authority, said it is necessary to make the insurance system more inclusive, modern, and effective to protect micro, small, and medium enterprises from a wide range of risks.
He added that MSMEs are particularly vulnerable to natural disasters, climate change, financial crises, cyber threats, and public health emergencies, making effective risk management indispensable.
