KATHMANDU, Oct 29: Small, cottage and household industries in Lumbini Province are facing mounting difficulties due to unstable government policies, limited access to bank loans, shrinking consumer demand and an economic slowdown.
New industry registrations have fallen sharply in recent years, while renewals of existing businesses have also fluctuated, reflecting growing uncertainty in the industrial sector.
According to the Ministry of Industry, Tourism and Transport’s data for fiscal year 2025/26, Lumbini registered 2,501 new small and cottage industries, down from 10,759 in 2022/23. Registrations fell to 4,254 in 2023/24, 3,639 in 2024/25 and 3,267 in 2025/26.
The decline has affected all 12 districts of the province. In Rukum East, new registrations dropped from 153 in 2022/23 to 37 in 2025/26. Rolpa recorded a fall from 331 to 35, while Gulmi saw registrations decline from 312 to 42. Pyuthan registered 41 new industries in 2025/26, compared with 158 four years earlier.
Arghakhanchi recorded 58 registrations in 2025/26, down from 190 in 2022/23. In Palpa, the number fell from 518 to 63 over the same period.
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The trend is also evident in the province’s industrial and commercial centres. Nawalparasi West registered 251 new industries in 2025/26, compared with 1,405 four years earlier. Rupandehi, a major commercial hub, recorded 695 registrations, down from 1,628. Kapilvastu saw the number fall from 1,417 to 283, while Dang recorded 363, against 1,831 in 2022/23.
In Banke, new registrations declined from 1,712 to 480. Bardiya recorded 153, compared with 1,092 four years earlier.
Renewals have fared somewhat better, but many existing industries are operating below capacity. Some businesses reportedly maintain their registration on paper to avoid legal action or complications related to outstanding loans, despite having little or no actual production.
The ministry recorded 3,872 industry renewals in 2023/24, rising to 7,429 in 2024/25 and 7,729 in 2025/26. The number fell to 6,121 in the latest fiscal year.
District wise, Rupandehi recorded the highest number of renewals at 1,225, followed by Kapilvastu with 821, Banke with 761 and Dang with 714. Bardiya recorded 541, Nawalparasi West 586, Palpa 378, Gulmi 341, Pyuthan 254, Arghakhanchi 239, Rolpa 230 and Rukum East 31.
Chiranjibi Oli, president of the Nepalgunj Chamber of Commerce and Industry, said the lack of capital and markets was the biggest problem facing industries of all sizes.
“Capital is the first problem. Industrialists are unable to obtain loans even though banks have excess liquidity,” Oli said. He added that declining consumer demand was making it harder for businesses to sell their products.
The migration of young people and working age adults to foreign countries for employment has reduced domestic purchasing power, he said. With many potential consumers earning and spending abroad, demand for locally produced goods has weakened.
Oli also blamed frequent changes in government policies for discouraging investment. Industrialists make long term plans based on existing rules, but policy changes following changes in government create uncertainty and raise business risks.
Krishna Prasad Shrestha, a former president of the Nepalgunj Chamber of Commerce and Industry, also identified policy instability as a major factor behind the industrial downturn. He said businesses investing billions of rupees over several years could struggle to remain viable when the government repeatedly changes regulations, policies and tax rates.
Small and cottage industries play a significant role in Lumbini’s economy by generating employment and supporting local production. Their continued decline could further weaken economic activity and reduce job opportunities.
Industrialists say the government must introduce a clear, long term industrial policy and maintain a predictable business environment. Banks should also be encouraged to channel available liquidity into productive sectors, particularly small industries, at affordable interest rates.
Creating jobs at home and retaining young workers would help rebuild domestic demand and expand the market for locally made products. Without policy stability, easier access to credit and stronger consumer demand, the province’s small industries are likely to remain under pressure.
