Summary

Key takeaway: Nepal’s small and medium enterprises (SMEs) face a multifaceted crisis in mid-2025, driven by persistent, albeit moderate, inflation. This is reflected in significantly higher transaction costs (especially for imported raw materials and selected services), persistent supply chain vulnerabilities exacerbated by both domestic and global factors, and cautious consumers whose purchasing power is waning.
Main problems: The combination of these pressures reduces SME profitability, complicates financial planning and threatens business continuity, especially for enterprises with limited financial reserves or high dependence on imports.
Adaptive measures for SMEs: SMEs are actively, albeit to varying degrees, implementing strategies that include tight cost control, finding alternative sources of supply, adopting digital tools to improve efficiency and market expansion, and in some cases innovating their product offerings. However, the ability to adapt is uneven.
Support Ecosystem: Government and institutional support (e.g. FY2025-26 budget incentives, FNCCI/CNI initiatives, development partner projects such as REED) offer some relief, but gaps remain in coverage, awareness and comprehensiveness, particularly with regard to access to affordable finance and practical support for supply chain diversification.
Prospects and key recommendations: The outlook for Nepalese SMEs beyond mid-2025 is assessed as cautiously optimistic, but depends on sustained economic stability, effective implementation of supportive policies, and continued SME resilience. Key recommendations will focus on increasing access to finance, targeted capacity building for supply chain resilience and digitalization, promoting a more stable policy environment, and promoting domestic value chains.

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Podcasts

ABM - Nepal Commerce and Economic Podcast