Former Finance Minister Khanal calls for reforms to revive MSMEs

KATHMANDU: Former Finance Minister Rameshore Prasad Khanal has called for comprehensive reforms in insurance, credit and policy frameworks to revive micro, small and medium enterprises (MSMEs) hit hard by the Covid19 pandemic.

Khanal made the remarks at a policy discussion in Kathmandu on Monday organised by Society of Economic Journalists – Nepal (SEJON), Nepal Insurance Authority and United Nations Development Programme (UNDP) to launch the study report 'Risk Management in Nepal’s MSMEs'.

He said the sector has weakened because of inadequate risk management and limited access to finance, and proposed changes to agricultural insurance that would see the government initially cover 100% of premiums for poor farmers, with farmers contributing only after receiving compensation. He noted current subsidies of up to 75% have not been fully utilised by farmers.

"According to the report that was made public on the occasion, only 10% of the nearly 900,000 MSMEs in Nepal have access to insurance, while the remaining 90% are unprotected against any risks," he said. He added, "Even though sectors like tourism and construction are gradually recovering after the Covid19 pandemic, MSMEs are still in crisis, and this situation has contributed to an increase in bad loans and non‑banking assets in banks and financial institutions."

Kalpana Shrestha, Joint Secretary at the Ministry of Industry, Commerce and Supplies, called for wider insurance access by integrating government programmes that support MSMEs. She said nearly 50% of the roughly 923,000 MSMEs operate in the informal sector and therefore fall outside existing insurance schemes, limiting overall coverage to about 10%. The government is running initiatives such as start‑up loans, MEDPA programmes, production‑based incentives and the National Enterprise Facility to promote entrepreneurship.

Kyoko Yokosuka, UNDP Nepal’s resident representative, said MSMEs remain highly vulnerable to rising 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 risks and remains committed to helping expand affordable insurance access for MSMEs.

Susil Dev Subedi, Executive Director of Nepal Insurance Authority, said the insurance system must become more inclusive, modern and effective to shield MSMEs from natural disasters, climate change, financial shocks, cyber threats and health emergencies, and that robust risk management is essential for the sector’s resilience.

(With inputs from RSS)