E-Kantipur

Expanding productive employment is the foremost means of poverty reduction and socio-economic development. Unemployment and under-employment are one of the major problems in Nepal. Unemployment has been continuously increasing and it is widely believed that the under-employment rate is not less than 50 percent of the total labour force. The problem of unemployment and under-employment among youth is more serious than unemployment among other groups. It is estimated that more than 15 percent of the educated youths are unemployed and over 42 percent are under-employed. 

The Youth and Small Enterprises Self-Employment Fund (YSESEF) programme was launched in 2009 by the Ministry of Finance in collaboration with the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) to generate self-employment through micro and small enterprises particularly for unemployed and underemployed youth in rural areas. The programme aimed to achieve optimum utilisation of productive labour and exploitation of local resources, relieve rural unemployment, alleviate rural poverty, reduce rural-urban migration, aid peace development and lessen social injustice. The challenges for the programme are lack of positive attitude, lack of entrepreneurial skills and vocational experience among the applicants, inability to develop a bankable proposal to get the loan for the business and so forth.

It was proposed that the government would help financial institutions to provide loans to the young entrepreneurs at a special rate without collateral. For this purpose, it envisaged creating a Self-Employment Fund that would be utilised to operate the YSESEF and to provide necessary entrepreneurship training. To be eligible for the YSESEF programme, one had to be fully unemployed and not be a student. The programme aimed at providing loans for activities like commercial agriculture, animal husbandry, agro forestry, cottage industry and small business. Apart from according priority to Dalits, Janajatis, women and other deprived people, the programme would also give priority to business plans that would utilise local resources.

A simplified process to obtain a loan was formulated, which was based on submission of a business plan, copy of the citizenship certificate and other documents as demanded by the financial institution that would provide the loan. After submission of all the required paperwork, the applicant could receive up to Rs. 200,000. If the applicants paid off the loan on time, they could receive up to 60 percent of the interest back as a subsidy. Although the applicants did not need to put up any collateral to obtain a loan, the future business itself would serve as collateral until the loan was repaid. A ToT programme on entrepreneurship development was conducted for 28 days in which 55 trainees from 43 different chambers of commerce took part. It was held in Narayangarh, Tansen and Birendranagar, and was organised by the FNCCI with the support of the GTZ INCLUDE Programme. 

In order to fully assess the situation of the YSESEF applicants, a study was conducted by GTZ INCLUDE in four districts — Sunsari, Chitwan, Rupendehi and Kailali. The overall objective of the situation assessment was to establish a benchmark reflecting the pre-training situation. The specific objectives of the study were to obtain background information of the YSESEF applicants, to assess their needs and expectations from the entrepreneurship development training, to assess the respondents’ perceptions of financial institutions interested in providing loans and to assess the knowledge of the applicants about business service providers.

The study was conducted in three phases — collection of secondary data from agencies related to the YSESEF programme, participatory discussions to collect information from district level authorities and questionnaire survey with representative samples of the target group. The survey selected 1,207 applicants for individual interviews. The study concluded that an overwhelming majority of the YSESEF applicants were married youths. The proportion of illiterate applicants was not significant. A majority of the applicants who had higher secondary or university education were from the management and humanities streams.

A majority of the applicants had an annual income of less than Rs. 50,000. The income level of female applicants was much less than that of male applicants, and a majority of unemployed female applicants were dependent on their family members. A majority of the applicants were doing something, but their interest was to set up a business and thus they required loans. Many applicants wanted to be involved in business as their future employment plan, but very few had taken entrepreneurship development training. This is indicative of the fact that there is a need for entrepreneurship development training. A vast majority of the applicants were willing to pay for entrepreneurship development training to set up their own businesses.

Only around 8 percent of the applicants had received training in business plan development. But around 80 percent of them developed business plans after the training, and around 70 percent of the applicants set up some sort of business according to their plan. Since more than one-third of the applicants had their own businesses, but were operating without a business plan, there is a need for business plan development training. A majority of the applicants believed that there was very good demand for their proposed businesses in their localities. Almost all the applicants indicated the need for a loan for their future business plan. However, a clear directive from the central level/board to district level financial institutions is perceived to be required to obtain a collateral-free loan.

As many respondents did not have much knowledge about business service providers, there is a need to publicise their availability and services. Support should be provided to make linkages between entrepreneurs and business service providers. Preparation of a bankable business proposal would provide the respondents a clear understanding about the actual amount of finance required for their business, and it is generally below Rs. 200,000. A majority of the applicants believed that the YSESEF programme was good because it would generate employment and reduce poverty. However, as nothing had happened after the three-day orientation programme provided by the chambers of commerce, the respondents were disappointed. 

(The author is a lecturer in economics at CEDA, Tribhuvan University)

Uma Shankar Prasad

us_prasad@hotmail.com

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