Govt initiating business formalisation

Kathmandu, July 31: Anita Regmi of Narayan Municipality-6 in Dailekh district has been running a poultry farm for the last several years. She was running the business without registering it at any authorities but she got a chance to attend a two-day training organised by Dailekh Chamber of Commerce which educated her about the benefits that she could have if her business were registered.

Regmi's Samragyi Agriculture and Livestock Farm is now registered with the local government. 

"I didn't know that registering the business could draw multiple benefits. Now, I know the benefits of enrolling into the Social Security Fund and book keeping. I am also planning to get a Permanent Account Number (PAN) as well," she said to The Rising Nepal. 

Many entrepreneurs from across the country need such awareness and education on registering their business. But federal, provincial and many local governments have just been calling on the businesspeople to register their business. Although they have formulated policies and laws to formalise the business, a significant portion of it is operating informally. 

Only making rules is not sufficient, education awareness and trainings to the entrepreneurs are necessary, said Juna Mathema, Chairperson of the FNCCI's Start-Ups and Innovation Forum. 

"However, the entire process should be facilitating the entrepreneurs, not scaring them away from the government authorities," she said. 

To support in this process, 'Formalise Your Business' (FYB) initiative is being implemented by the governments at various level especially the provincial agencies, International Labour Organization (ILO), private sector agencies including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and its local district and municipal chapters, and Joint Trade Union Coordination Center (JTUCC).

Likewise, Industrial Enterprise Development Institute (IEDI), National Vocational Training Academy, Federation of Women Entrepreneurs Associations of Nepal (FWEAN) and EU UN joint Empowered Women Prosperous Nepal programme is also supporting this process. 

A National Formalisation Committee (NFC) is working on the national formalisation action plan that also includes the development of the National Strategy for the same which is expected to engage all concerned stakeholders from the government and non-government sectors in spearheading the initiative. 

The NFC has recently felt that Nepal is making significant strides in its efforts to transition informal businesses into the formal economy, a crucial move aimed at fostering economic growth, promoting decent work, and advancing social justice. 

Registering businesses

Registering informal enterprises – those operating outside the legal and regulatory framework – with government authorities and comply with laws and regulations is business formalisation. 

This includes aspects like business registration, bookkeeping, adherence to tax laws, social security contributions, and compliance with labour laws. The FYB programme acts as a practical tool that provides entrepreneurs and business managers with the necessary information and guidance to facilitate them in this transition.

The formalisation of businesses is a priority which is backed by the 16th Periodic Plan with a target to achieve 50 per cent formal employment by 2028. The plan also envisions to increase the number of formally registered businesses at least with one government authority to 85 per cent by mid-July 2086. This aligns with Integrated National Action Plan on Formalisation and the Decent Work Country Programme 2023-27.

An ecosystem supporting formalisation

Krishna Bahadur Rokaya, Officer at the Directorate of Industry and Consumer Protection in Karnali, said that for the past six months, his office has been spearheading with the training and awareness programmes for business registration and sharing its benefits to the entrepreneurs.  The training which began with 15 entrepreneurs that included 12 businesswomen has now completed four rounds. 

"We have launched business formalisation training for beauticians, pickle producers and other businesspeople," said Rokaya while adding that the Directorate conducts continued follow-ups to ensure that the trainee entrepreneurs have registered their enterprises and are entitled of various benefits offered by the government as well the banks and financial institutions (BFIs). 

The Directorate is one of the key agencies in implementing the FYB initiative in Karnali Province. 

The directorate is working on an ecosystem of creating entrepreneurs with relevant training, enabling them to register their business, and conducting monitoring and follow up to make sure they are registered with the relevant authorities. 

"Earlier, entrepreneurs used to think that registering business was just an act to get a piece of paper from the government and it would be of no use in making the business better or enhancing it. But now they know about the tax system, social security, consumer interest, work place safety and labour rights," said Rokaya. 

The trainings being implemented as per the national action plan on business formalisation are conducted at 18 locations and have trained 399 entrepreneurs with 350 women. Likewise, follow-up and monitoring were conducted with 197 participants of such programmes to assess the impact, according to the National Formalisation Committee (NFC). 

The formalisation of business brings benefits like access to finance, legal protection, market access, improved business practice, social security and decent work and economic growth. Pradip Kumar Koirala, Joint-Secretary at the MoLES and Chairperson of the NFC, said that the business formalisation training has become impactful and it should be continued.