Increasing investment and finance opportunities for smallholders and agribusinesses in Nepal

Sustainable agriculture
The agriculture sector contributed 32% towards GDP in 2016 and is declining, compared with industry and service sectors which contributed 14% and 54% respectively. While there have been developments in infrastructure, energy, manufacturing and service sectors; agriculture still remains as one of the most important sectors of the country accounting for 68% of employment (ILO) and provides a significant share of exports. 

The transformation towards a more commercialised agriculture requires a set of measures that focuses not only on farmers, but fundamentally on the growth impediments of agro-enterprises. These enterprises include input providers, producer companies, marketing cooperatives, storage operators, logistic companies, agro-processors, importers and exporters of agricultural and food products, distributors, traders, and agricultural service providers (including financial service providers, insurance providers, business service providers and other).  DFID’s Commercial Agriculture for Smallholders and Agribusiness programme (CASA) is working to increase economic opportunities for smallholders to step up and trade into growing commercial markets in Malawi, Uganda, and Nepal. The programme will also increase investment in agribusinesses which source from smallholder farmers and generate new evidence and research which amplifies the case for doing business with smallholders.  In Nepal, Swisscontact implements the CASA programme and is encouraging and supporting investments which are likely to produce broad based benefits to both farmers and agribusinesses, and contribute to the commercialisation of the agriculture sector. It does this by showcasing successful models for businesses that source produce from smallholders, bridging evidence gaps on impact and viability of business models, and ensuring investors and policymakers have access to the right information to enable them to make inclusive agribusiness models succeed.  Analysis into the dairy and vegetable sectors of Nepal indicated that agribusinesses face multiple challenges along the value chain. Limited access to appropriate finance, insufficient managerial and governance capacity, limited product diversification, low adoption of technology, product branding, and marketing were identified to be the most prominent challenges. Similarly, at the production end, smallholder farmers have low incentive to commercialise due to a combination of high production costs, high post-harvest loss, low revenues from sales, high investment upgrading costs, and low confidence in the market.  As such, CASA’s strategy in Nepal is focused on: 1. Linking smallholders to markets and finance by:

  • Strengthening producer groups to access commercial markets.
  • Producer group capacity building on aggregation including standards compliance, relevant group management skills and good governance projects.
  • Facilitating linkages between producers and SME off takers – including inputs/services SMEs.
  • Facilitating access to finance for producer groups.

2. Supporting SME growth and expansion to engage more smallholders by:

  • Developing SME business models for engaging more smallholders.
  • Providing Business Development Services (BDS) for making the SME investment ready.
  • Matchmaking with CASA’s evolving finance provider and investor mapping lists.
  • Facilitating access to finance for SMEs.

3. Improving investment climate by supporting government and regulators to improve the enabling environment for farmers and agribusinesses with specific value chains.