Micro, small and medium enterprises (MSMEs) in Chitwan and Makwanpur are operating well below their potential, according to a recent survey by Nepal Rastra Bank (NRB). Conducted among 321 firms and published by the central bank’s Birgunj office, the study finds that average capacity utilisation in the two districts stands at just 50.7%, alongside modest returns on investment of 11.7%.
The survey highlights weak digital readiness as a persistent constraint. Fewer than one in five businesses (17.8%) view their use of digital technology positively, while the majority describe it as average or poor. Where technology is used, it is largely limited to payments and production, with minimal application in areas such as marketing, bookkeeping, or administrative management.
External conditions are also weighing on performance. More than two-thirds of respondents reported negative effects from the macroeconomic and political environment, citing instability and uncertainty as major barriers to growth. While 40.8% said the impact was limited, a quarter of firms experienced severe disruption to their operations.
Access to finance remains another major hurdle. Nearly 45% of MSMEs rated credit conditions as poor or very poor, pointing to high interest rates, rigid repayment terms, and complex procedures. As a result, most enterprises continue to rely on personal savings for capital, although dependence on formal credit tends to increase as firms expand.
Operational assessments painted a mixed picture. Business location was considered average by most respondents, but nearly three in ten rated it unfavourably. Labour conditions emerged as a significant weakness, with over half describing the labour environment as poor. Raw material supply and quality received mostly average ratings, though a sizable share of firms reported persistent shortages or quality issues. Infrastructure stood out as a relative strength, with just over half of MSMEs rating it positively.
Government and central bank support, however, drew widespread criticism. More than 80% of respondents said existing support programmes were insufficient to address their needs.
Financial performance indicators reflect these challenges. Over half of surveyed firms reported a decline in turnover, including nearly 30% that experienced a sharp fall. Only about a quarter recorded growth, while the rest maintained stable sales. Median annual revenue across MSMEs in the two districts is estimated at NRs 4 million.
