Nepal's E-commerce Potential

E-commerce is a global phenomenon of our age that accounts for 12 per cent of the global trade volume. Currently at $25 trillion, e-commerce’s share of the total international trade is expected to rise fast as more and more regions of underdeveloped and developing countries embrace the ‘digital age.’ As most South Asian countries are trying to exploit the potential of e-commerce, it remains underdeveloped in Nepal.

The Government of Nepal realizes the importance of e-commerce and has taken significant steps to ensure its development. The United Nations Conference on Trade and Development (UNCTAD) appreciated those efforts in its assessment of Nepal’s e-commerce industry. The gradual investment in ICT (Information Communication Technology) has led to a much wider Internet penetration, the most important prerequisite for a bustling e-commerce sector. Another factor that assists the development of e-commerce is a tech savvy population. Nepal’s youth show promise in that aspect. Many of Nepal’s universities have recently added courses on content marketing and data analysis, which are essential for e-commerce-related skill development. The government has provided a regulatory environment which facilitates innovation in payment systems that are much needed for the uptake of e-commerce. Emergence of eSewa (a mobile wallet system) and IME (International Money Express) pay is a welcome development. These payment systems allow consumers to link their bank accounts for face-to-face or online payments. Although the government’s efforts to develop e-commerce deserve praise and recognition, they are not enough.

There are many bottlenecks because of which e-commerce is still in its infancy in Nepal. One of the reasons cited by the US government’s export website is Nepal’s challenging terrain coupled with a lack of street addresses, which hinders efficient delivery of goods and services. In addition to repeating these concerns, UNCTAD highlighted other factors responsible for stifling the growth of e-commerce in Nepal. The legal and regulatory framework of Nepal includes e-commerce under multiple ministries instead of its own separate recognition. As a result efforts for its development are not coordinated and hence not as efficacious. The payment solutions mentioned before have facilitated domestic e-commerce but international e-commerce is still restricted due to “severe constraints on international means of payment.” Further constraining the growth of e-commerce in Nepal is a general lack of access to finance in Nepal. Banks in Nepal do not readily give out loans because of a lack of confidence in the information provided by the Credit Information Bureau of Nepal. Also, banks consider e-commerce to be a risky sector for investment adding to the already existing problems facing the e-commerce sector in Nepal.

The government of Nepal needs to address the causes restraining e-commerce. It needs to improve the addressing system to reduce some of the logistical issues. Forward looking laws should be formulated which aim to coordinate the efforts for the development of e-commerce and improve consumer confidence in using online payment systems. A continuous dialogue needs to be held between relevant national and international regulatory bodies to allow cashless international payments in order to truly exploit e-commerce’s trade potential. The government should actively assist leading banks and payment service providers in developing customizable loans so that they are able to finance small and medium enterprises trying to enter the digital economy. Such efforts should be particularly directed towards fintech (financial technology) and cashless payments startups.

With the existence of an ICT infrastructure and a tech savvy young population, the government of Nepal needs to provide a regulatory framework that promotes e-commerce. E-commerce has the potential to create jobs, both in rural and urban areas. A more vibrant e-commerce sector will help Nepal’s GDP grow significantly especially when the whole world is moving away from traditional commerce towards e-commerce. Will Nepal allow itself to be transformed into a digital economy? Let us hope so.