Publications

Survival or Growth? Nepal's Microenterprise Landscape and the Case for a Differentiated Policy Approach

Informal microenterprises are the backbone of urban Nepal's economy, absorbing a large share of the workforce and serving as a critical safety net where formal wage employment remains scarce. Yet the vast majority operate at subsistence levels, with limited prospects for productivity growth or structural transformation. This World Bank Group report takes a deep look at Nepal's microenterprise sector — profiling informal and formal firms, mapping the structural divides between them, and assessing which informal businesses have a realistic path to formalization and growth.

The findings reveal a starkly heterogeneous landscape. While a small subset of informal firms — approximately 22% — demonstrate productive potential and could benefit from targeted formalization support, the remaining 78% face deep structural barriers that make formalization costly without proportionate gains. The report argues that a one-size-fits-all policy response is not only ineffective but counterproductive. Instead, it makes the case for a differentiated approach: livelihood stabilization and social protection for survivalist enterprises, targeted productivity and formalization support for high-potential firms, and economy-wide reforms to strengthen the business environment for all.

With actionable recommendations spanning finance, regulation, gender-responsive policy, and governance reform, this report offers a compelling, evidence-based roadmap for policymakers seeking to unlock the growth potential of Nepal's microenterprise sector while leaving no one behind.