Nepal’s GDP growth fell from 3.32 per cent in 2014-15, to 0.59 per cent in 2015-16. About 5.6 million people – about one in five people in the country of 28.1 million – lost their jobs.

To help the country cope with being cut off, many entrepreneurs began providing solutions to reduce Nepal’s reliance on imports, experts said.

More than 80 per cent of products in Nepal, a country locked between India and China, are imported, with oil, gold, iron and steel, pharmaceutical products, cement and electronic appliances among the most common goods brought in.

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The start-ups offer goods and services ranging from apparel to tech products, and operate in sectors as varied as horticulture, organic food chains, disaster recovery and the vehicle industry. The entrepreneurs are usually people between the ages of 22 and 35 who have been educated in universities overseas.

Some of the start-ups began operations with only one or two persons, and with a capital of as little as 70,000 Nepalese rupees (US$600). Rising start-up brands include coffee chain Red Mud Coffee, e-commerce platform Foodmandu and ride-sharing app Tootle.

While most of the products are aimed domestically, some items, such as textile, clothing, tea, coffee and PET bottles are exported. The top five exports from Nepal are palm oil, coffee, tea, spices and textiles.

The concept of start-ups is new in Nepal, where large family-owned corporations dominate a private sector that employs some 1.75 million people and contributes to 22 per cent of the country’s GDP.

Chandan Sapkota, a Kathmandu-based economist, said after the earthquake hit, young entrepreneurs began coming up with solutions for massive logistical challenges and ways to make relief distribution efficient. “Similarly, during the blockade, some car and bike pooling start-ups came up to facilitate the transport system,” he said.

Shabda Gyawali, investment director of Nepal’s Dolma Impact Fund, said he had observed a range of e-commerce platforms emerging after 2015.

“After the blockade, Nepal’s push for self-reliance was seen in energy security, hydro power and agriculture,” he said. “Also, urban firms dealing in transport, logistics, e-commerce and fintech had grown.”

Puspa Sharma, the executive director of South Asia Watch on Trade, Economics and Environment, said a number of hydroelectricity projects were currently being developed.

“In a few years, Nepal might not only have enough electricity for domestic consumption, but also for exports,” he said.

Sharma said the value of Nepal’s imports was 15 times greater than its exports. “In an economy that produces around US$30 billion of annual output, it has around US$15 billion of imports and US$1 billion of exports of merchandise annually,” he said.

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Experts list a number of other factors that pushed the growth of start-ups – political stability, the rise of digital technologies, the introduction of private equity and venture capital funding, and the growing international exposure of young Nepalis.

Investment director Gyawali said a year after the earthquake, the credit boom in the private sector picked up and there was a significant uptick in the stock market following the promulgation of Nepal’s constitution.

While a boom was expected, the rate of growth surpassed expectations. “In 2016, the GDP growth rate was 7.7 per cent as per central bank estimates. Nepal had not witnessed such a strong growth rate in more than 20 years,” Gyawali said.

Sharma said that improved electricity supply and wider internet services reaching over 17.5 million users, had helped “e-commerce models of business gather steam”.

Some economists warn though, that start-ups alone would not be able to help Nepal achieve self-reliance, and it would be “unrealistic” not to continue attracting foreign investment.

In 2018-2019, the actual foreign direct investment (FDI) in Nepal was about US$161 million, the second-lowest in South Asia.

Given its location, Nepal is uniquely placed to receive investments from both India and China. According to Nepal’s department of industry, India in 2018-2019 had committed investment in 53 projects, including construction of a strategic broad-gauge railway line between Kathmandu and the border town of Raxaul in Bihar. In the same financial year, China invested in 160 projects, including Huaxin Cement Narayani Pvt Ltd, a joint Nepali-Chinese venture with Investment Board Nepal (IBN) to establish a US$140 million cement plant in Nepal.

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Barely any Nepalese start-up has caught the eye of any Indian or Chinese company yet, though.

“Both Indian and Chinese investment in Nepal are focused on traditional capital expenditure-heavy infrastructure projects in hydropower, cement and manufacturing sectors besides the service industry such as restaurants, hotels, educational consulting companies and health care firms, rather than the small start-ups engaging young entrepreneurs,” Gyawali said.

Red tape and a minimum foreign investment threshold of US$500,000 are also likely discouraging investments in Nepal’s start-ups.

Bu Suraj Shreshtha, 33, the CEO of Anthropose, Nepal’s sole eyewear brand, noted Nepal did not have a strong manufacturing infrastructure, leading it to be “always dependent on China and India for business”. Anthropose manufactures its products in China.

Rhea Pradhan, 25, a fashion stylist and blogger, said the fast-fashion market in Nepal was dominated by China.

“Chinese goods are popular because of their affordability factor – a polyester T-shirt is available for less than US$1 and a pair of trousers for US$3,” she said. “The indigenous brands can never sell anything so cheap because the cost of production in Nepal is high.”

High taxes, the lack of start-up friendly policies, regulatory barriers and red tape in getting government licences are also viewed as slowing innovation and the growth of entrepreneurship in Nepal. The Global Innovation Index last year ranked Nepal 109 out of 126 countries.

Ajay Shreshtha, former president of Nepalese Young Entrepreneurs’ Forum, said the biggest challenge for a start-up was to raise capital, since banks offer only collateral-based lending, with real estate the most preferred collateral.

“A lot of start-ups run in losses before picking up or shut down in early years as venture capital funds are not available due to the primitive ecosystem,” Shreshtha said.

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Gurung, the fashion label owner, believes if these “hurdles” are addressed, Nepal’s fortunes will grow.

Nepalese start-ups have the “potential to do business internationally”, she said.

Ranjan Ojha, who started Nepal School of Entrepreneurship in 2016, said the image of entrepreneurs was increasingly attractive to young people.

“Men and women from both lower and upper middle-class families want to be entrepreneurs now, and contribute to the country’s economy,” he said.