Positioning Nepal's Micro, Small, and Medium Enterprises (MSMEs) Sector in South Asia

This study applies an explanatory sequential mixed-method design to benchmark Nepal’s micro, small, and medium enterprise (MSME) sector against those of Bangladesh, India, Pakistan, and Sri Lanka. The analysis examines contributions to GDP, employment, and exports, while positioning Nepal within a standardised policy assessment framework. The findings reveal a paradoxical reality in Nepal’s MSME sector. Although MSMEs generate exceptionally high employment in Nepal, they contribute the least to GDP and operate within the weakest institutional and policy frameworks in the region. Key constraints include institutional capacity deficits, policy fragmentation, challenged access to finance, and weak innovation support. Nevertheless, the sector demonstrates notable resilience in exports, despite Nepal’s geographical and infrastructural disadvantages. To address systemic deficits, the authors propose a five-pillar reform agenda encompassing institutional restructuring, expanded financial access, export competitiveness, innovation promotion, and performance-based monitoring. Collectively, these reforms can transform Nepal’s MSME sector from a high-employment, low-productivity segment into a dynamic engine of inclusive growth and regional economic integration.