The Lal Bakaiya River in Nepal’s Madhesh Province is no stranger to floods, as rising riverbeds, degraded Chure hills, and unplanned development turn monsoon rains into prolonged disasters. ICIMOD is strengthening local resilience through Community-Based Early Flood Warning Systems (CBFEWS) and innovative gamification of preparedness training, making life-saving knowledge accessible and engaging for all. Combined with integrated watershed management efforts, these initiatives aim to tackle the region’s ‘Too Much Too Little’ water crisis and break the cycle of recurring floods.
Nepal’s richness in its high-value resources, including those in energy, agriculture, minerals and metals, medicinal herbs, forest resources, and tourism, has the potential for the setting up of new businesses. However, restrictive policies, inadequate regulatory frameworks, and limited market access have hindered this progress.
A fitting entrepreneurial ecosystem in the country is required to helm and provide all necessary skillsets, technology transfer and policy guidance required for this to take shape. The World Bank’s Ease of Doing Business Report 2020 ranked the country 94th out of 190 economies based on factors such as access to credit information, cross-border trade, and other key business indicators. Nepal, a lower-middle-income country with a gross domestic product (GDP) per capita of $1,336.55 and 30.5 million people, shows mixed performance in its business environment. It excels in operational efficiency but falls short in regulatory framework, public services, and especially market competition. While it performs well in financial services and labour, it lags behind regional peers like Pakistan in areas such as business entry. Overall, Nepal has some strengths in business operations but needs significant improvements to create a more supportive environment for entrepreneurship and growth. But these factors get more complicated if conditions like climate change, environmental degradation, and socio-economic deprivation are factored in.
The act of doing business across the country is not the same. While certain regions reap benefits from better-developed sectors like tourism, other regions, like the Madhesh province, are prone to external shocks such as natural disasters, economic downturns, and political instability. Additionally, essential building blocks like technology transfer, education, and supporting infrastructure are often missing.
Fostering a startup-friendly Nepal
Given these conditions, how can the country encourage more founders to take the entrepreneurial leap?
To answer this question, the International Centre for Integrated Mountain Development (ICIMOD) has been collaborating with the government of Nepal to identify and utilise national and provincial level opportunities to create more demand for startup thinking. ICIMOD has established a national consortium to foster and strengthen the entrepreneurial ecosystem of Nepal which includes participation from the Ministry of Industry, Commerce, and Supplies, private sector like the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), and academia following the triple-helix model (a framework that describes the dynamic and synergistic interactions between universities (academia), industry, and government to foster innovation and entrepreneurship in a knowledge-based economy, where these three institutional spheres collaborate through overlapping roles, knowledge transfer, and resource sharing to drive economic and social development). This model has led to increased awareness of the government’s willingness to foster and strengthen the entrepreneurial landscape of Nepal.
Firstly, ICIMOD has been working to bridge the gap between public and private sector actors. An example of this effort is the partnership between the Birgunj Chamber of Commerce and Industries and the Industrial Enterprise Development Institution (IEDI). This collaboration seeks to leverage private sector expertise while strengthening public-private dialogue, ultimately supporting local business development and improving service delivery.
Secondly, we have also been focusing on strengthening institutional capacities at the national level. We aim to support authorities with relevant skillsets, which would lead to knowledge transfer and scaling of efforts at the provincial level. With this vision, we initiated the Startup Nation concept – a key platform to showcase the government and private sectors’ efforts in building a startup ecosystem. While ICIMOD has been supporting the government since 2023 with the Startup Nation 2030 initiative, one breakthrough was the Government of Nepal (GoN)’s commitment to establishing incubation centres (IC) in all seven provinces, signalling a strategic move toward nurturing a robust startup ecosystem. Although initial steps such as feasibility studies have been completed, the actual establishment of the ICs has yet to commence, indicating a need for accelerated implementation to realise the envisioned startup culture.
What is an incubation centre (IC)?
An incubation centre supports startups and early-stage businesses by providing resources like office space, mentorship, funding opportunities, and networking. It helps entrepreneurs overcome challenges, refine their ideas, and grow sustainably. By fostering innovation, incubation centres play a key role in driving economic development, creating jobs, and promoting innovation and technology transfer.
Thirdly, ICIMOD has also focused on creating relevant support systems to aid the government with its National Startup Policy 2024, a framework designed to promote entrepreneurship, support innovation, and facilitate the growth of startups in the country outlines several incentives to support startups, including tax exemptions, concessional loans, and the enhancement of accelerator programs through the establishment of ICs. The policy also aims to establish associations such as the Nepal Startup Council and the National Startup Board to provide focused support and governance for the startup ecosystem across the nation.
ICIMOD has also been working with the IEDI, a mandated agency for startup promotion and incubation centre development, since 2023, in developing startup-related policies and procedures. The institute also prioritises support to provinces like Madhesh, including the allocation of a budget for establishing an incubation centre. In collaboration with private sectors and development agencies, including ICIMOD, the government has launched initiatives to create ICs in all seven provinces (Koshi, Madhesh, Bagmati, Gandaki, Lumbini, Karnali, and Sudurpachchim) of Nepal, particularly focusing on the Madhesh Province. This ambitious plan is part of a broader mission to transform Nepal into a hub for startups, to create 10,000 startups and 100,000 new quality jobs by 2030.
Thus, ICIMOD’s Building capabilities for green, climate resilient and inclusive development in the Lower Koshi River Basin (HI-GRID) project, supported by the Australian government, with its partner, has been working in the Madhesh Province to establish an incubation centre.
The rise of Madhesh as an entrepreneur hub
The Madhesh Province is historically known for its cultural richness and economic significance. It is experiencing a shift towards entrepreneurship as a driver for local development. The region has a longstanding tradition in trade and agriculture, and with growing interest in innovation and technology-based enterprises, the startup ecosystem in Madhesh Province is now beginning to emerge.
While the development of IC and the entrepreneurial landscape in Madhesh Province is still in its nascent stages, there are promising signs of progress. A significant boost to the region’s entrepreneurial landscape comes from ICIMOD’s involvement with a local-level consortium, including the government, in establishing an IC focused on green, resilient, and inclusive startups. Birgunj, an important trade city with a key role in cross-border exchange with India, has taken the lead and committed to allocating land for the establishment of IC. Other cities in the province have yet to make similar commitments. This initiative in Birgunj is expected to foster startups and transform Madhesh into an entrepreneurship and innovation hub, addressing unemployment across all community segments.
The initiative supports the development of a startup ecosystem aligned with the fourth industrial revolution principles. This also includes setting up centres known as Rojgar Kendra or employment centres, which are organisations or government offices that provide job placement services, vocational training, and other resources to help people find employment.
Opportunities like the national Startup Nation 2030 conference have also influenced laying out a roadmap for advancing entrepreneurship within the province. Seeing the success of the national conference, a provincial-level event was held in Birgunj. Over 100 Nepali organisations participated in the event with an aim to transform Madhesh Province’s entrepreneurial landscape.
The entrepreneurial spirit in Madhesh is pervasive, driven by a young and dynamic population eager to harness new opportunities. The provincial and municipal governments in Madhesh are yet to implement dedicated activities like the establishment of IC and innovation labs (physical hubs for co-creating and nurturing entrepreneurial ideas), highlighting that, although plans exist, their implementation is still at a nascent stage. This presents both a challenge and an opportunity for focused development in the region.
Chief Minister Satish Kumar Singh of Madhesh Province emphasised establishing an incubation centre with supportive policies and infrastructure. | Photo: FNCCI
What is next for the Madhesh Province?
The future of Madhesh’s entrepreneurial ecosystem hinges on the synergetic integration of three key components: the incubation centre (backed by the government, development partners like ICIMOD, FNCCI, and local leadership), innovation hubs, and Rojgar Kendras.
IC serves as the cornerstone, providing mentorship and resources. Innovation labs will act as creative spaces for idea generation, experimentation, and prototyping of new solutions, particularly addressing local development and market challenges. Rojgar Kendras will ensure a steady flow of skilled talent by bridging the gap between job seekers and startups. This integrated approach can position Madhesh to transform into a vibrant entrepreneurial hub, fostering innovation, creating employment opportunities, and driving sustainable economic growth. Success will depend on continued leadership commitment, effective implementation of supportive policies, and sustained collaboration between the government, private sectors, academia, and international organisations.