UNIT 1

INTRODUCTION

Concepts of Entrepreneurship

The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved
ever since. Entrepreneurship is the process of creating new venture. It involves creativity &
innovation as well as risks for reaping of rewards. Thus, entrepreneurship is the process of
identification and exploration of opportunities by acquiring and managing resources like men,
material, capital, technology, equipment’s, etc.

Entrepreneurship can be described as a process of action an entrepreneur undertakes to establish

his enterprises. Entrepreneurship is a creative activity, it is an ability to create and build
something from practically nothing. It is an attitude of mind to seek the opportunity take
calculated risk and derive benefit by setting up the venture. It comprises of numerous activities
involved in conception, creation & operating an enterprise. It is concerned with creation of
wealth through production, distribution & sales of goods and services.

Most economists today agree that entrepreneurship is a necessary ingredient for stimulating
economic growth and employment opportunities in all societies. In the developing world,
successful small businesses are the primary engines of job creation, income growth, and poverty
reduction. Therefore, government support for entrepreneurship is a crucial strategy for economic
development.

Entrepreneurship has traditionally been defined as the process of designing; launching and
running a new business, which typically begins as a small business, such as a startup company,
offering a product, process or service for sale or hire, and the people who do so are called
'entrepreneurs. Entrepreneurship can be described as a process of action an entrepreneur
undertakes to establish his enterprises.

In other words, Entrepreneurship is the process of identifying opportunities in the market place,
arranging the resources required to pursue these opportunities and mobilizing the resources to
exploit the opportunities for better gains.
According to Stevenson & Jarillo ‘Entrepreneurship is the process by which individuals pursue
opportunities without regards to resources they currently control.

According to Fred Wilson ‘Entrepreneurship is the art of turning an idea into a business.’

Definition of Entrepreneur

The word ‘entrepreneur’ derives from the French words ‘entre’ meaning ‘between’ and ‘prendre’
meaning ‘to take’. The word was originally used to describe people who ‘take on the risk’
between buyer and sellers or who undertake a task such as starting a new venture. Many simply
equate it with starting one’s own business. Most economists believe it is more than that. To some
economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a
significant chance for profit. And others emphasize the entrepreneur’s role as an innovator who
markets his innovation. Still other economists say that entrepreneurs develop new goods or
processes that are not currently being supplied.

Business expert Peter Drucker (1909-2005) describes the entrepreneur as someone who actually
searches for change, responds to it, and exploits (make good use of it) change as an opportunity.
For e.g.: A quick look at changes in communications: from typewriters to personal computers to
the Internet: illustrates these ideas.

Entrepreneurs have been described as people who have the ability to see and evaluate business
opportunities, gather the necessary resources to take advantage of them and initiate appropriate
action to ensure success.

An entrepreneur is one who creates a new business in the face of risk and uncertainty for the
purpose of achieving profit or bringing change in the society and growth by identifying
opportunities and assembling the necessary resources to capitalize on those opportunities.

Entrepreneurs usually start with nothing more than an idea: often a simple one: and then organize
the resources necessary to transform that idea into a sustainable business.

An entrepreneur is the man or woman who is able to actualize his/her inherent potentials and
develop a character that is not dependent but independent.

He/She is that person who undertakes the journey of creating value in idea by pulling together a
unique package of resources to exploit an opportunity.
 He or She has the capacity and capability to build something from practically nothing –
initiating, daring, doing, achieving, and building an enterprise. They genuinely believe they have
something new and special to offer, either a product or a service. To them, life will remain a
fantasy unless their dreams are actualized. An individual does not have to invent something to be
an entrepreneur. He can pick up something that already exists and make it different by his/her
innovative ideas.

Attribute/ Traits/ Characteristics of Entrepreneur

There is no such thing as a typical entrepreneur. Some entrepreneurs are quiet and hard-working,
while others are more outgoing and extravagant. The key to being a successful entrepreneur lies
in the ability to take an idea and then, through the process of innovation, develop it in such a way
that it becomes a marketable product or service. Research indicates that there are a number of
characteristics that are quite likely to be present in high-achieving entrepreneurs:

1. Risk taker: Entrepreneurs are not wild risk-takers but are instead calculating risk-takers.
Entrepreneurs often have a different perception of the risk involve in a business situation. The goal
may appear to be high, even impossible from others’ perspective, but entrepreneurs typically have
thought through the situation and believe that their goals are reasonable and attainable.
Entrepreneurs launched many now-famous businesses, including Burger King, Microsoft, FedEx,
Disney, CNN, MTV, HP, and others, during economic recessions when many people believed their
ideas and their timing to be worse.

2. Creative Thinker: Creative is the spark that drives the development of new products or
services or ways to do business. They know how to turn an existing product or idea into
something even better.

3. Perseverance. Even when things don’t work out as they planned, entrepreneurs don’t give up.
They simply keep trying. Real entrepreneurs follow the advice contained in the Japanese proverb,
“Fall seven times; stand up eight.”

4. Flexibility: One hallmark of true entrepreneurs is their ability to adapt to the changing demands
of their customers and their businesses. In this rapidly changing world economy, rigidity often
leads to failure. As society, its people, and their tastes change, entrepreneurs also must be willing
 to adapt their businesses to meet those changes. Successful entrepreneurs are willing to allow their
business models to evolve as market conditions warrant. Obstacles, obstructions, and defeat
typically do not demotivate entrepreneurs from continuously pursuing their visions. Successful
entrepreneurs have the willpower to conquer the barriers that stand in the way of their success.

5. Commitment. Launching a company successfully requires total commitment from the

entrepreneur. As per the expert, “The commitment you have to make is tremendous; entrepreneurs
usually put everything on the line,”.That commitment helps overcome business-threatening
mistakes, obstacles. Entrepreneurs’ commitment to their ideas and the businesses determine how
successful their companies ultimately become.

6. Future orientation. Entrepreneurs tend to dream big and then formulate plans to transform those
dreams into reality. They have a well-defined sense of searching for opportunities. They look ahead
and are less concerned with what they accomplished yesterday than what they can do tomorrow.
Entrepreneurs observe the same events other people do, but they see something different.

7. High need of achievement: One of the most common misconceptions about entrepreneurs is that
they are driven wholly by the desire to make money. To the contrary, achievement seems to be the
primary motivating force behind entrepreneur. Money is not the driving motive of most
entrepreneurs.

8. Confidence: Entrepreneurs typically have an overflowing confidence in their ability to succeed,

and they tend to be optimistic about their chances for business success. Entrepreneurs face many
barriers when starting and running their companies, and a healthy dose of optimism can be an
important component in their ultimate success. “Entrepreneurs believe they can do anything,”.

9. Passion: Passion is a strong & powerful emotions. Successful entrepreneurs are passionate. They
feel deeply about their product or service or mission. Passion is what will help you find motivation
when you are discouraged and it will drive your forward. Passion is fuel for successful
entrepreneurship. If you find yourself losing your passion, that might be the clue that it’s time to
move on to something else (that stokes your passion). The passion of entrepreneur towards the
business must be consistent with his/her skill and must be a legitimate business opportunity.
 BASIS FOR
ENTREPRENEUR ENTREPRENEURSHIP
COMPARISON

Meaning An entrepreneur is an Entrepreneurship is a risky

individual or a team activity of commencing a
thereof, having an business usually a start up
innovative idea, and company, offering distinct
takes every step to products and services to the
turn the idea into target customers, which may
reality, while bearing or may not get success.
the risks.

What is it? Person who has an Process which gives shape to

idea and gives shape the idea.
to it.

Represents An innovator, who A procedure through which

chased the dream, till it an innovation is done.
becomes true.

Business He/She is the one who It is the activity, which an

Venture sets up the business entrepreneur undertakes to
venture, to turn a set up the business venture.
concept into reality.
 Points of Difference Entrepreneur Owner Manager
1. Motive and Reward Independence and Leadership and power,
achievement, uncertain corporate rewards
monetary rewards.
2. Venture Creates new venture Works in the existing
Focus on future vision organization.
Perceives opportunity Focus on present realities.
3. Status Owner of the enterprise, Servant in the enterprise,
not concerned about status concerned about status.
4. Risks Bears all risks himself Does not bear risks himself
5. Innovative and Change Innovate to meet changing Translates ideas into
customer demands practice, maintain status
quo.
6. Commitment of Resources Multi-stage commitment Single- stage commitment
 7. Authority Direct involvement , Delegates and supervises,
centralized hierarchical
8. Qualifications Creativity, far sightness, Knowledge of management
technical knowledge and theory and practical
experience. experience

Function of Entrepreneur:
The various function of entrepreneur includes planning, organizing, mobilizing resource,
relationship management and control.

1. Planning: Planning is the first decision of the management. Planning is deciding in advance what
is to be done, how is to be done, by whom it is to be done. It is very necessary function of
entrepreneur. It is predetermined future. It sets targets to convert new idea into reality. Through
planning entrepreneurs carry out the following functions:

• Setting Goals: Goals are set for new ventures in terms of growth, profit, leadership and services.
They are set for a long term.

• Formulating policies and procedures, Preparing work schedules and budgets.

• Developing Business Plan: This consist of action plans related to production, marketing and
finance. Contingency plans are developed to cope with risks.

2. Organizing: It establishes a structure for the new ventures through organizing. Entrepreneurs carry
out the following functions

• Grouping the task: Tasks requited to achieve the goals are grouped together and the authority and
responsibility for each position is established.

• Assigning Jobs to different employees of different department.

• Delegating necessary authority to fulfill given responsibility.

3. Mobilizing Resources: Entrepreneurs determine the resources required for the new venture. They
mobilize the needed resources. Resources can be:
 • Financial Resources: These resources can be mobilized from friends, relatives, banks and other
sources.

• Human Resources: Skilled and Knowledgeable employees are hired to fulfill the goals of the
enterprise.

• Technology Resources: Advanced technology are purchased to transform new ideas into useful
products.

4. Relationship Management: Entrepreneurs manage a variety of relationship such as:

• Exchange Relationship: They are related with the purchasing of inputs and marketing of outputs.
For e.g.: with suppliers and customers

• Professional Relationship: Entrepreneurs manage professional relationship within the ventures.

This is essential to motivate employees for higher productivity. They tackle labor problems

• Government Relationship: Entrepreneurs manage relationship with government and regulatory

agencies to get licenses, facilities, financing and tax concessions.

• Social Relationship: Membership in clubs, professional associations and relations with local
community are used to manage social relationship.

5. Control: Another function of entrepreneurship is control. They have to control various factors
such as financial, production and management.

• Financial Control: Entrepreneurs ensures proper allocation and utilization of financial resources.
This is needed to control costs and minimize wastage.

• Production Control: Entrepreneurs achieve proper combinations of inputs for production,

Quality control is ensured and Efficiency is improved.

• Management Control: Entrepreneurs ensures management control in the new ventures. They
make key decisions themselves to solve problems.
 Types of Entrepreneurs

An entrepreneur is an innovator, researcher and developer who recognizes opportunities, converts

those opportunities into workable and marketable ideas and methods. In this sense, the
entrepreneurs are classified into following groups: There are three types of entrepreneurs
commonly known as innovative, behavioral and focus group entrepreneurs.

1. Innovative Entrepreneurship
Under this, there are six types of innovative entrepreneurs. They are explained below:
a. Innovative entrepreneurs: Those entrepreneurs, who introduce new products, install new
method of production, discover new market, reorganize the enterprise, exploit new sources of raw
materials and take the change in business activities and speed, are known as innovating
entrepreneurs. These entrepreneurs have the ability to think newer, better and more economical
ideas of business organization and management. They are the business leaders and contributors to
the economic development of a country. They are aggressive in experiment and proactive in nature.
They are creative and believe in experimentation. Examples: Thomas Elva Addison, Steve Jobs,
Bill Gates, Jeff Bezos, Mark Zuckerberg etc.

b. Imitative entrepreneurs: The entrepreneurs, who copied the innovations made by the
innovative entrepreneurs, are known as imitative entrepreneurs. These entrepreneurs are people
who follow the path shown by innovative entrepreneurs. They are not involved in innovation
themselves but they simply imitate the techniques, process and systems of others. They imitate
innovative entrepreneurs because the environment in which they operate is such that it does not
permit them to have creative and innovative ideas on their own. They operate ventures with
limited resources. They prefer to imitate technology available in developed countries. Specially,
in the developing and under developing countries imitative entrepreneurs are found. Examples:
Min Bahadur Gurung founder of Bhatbhateni, Sixit Bhatta founder of Tootle, Ashim Pandey
founder of Yatri Bike.

c. Fabian entrepreneur: These types of entrepreneurs are skeptical about the changes to be made
in the organization. They do not initiate any inventions but follow only after they are satisfied
with its success rate. They wait for some time before the innovation becomes well tested by
 others. They believe in fact and Fabian and as far as possible, they would like to work with old
methods only. They do not want to take any type of risk by adopting new things. The Fabian
entrepreneur is also known as ‘waiting for the opportunity’; entrepreneur because such an
entrepreneur is also imitative, but he waits for favorable opportunities to implement them and he
does not implement the innovations, until he is sure that there is no disadvantage in applying
innovations. Kodak is one of the example of Fabian entrepreneurs.

d. Drone entrepreneur: These entrepreneurs are reluctant to change since they are very
conservative and do not want to make any changes in the organization. They are happy with their
present mode of business and do not want to change even if they are suffering the losses. He
operates his industry or business only in a traditional and routine way. Such entrepreneurs are
interested only to continue their business anyway. He remains away from innovations, although
it may be much advantageous to him. In the long run, such entrepreneurs face business failures.
He does not like to take any risks and to take any challenging work in the operation of his
business. Nokia Company is one of the best example of drone entrepreneur.

e. Forced entrepreneurs: Forced entrepreneurs are the individuals who had no plans to own their
own business but the circumstances moved them to strike out on their own realizing that the
entrepreneurship was the only way they can beat the current situation. The entrepreneurs are the
victims of circumstances. For example: A worldwide pandemic has forced us to put heavy
reliance on technologies for a larger scale, particularly in the verticals of E-learning
Technologies, Cashless Payments although technologies like e-learning, teleconferencing, VPNs
and digital payments were all available before the outbreak but now they have taken the
evolutionary leap in becoming an operational norm for now and forever. E-pharmacy started in
Nepal after the outbreak of Corona Virus. E counseling with doctor started.

f. Empire Builder Entrepreneurship: The entrepreneurs who are formulating and developing new
ventures one by one are known as empire builder entrepreneurs. They maintains ownership and
controlled all area of business. They do not get involved in day-to-day activities but keep strategic
control. They build on the strength of existing venture to promote new ones. They innovate as well
 as imitate to build an empire. Ratan Tata and Binod Chaudary is an example of empire builder
entrepreneurship.

2. Behavioral Entrepreneurship
Under this, there are six types of behavioral entrepreneurship. They are explained below:

a. Solo Entrepreneur: The entrepreneurs who formulates and develops there venture alone are
known as sole entrepreneurs. They only appoints few staffs for supporting. In the beginning, most
of the entrepreneurs start their enterprises working alone.

b. Active and Sleeping Entrepreneur: The entrepreneurs who operate with partners are called
active entrepreneur. All Partners participate actively in the operation of business as a team. All
partners are actively participate in management and controlling activities for the operation of
business.
The entrepreneurs who only contributed funds in the enterprise but do not actively participate in
business activity are called sleeping entrepreneur.

c. Inventor Entrepreneur: The entrepreneurs who are drawn to new ideas and finding way of
getting ahead of the competition are inventor entrepreneur. They may be idealistic and are carried
away with their enthusiasm. On the basis of knowledge, ability, skills and qualification they are
inventing technology, method, strategy and ideas. They have competence to invent new products
and processes.

d. Challengers Entrepreneur: The entrepreneurs who like challenges, plunges and risks are known
as challenger entrepreneurs. When one challenge seems to be met, they begin to look for new
challenges. They are challenges seekers.

e. Buyer Entrepreneur: The entrepreneurs like to buy out an on-going business. They do not like
to face risk by starting their own business.
f. Life Timers: These entrepreneurs take business as a part of their life style. Their business depends
on personal skills. Their intention is to earn an income for themselves and their family.

3. On the basis of Focus Group

a. Women Entrepreneurs: They are women in independent business. Development of
Consciousness and desire for independence makes them entrepreneurs. The women who innovate,
create, formulate and imitate an independent business are known as women entrepreneurs. As an
entrepreneur, their contribution is very important for the economic and social development.

b. Minority Entrepreneurs: They are minority race in business. Based on religion, culture, casts,
social values and norms, the people are classified into minority groups. The Asian, Hispanics and
blacks are regards as minority in USA. Similarly, Tibetan and Bhutanese refugees are regarded
as minority in Nepal. They are involved in entrepreneurial activities, which is called minority
entrepreneurs.

c. Immigrants Entrepreneurs: The entrepreneurs who go to different countries for business

purpose is called immigrant entrepreneurs. They do this for seeking business opportunities.
USA has been a center of diverse culture. Due to the economic freedom, many immigrants have
been attracted towards this country. Most of them are educated, experienced and skilled.

d. Part-time Entrepreneurs: The person who are engaged in some other works besides
entrepreneurship are called part time entrepreneurs. They do not take entrepreneurship as their
main profession. Such entrepreneurs can be found in the developing countries including Nepal.
Generally, those who are unable to meet family expenses from their jobs are involved in small
business is called part time entrepreneurs.

e. Home-based Entrepreneurs: Entrepreneurs who begins business in their houses are called
home based entrepreneurs. These types of entrepreneurs are increasing very rapidly. In past, the
people who had not job, they start such types of business. But the situation has changed now. It
is open to all now. The women and part time entrepreneurs are contributing in the growth of the
 home based business. Development of technologies such as computer, fax, internet, email,
telephone, mobile cell and photocopy machine have converted home based entrepreneurs.

f. Corpreneurs: They are couples who work together as co-owners of business. Both husband and
wife work hard in their defined roles. They start small scale ventures.

g. Intrapreneur: An intrapreneur works inside a company to develop an innovative idea or project

that will enhance the company's future. They are given the time and freedom to develop the project
as an entrepreneur would. Over time, an intrapreneur may turn into an entrepreneur and start their
own venture outside of the established organization. Intrapreneurs are typically highly motivated
individuals who have specific skill sets as well as leadership abilities and an innovative vision that
others in the corporation can get behind.

Role and Importance of entrepreneur in economic growth

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering
economic growth and development. Entrepreneurship is one of the most important input in the
economic development of a country. The entrepreneur acts as a trigger head to give spark to
economic activities by his entrepreneurial decisions. He plays an essential role not only in the
development of industrial sector of a country but also in the development of farm and service
sector. The major roles played by an entrepreneur in the economic development of an economy is
discussed in a systematic and orderly manner as follows:
1. Promotes Capital Formation: Entrepreneurs promote capital formation by mobilizing the unused
savings of public. They employ their own as well as borrowed resources for setting up their
enterprises. Such type of entrepreneurial activities lead to value addition and creation of wealth,
which is very essential for the industrial and economic development of the country. Entrepreneurs'
activities are developing, innovating and introducing of new ventures, industries and business
forms. They are establishing and merging of Banks, schools, agriculture based forms, financial
companies, insurance companies and other capital markets from different areas. All these forms
are formulating of capital that helps to economical development.
2. Creates Large-Scale Employment Opportunities: Entrepreneurs provide immediate large-scale
employment to the unemployed which is a chronic (constant) problem of underdeveloped nations.
With the setting up of more and more units by entrepreneurs, both on small and large-scale
numerous job opportunities are created for others. As time passes, these enterprises grow,
providing direct and indirect employment opportunities to many more. In this way, entrepreneurs
play an effective role in reducing the problem of unemployment in the country which in turn clears
the path towards economic development of the nation.

3. Promotes Balanced Regional Development: Entrepreneurs help to remove regional differences

through setting up of industries in less developed and backward areas. The growth of industries
and business in these areas lead to a large number of public benefits like road transport, health,
education, entertainment, etc. Setting up of more industries lead to more development of backward
regions and thereby promotes balanced regional development.

4. Reduces Concentration of Economic Power: Economic power is the natural outcome of

industrial and business activity. Industrial development normally lead to concentration of
economic power in the hands of a few individuals which results in the growth of monopolies. In
order to redress this problem a large number of entrepreneurs need to be developed, which will
help reduce the concentration of economic power amongst the population. When the number of
entrepreneurs increases, a large amount of national wealth is also shared by a large number of
entrepreneurs.

5. Wealth Creation and Distribution: It stimulates equitable redistribution of wealth and

income in country to more people and geographic areas, thus giving benefit to larger sections of
the society. Entrepreneurial activities also generate more activities and give a multiplier effect in
the economy.

6. Increasing Gross National Product and Per Capita Income: Entrepreneurs are always on the
look out for opportunities. They explore and exploit opportunities, encourage effective resource,
they mobilize capital and skill, bring in new products and services and develops markets for growth
of the economy. In this way, they help increasing gross national product as well as per capita
 income of the people in a country. Increase in gross national product and per capita income of the
people in a country, is a sign of economic growth.

7. Improvement in the Standard of Living: Increase in the standard of living of the people is a
characteristic feature of economic development of the country. Entrepreneurs play a key role in
increasing the standard of living of the people by adopting latest innovations in the production of
wide variety of goods and services in large scale that too at a lower cost. This enables the people
to provide better quality goods at lower prices which results in the improvement of their standard
of living. Entrepreneurs set up industries which remove scarcity of essential commodities and
introduce new products.

8. Promotes Country's Export Trade: Entrepreneurs help in promoting a country's export-trade

which is an important ingredient of economic development. They produce goods and services in
large scale for the purpose of earning huge amount of foreign exchange from export. Hence import
replacement and export promotion ensure economic independence and development.

Small Business and Entrepreneurship

Small Business
A business which functions on a small scale level, involves less capital investment, less number
of labor and fewer machines to operate is known as a small business.
It is an organization which is engaged in production and marketing or retailing of goods and
services. It is small in terms of size, capital and employees. It is established and managed by
small business owner to attain personal objectives. It has limited operations. The owner focuses
on running a business over a long period of time.
According to Industrial Enterprise Act 1992, the business with capital less than million are termed
as small business.
Difference between Entrepreneurship and Small business.

Bases Small Business Entrepreneurship

1. Goals Its main goal is achievements of Its main goal is achievements of

normal profit and growth as well profitability and rapid growth of
as financial independent enterprises.
2. Practice Normal management Practice New and innovative Practice
3. Size Small size Large size
4. Risk It does not take high risk It takes high Risk
5. Focus It focus on a limited area It focus on a large area
6. Reward The owners are not rewarded The owners are rewarded
7. Employment They usually employ less number They employ a large number of
of people people
8 Aim Its aim is limited growth and Its aim is rapid growth with high
continued profitability productivity
9. Ability They have lack of analytical and They have analytical and
predictive ability predictive ability.

Entrepreneurial Motivation
The word motivation originally comes from the Latin word mover, which means “to motive”. The
term motivation has been derived from the English word ‘motive’. Motive is an inner state of our
mind that moves or activates or directs our behaviors towards our goals. Motives are expressions
of a person’s goals or needs. They give direction to human behavior to achieve goals or fulfill
needs. Motive is always internal to us and is externalized via behavior.

Accordingly, the entrepreneurial motivation may be defined as the process that activates and
motivates the entrepreneur to exert higher level of efforts for the achievement of his/her
entrepreneurial goals. In other words, the entrepreneurial motivation refers to the forces or drive
within an entrepreneur that affect the direction, strength, and persistence of his / her behavior as
 entrepreneur. So to say, a motivational entrepreneur will be willing to exert a particular level of
effort (intensity), for a certain period of time (persistence) toward a particular goal (direction).
Motivation is a psychological process. It gives purpose and direction to behavior of entrepreneur
to put higher levels of efforts. It induces entrepreneur to use skills and abilities to perform
effectively. It is an inner state within the entrepreneur that energizes, directs and sustains behavior
towards goal achievement. There are four primary reasons for people to become entrepreneurs and
start their own business. They are:

 Be their own boss

 Pursue their own ideas
 Pursue financial rewards
 They want to Change the world

1. Desire to be their own boss

Many people want to be their own boss & they realize that it can only be fulfilled by starting their
own business. Such people do not like to have a superior or someone watching over their shoulder.
They want to work on their own without being directed or instructed.

2. Pursue their own ideas

People start their own ventures to pursue their own ideas. Their ideas are unconventional &
original. Some people are creative & they have a desire to see those ideas realized, & this can be
a reality only when you have your own enterprise. Some people are naturally alert, and when they
recognize ideas for new products or services, they start their own business to realize their ideas.

3. Desire to pursue financial rewards

People start their own firms to pursue financial rewards. People want financial independence and
this is the main reason why people start their own companies. One of the best options for achieving
financial security is starting a business and creating their own opportunity.

4. They want to change the world

The best reason to start an organization is to make meaning: to create a product or service to make
the world a better place.” The exploration of meaning and doing work that changes the world is
something that drives every entrepreneur. Entrepreneurs learn by doing and explore with a passion.
Entrepreneurs don’t just want to change their lives: they want to change the world.
 UNIT 2
WOMEN ENTREPRENEURSHIP

CONCEPT OF WOMEN ENTREPRENEURSHIP

In traditional societies, women's work were regarded to remain with the four walls of the house
and to undertake the domestic works. However now, women have come outside the wall of
house due to the development of education, communication, transportation and awareness.
Today's women have to begun to be involved in almost all activities even in small numbers.
They also started business activities. All these activities are regarded the women
entrepreneurship.

In general concept, women entrepreneur is a women or group of women who initiate, organize
and run a business venture. In the other words, women entrepreneurs are those women who think
of a business enterprise.

Women entrepreneurship is the process of creating new venture, risk taking, uncertainty bearing,
innovating and managing for rewards. It refers to the women for independent business activities.

Women entrepreneurship is the process where women take, lead and organize a business or
industry and provide employment opportunities to other.

According to Joseph Schumpeter "Women entrepreneurs are women who innovate, imitate or
adopt a business activity."

In conclusion, Women entrepreneurs or entrepreneurship are those women who think of a

business enterprise, initiate it, organize and combine the factors of production, operate enterprise
and undertake risks and handle economic uncertainty involved in running a business enterprise.

Women Entrepreneurship in Nepal

In present time, there is consensus that women should be an inseparable part of the development
efforts. The economic and social empowerment of women is a necessary factor for the
development of the nation. With a view to raising women’s participations in various sectors,
Nepal Government has introduced some policies. Specially Nepal’s Industrial Policy, 2010 has
made some special provisions for women entrepreneurs. Some of them are as follows.
• Women will be represented at policy making level relating to industry and business.

• Arrangements will be made for easy group loan for cottage and small industries from banking
and cooperative institutions.

• Women will get priority in venture capital.

• Industry in the name of women will get 35 percent reduction in registration fee.

• Women will get priority to establish industry in industrial districts.

• Women participation will be ensured in training, conferences, seminars and study tours
relating to technology development.

• Sales counter will be established for good produced by women entrepreneurs in regional sales
emporiums.

• Women participation will be mandatory in government organized industrial exhibitions.

• Export loan will be made available to women’s.

• Patent, design and trademark registered in the name of women will get 20 percent reduction.

• Women entrepreneurship development fund will be established.

• Industry Ministry will have a separate unit for women.

• Directive will be implemented to check gender-based violence at workplace.

• Plans, policies, and programmes related to industrial promotion will be based on gender
analysis and assessment, gender audit and gender budget.

Problems/ Challenges of Women Entrepreneurship in Nepal

Women entrepreneurs have to face many challenges and threats when establishing the ventures.
They have seen internal and external problems. Some problems are general that faced by all
entrepreneurs, besides some problems are specific which are bearing by women entrepreneurs.
The major problems are described as below:
1. Problem of Finance:
Money is as important to a business a s food is to the human body and is vital for any
business enterprise. However, women suffer in this aspect as they do not have any access
to extra funds, family property and at times they get zero support, material and financial
from their own families. They do not get the right to use property as collateral to get bank
loans. Even banks and financial institutions considers women less credit worthy and
discourage women borrowers on the belief that they can at any time leave their business.
They even face difficulty in securing funding externally as women are perceived as low
risk-takers and hence would not be able to attain the desired success for their venture. In
this regard women has a big challenge in gaining trust of Investors.

2. Family Ties/ Balancing family and Business Life.

In Nepal, it is mainly a women's duty to take care of family, children, other elder people
and other members of the family. • In case of married women, she has to strike a fine
balance between her business and family. Her total involvement in family leaves little or
no energy and time to devote for business. In this regard, support of husband is needed. It
is said that if the husband is educated then it positively influence women's entry into
business activities.

3. Limited Mobility:
In Nepal, women mobility is highly limited compared to men due to various reason. Due
to social norms, values and attitude women cannot travel alone from one place to another
and cannot stay alone in faraway places. This is primarily so because the safety of women
is a huge global issue. A single woman cannot travel anytime and anywhere to procure
raw material, be part of crucial meetings or take a flight to another country or city
without seeking approval from parents or spouse. Moreover, Sexual Harassment is also
one of the major issue.
4. Male Dominated Society:
Male domination still prevails in Nepalese culture and society. The constitutions of Nepal
Speaks of equality between genders, but in practice, women are looked upon as weak in
all respects compared to men and major decision making is often taken by male. This, in
turn, serves as a barrier to women entry into business.

5. Lack of Education:
In Nepal many women are still illiterate. Not all the female population in Nepal could
pursue higher education compared to male. Illiteracy is the root cause of socio economic
problems. Due to the lack of education and that too qualitative education, women are not
aware of business, technology, market knowledge, management skills and financial
management etc. Less education cause low motivation on women to step forward
Thus, lack of vocational and technical education creates one type or other problems for
women in the setting up and running of business enterprises.

6. Low risk bearing ability:

The women of developing countries like Nepal they lead a protected life from the very
beginning. Father provides protection to them before marriage and husband provides
protection after marriage. Their family environment, their bringing up, is the cause that
they are not able to be strong minded or strong willed to bear risks. Lack of emotional
support from family from the very beginning is also the cause that most women have low
risks bearing ability. Also, Women tend to be low-risk takers because they have to look
and care for so many factors surrounding them and the impact of their actions. Due to this,
they always have a fear of failure and judgment lurking in their minds and consequently,
 they cannot take all sorts of risks and make all sorts of moves in their entrepreneurial
journey.

7. High Competition:
Women are still struggling to find their foot in a man’s world and entrepreneurship is no
different. There is a lot of competition between existing and upcoming businesses and that
makes difficult for a woman trying to make it big without proper financial aid and
organizational machinery to help her with advertising and marketing, promotions and
canvassing. They are not able to manage funds for business activities. Therefore, they are
not able to stand competition between large firms having high capital. Such a competition
sometimes leads to loss and closure of women enterprise.

8. Lack of technical ability and skills:

Women are still two third of world's illiterate. They have lack of skills and experience in
manufacturing, construction and technical areas. They generally possess administrative
experience. Their entrepreneurship is limited within service industries like fashion
designing, beauty clinics, education, counseling and public relation areas.

Women Empowerment through Entrepreneurship

Concept of empowerment:
Empowerment is the process of increasing the spiritual, political, social, educational,
economical and gender strength of individuals and communities.
According to British Dictionary, "give (someone) the authority or power to do something.
Make (someone) stronger and more confident, especially in controlling their life and
claiming their rights. Hence, empowerment is the ability of an individual to make choices
regarding his/her life.
Women empowerment refers to equipping the women with rights and powers. It makes
the women powerful legally and socially. It plays a major role for the development of
society.
 It leads to self -fulfillment of their needs. They become aware of where they are going,
what their position is in the society, their status, existence and rights. In Nepal, women
empowerment is based on economic freedom.

In other words, Women Empowerment refers to the creation of an environment for

women where they can make decisions of their own for their personal benefits as well as
for the society.
Women Empowerment refers to increasing and improving the social, economic, political
and legal strength of the women, to ensure equal-right to women, and to make them
confident enough to claim their rights, such as:
RIGHT TO-
• freely live their life with a sense of self-worth, respect and dignity,
• have complete control of their life, both within and outside of their home and workplace,
• to make their own choices and decisions,
• have equal rights to participate in social, religious and public activities,
• have equal social status in the society,
• have equal rights for social and economic justice,
• determine financial and economic choices,
• get equal opportunity for education,
• get equal employment opportunity without any gender bias,
• get safe and comfortable working environment

Women from an important segment of the labor force and the economic role-played by
them cannot be isolated from the frame work of development.
The role of women as business owners is gradually increasing all over the world. Women
entrepreneurship development is the instrument of women empowerment.
Empowerment leads to self-fulfillment and women become aware of where they are
going, what their position is in the society, their status existence and rights and women
are becoming more empowered, personally and economically through business
ownership. Therefore, women empowerment is essential for promoting entrepreneurship.
Entrepreneurship promotes women empowerment by promoting economic independence,
helping build social relationship, promoting gender equality, enhancing training,
educational development, improving quality of life, building decision making and critical
thinking ability, boosting women morale and developing leadership ability.

Women empowerment through entrepreneurship

The following measures help women empowerment through entrepreneurship:

1. Increase status of women.

2. Promote equality for women
3. Develop networks of women entrepreneurs.
4. Design institutional support system to suit the requirement of women
entrepreneurs.
5. Treat women as a special target group for entrepreneurship development
programs.
6. Establish vocational training institutes for skills development of women.
7. Identify investment opportunities for women entrepreneurship
8. Involve women in decision making in matters related to entrepreneurship
development.
9. Reform laws to provide access to institutional finance and promote equality for
women.

Success Factor for women entrepreneurship

The following are the success factors of women entrepreneurship:

1. Providing access to capital, infrastructure and markets.

2. Sponsoring, delegating, participation in trade fairs, exhibitions, and conferences.
3. Organizing seminars, workshops and training programs for giving wider exposure
to women entrepreneurs to develop their entrepreneurial capabilities.
4. Advocating effectively for securing their rightful place in national economy and
family support, freedom.
5. Encouraging and rewarding dynamic representative associations of women
entrepreneurs.
6. Women empowerment through education, training and awareness.
7. Financial support policy from investors and financial institutions.
 Chapter 3
Growth of Entrepreneurship

Concept of Socio- Economic Growth:

Generally, socio-economic growth is the process of social and economic development of the
society or communities. It refers social and economic change of social groups.

The main objective of socio economic growth is to find ways to improve the living standard within
the area while also making sure the local economy is healthy and capable of sustaining the
population present in the area. It is the part of development and enhance of metropolitan areas,
sections of smaller cities and towns, and even in rural settings. It also involves making changes in
current laws and regulations, social norms, values and assumptions in order to attract new growth
and enhance the standard of living for local residents.

Socio-economic growth is measured with different indicators, such as

 Per capita income: measures the average income earned per person in a given area (city,
region, country, etc.) in a specified year. It is calculated by dividing the area's total income
by its total population.
 Life expectancy: is a statistical measure of the average time an organism is expected to
live
 Literacy: It means the ability to read and write.
 Levels of employment: It means measuring number of employment of the country.
 Environmental protection: It means protecting environment from deforestation, ozone
layer depletion, air and water pollution etc.
There are a number of factors that must be considered as part of any socio-economic
development effort and Entrepreneurship is the driving force for socio-economic growth
in the following ways: ( We studied about the importance of entrepreneurship in economic
growth in Unit 1)
• Promotes Capital Formation
• Creates large scale Employment Opportunities
• Promotes balanced regional development
• Reduces concentration of economic power
 • Increases Gross national product and Per capita income
• Promotes country export trade.

Factors Affecting Entrepreneurial Growth

There are many factors that affect entrepreneurship or entrepreneurial growth or
development. The factors may have positive and negative effects on entrepreneurship
development. The positive effect promotes entrepreneurship whereas the negative effects
hampers entrepreneurship development. The factors are grouped and discussed under two
categories such as economic factors and non-economic factors:

FACTORS AFFECTING ENTREPRENEURIAL

GROWTH

ECONOMIC FACTORS NON- ECONOMIC

Economic System fFACTORS
Political factors
Capital
Social factors
Human Resource/ Labor
Psychological factors
Raw material
Technological factors
Market

fdfdssdsdv

Economic Factors

Economic factors which promote economic development account for the emergence and
development of entrepreneurship. It refers to all the economic surrounding which affect
entrepreneurship growth. The economic factors are classified as:
1. Economic System:
Economic system denotes the models of economy. The economic system prevailing in a
country determines the scope of private entrepreneurs and their activities. The prevailing
economic systems can be grouped into three categories such as:

i. Free Market Economics (Capitalism):

Free market refers to an economy where the government imposes few or no restrictions
and regulations on buyers and sellers. In a free market economy, all the factors of
productions such as land, labor and capital are privately owned and production is carried
on by private enterprise. What to produce, how to produce and for whom to produce, all
these economic problems are settled by the forces of demand, supply and mechanism.
• USA presents an example of free market economy.
• Free market economy or capitalism is good for entrepreneurship growth because it
respects entrepreneurship and individual initiative.

ii. Centrally Planned Economy:

A centrally planned economy is an economic system in which the state or government
makes economic decisions rather than the interaction between consumers and businesses.
Unlike a market economy in which private citizens and business owners make production
decisions, a centrally planned economy controls what is produced and the distribution and
use of resources.

• For e.g.: North Korea, Cuba

• This type of economic system is not suitable for entrepreneurship growth.

iii. Mixed Economy:

If the production factors public and private sectors coexist is called mixed economics. It
is the mixed economy of capitalism and socialism. Here both the public sector and
private sector co-exist as in Nepal. In many mixed economies, several basic and strategic
industries are owned and managed by the state. The state regulates the activities of the
private sector so that it may serve the interest of the nation rather than its own interest.
 This model is suitable for entrepreneurship growth in small scale enterprises. Nepal,
India, Bangladesh etc presents this type of model for entrepreneurship growth.

2. Capital:
Capital is one of the most important factors of production for the establishment of an
enterprise. It refers to liquid as well as physical assets. Availability of capital facilitates
for the entrepreneur to bring together the land, machine and raw material to combine them
to produce qualitative goods. The capital is required for expansion and diversification of
business. With increase in capital there is large possibility of enhanced productivity which
eventually boosts profits. Increase in profit further leads to capital formation.
Entrepreneurship activity too gets a boost with the easy availability of funds for
investment.

3. Human Resource/ Labor

The quantity and quality of human resource is another factor which influences the
emergence of entrepreneurship. Human Resource is an important factor of production.
Skilled and qualified labor are required to manage innovation. The availability of skilled
human resource is essential for the development entrepreneurship and entrepreneurs. In
this regards qualitative labors are important for the growth of entrepreneurship
development.
For e.g.: the productivity in Japan is high due to its human resource (labor) being very
efficient and skilled.

4. Raw materials
The necessity of raw materials is crucial for establishing any industrial activity and its
influence in the emergence of entrepreneurship. In the absence of raw materials, neither
any enterprise can be established nor can an entrepreneur be emerged • It is one of the
basic ingredients required for production. Shortage of raw material can adversely affect
entrepreneurial environment. Without adequate supply of raw materials no industry can
function properly and emergence of entrepreneurship to is adversely affected.
5. Market
A market consists of all potential customers having wants. Products and Services are
produced for customers or markets. If there is no market there will not be the use of all
kinds of factors of production. Thus, the size, composition and growth of market influence
entrepreneurship development.
In modern times, entrepreneurship is by no means limited by limitation of local markets.
The emergence of regional groups, such as SAARC, WTO, EU, APEC, ASEAN etc. has
facilitated the growth of regional markets. The growing wave of globalization has been
creating the world as one market.
Similarly, change on world political and economic sectors, development of market
economy effects of open and liberal economy, revolution on information technology,
transfer and communication etc. have facilitate access to foreign markets for
entrepreneurs.

Non- Economic Factors

The outside surrounding or external situations of entrepreneurship is called non-economic
environment. Some of the non economic factors which affecting entrepreneurship growth
are explained as below:
1. Political Factors:
The growth of entrepreneurship is affected by many political factors. The political
factors are related to management of public affairs and relationship. The political
factors mainly consists of government policies, actions and regulations. Such kind of
political factors define what entrepreneurs can do and cannot do.
i. Government Policies
The growth of entrepreneurship can be affected by the policies undertaken by
the government. It includes monetary policy, industrial policy, fiscal policy,
trade policy, labour policy, tax policy, technological policy, energy policy and
international policy etc. Such types of policies can help or hamper to
entrepreneurship growth.
 ii. Government action
The growth of entrepreneurship can be affected by the actions and functions of
government. Governmental actions consist of developing infrastructure such as
roads, communication, network and industry and providing of utilities such as
water, electricity, and irrigation facilities at low rates. On the other hand
government action consists of providing incentives, subsidies to prospective
entrepreneurs. Government can also provide special packages of finance or
incentives and training programs. These all government action promote
entrepreneurship.

iii. Government regulations

Government regulations also affect the entrepreneurship growth. The
governmental regulations are related to licensing and franchising. It consists of
new ventures, new investment, foreign exchange control, joint ventures,
technology transfer, price control, tariffs rate and quotas etc. Such regulations
provide legal framework to new and old ventures.

2. Social factors
Social factors refer to all social surroundings, concept and approaches which affected
entrepreneurship. They are related with human relation, interaction and mutual
welfare. Some of the major social factors are as follows:
i. Legitimacy of entrepreneurship:
Entrepreneurship operates within the society. It aims to satisfy social needs. The
socio- cultural norms and values of society grant approval to entrepreneurship.
They should provide legitimacy to entrepreneurship. For the development of
entrepreneurship , the social climate should be favorable and supportive. For
example, it is supposed that the one of the main reasons for the emergence of
entrepreneurship in America is the recognition given to them by the society.

ii. Social Mobility:

 The transforming behavior of entrepreneurs from one place to another and one
group to another group is called social mobility. A High degree of mobility
leads to the growth of entrepreneurship. The society should provide channels
for such mobility. The movement of people from rural areas to urban areas,
from one group to another group and one country to another in search of better
opportunities, security and skills enhancement compel them or other to become
prospective entrepreneurs.

iii. Marginality:
The marginality promotes entrepreneurship development in the society. It can
be drawn from religious, culture, ethnic or migrant minority groups. For
example – in Nepal Tibetan and Bhutanese refugees, In America Asian,
Hispanics and blacks are marginal groups. The marginal social condition of
these groups have psychological effort on them and entrepreneurship becomes
attractive to them.

3. Psychological Factors:
Many psychological factors also affect entrepreneurship development. They are as
follows:
i) Need achievement Theory: This theory propounded by David McClelland. He
maintained three types of needs- Need for achievement, Need for power and Need
for affiliation. According to this theory, Entrepreneurship ultimately depends on
motivation. The need for achievement motivates entrepreneurs towards
accomplishment of challenging jobs. They take initiative to start new venture,
convert innovations into new products and take risks.
ii) Withdrawal of status respect theory: The theory was propounded by E. E. Hagen.
According to this theory, Entrepreneurship emerges due to the withdrawal of status
respect theory. It motives them to seek outlets in entrepreneurship. E. Hagen
attempted to formulate a theory of social change. The theory of social change
explains that when members of some social groups feel that their values and status
are not respected by the society, they turn to innovation to get the respect of the
 society. According to Hagen, entrepreneurship is a function of status withdrawal.
This theory provides that a class which lost its previous prestige or a minority group
tends to show aggressive entrepreneurial drive.

4. Technological Factors: Technological factors refers to all technological surroundings

that affect entrepreneurship. Technology converts resources into products. It consists
of skills, method, systems, tools and equipment inventions and innovations. It includes
inventions and innovations.
It increases the efficiency of the factors of production and productivity. It helps to
reduce cost of production and increase profit. Likewise, the development of
technology creates a new demand and these all help for the development of
entrepreneurship. The development of technology is one of the main reasons of
emergence of entrepreneurship. The technological factors are given below:
i. Level of technology
Entrepreneurs must adopt the level of technology to satisfy the customer’s needs.
There are two levels of technology. They are labor based or capital based
technology:
Labor based technology: this is the traditional technology. Human labor is mostly
used for operations.
Capital based technology: this type of technology consists of automatic
technology, computerized system, robots etc. Machinery is mostly used for
operations.

ii. Pace of technological change.

Technology is dynamic and changes faster than any other environmental forces.
Technology change affects the types of products that the entrepreneur offer to the
market. Business activities and technology should move in parallel line to satisfy
the customer needs otherwise customer will not be satisfied. Because of lack of
technology entrepreneurs may not offer quality products. In this way, pace of
technological change affects the entrepreneurship directly. Entrepreneurs should
adopt changing technology.
iii. iii. Research and Development:
iv. Customers needs keep on changing. Old technology may useless to fulfill the
changing needs. So, it is essential to develop new technology. R and D is the
source of innovation, invention and creating new ventures. It requires sufficient
budget for research and development. If entrepreneurs have no sufficient budget ,
they can not go ahead and business activities will be affected negatively. So,
increased budgetary allocations for R and D promote the growth of
entrepreneurship.

Concept of Rural Entrepreneurship

Entrepreneurship emerging in rural areas is called Rural entrepreneurship. It refers to

establishing industrial and business units in the rural areas. It is the synonymous of
industrialization. Rural industrialization means encouraging location of large and small
scale units away from urban areas or planned shifting units from urban areas to rural
areas.

In other words,” Rural entrepreneurship is the creation of a new organization that

introduces a new product, services or creates a new market of utilizes a new technology
in a rural area."

Rural Entrepreneurship can be defined as entrepreneurship emerging at village level,

which can take place in a variety of fields such as business, industry, agriculture and acts
as a strong factor for economic development.

Need/ Importance for Rural Entrepreneurship

The need or importance for developing rural entrepreneurship is to promote rural

development in the country. This is justified as follows:

1. Rural industries helps to reduce the prevalent problems of rural unemployment.

 2. It helps in reducing differences in income between rural and urban areas. When
industries are set up in rural areas, it advances economic development which reduces
migration of the villagers to urban areas.
3. These industries promote balanced regional development by dispersing industries to
rural area.

4. Entrepreneurship in the rural areas can be taken up as career by the youths. The rural
youth can be encouraged and awakened.

5. Rural industries also help preserve the old rich heritage of the country by protecting
and promoting art and creativity.

6. The social problems like poverty, inequality, caste distinctions can be reduced by rural
entrepreneurship.

Types of Rural Entrepreneurship

Rural Entrepreneurship is related to the development and improvement of rural area

people by utilizing all the available resources in a proper manner. Various types of
opportunities for rural entrepreneurs are there in remote areas if you consider area,
population, biodiversity and various agro-climatic zones. Now, we will discuss various
types of Rural Entrepreneurship that can be done in rural areas.

1. Agro-Based Enterprises: It is the most preferred activity and especially in rural areas.
These enterprises indulge in the direct selling or processing of agriculture products, for
example, sugar, fruit juice, spices, oils from oilseeds, production of non- seasonal
vegetables, cultivation of medicinal plants etc.

2. Forest-Based Industries: Industries dealing in the supply of wood or wood products,

honey making, bamboo products, etc. are covered under the forest-based industry.

3. Pesticide products: Presently, we are using the chemical fertilizers for crop cultivation at
a great extent. Several types of organic fertilizers such as compost, vermin-compost as well
as neem based fertilizers can be produced fro own use and to sell the same in urban areas
also. These products are using a very low level of energy and can be easily made out of
wastes.
4. Textile Industry: Industry in which weaving, spinning, tie and dye, colouring and
bleaching of textile are carried out is covered under this category.

5. Handicrafts: Craft or artistic items made of wood, bamboo, glass, jute, soil, etc. are
called as handicrafts. Moreover, traditional decorative items, toys, antiques etc. are also
covered here.

6. Engineering Services: It may include making and repairing of parts used in agriculture
such as tractors, pumps, pipes and fittings, etc.

7. Animal Husbandry based enterprise: One of the most organized and popular enterprises
is dairy farming and it can begin with two to three animals to thousands of animals. This
business is related to the production and distribution of milk. Poultry will be next very
popular enterprise as it includes the sale of eggs and the poultry birds as well as the poultry
feed industry which are also viable.
In addition to this, there is another option of commercial rearing of animals such as pigs,
sheep, rabbits and goats for wool and meat where the grass is easily provided to these
animals.

Problems of Rural Entrepreneurship

1) Financial Problem

2) Lack of technology

3) Lack of awareness

4) Lack of infrastructure

5) Low risk bearing capacity

6) Low purchasing power

7) Lack of information

8) Management Problem
 9) High production cost

Factors Affecting Rural Entrepreneurship

1) Availability of capital

2) Availability of Raw materials

3) Institutional support

4) Training and education

6) Government action

7) Public awareness

8) Development of infrastructure facilities

Tourism Entrepreneurship

Tourism entrepreneurship is the activities related with creating and operating a legal tourist's
enterprises. In other words, Tourism entrepreneurship consist of transportation, accommodation,
eating and drinking establishments, retail shops, entertainment business and other hospitality
services which provided to individuals or groups traveling away from home.

Tourism entrepreneurship can be defined as the professional application of knowledge, skills and
competencies of tourism related new ideas by an individual or a set of people. In other words,
tourism entrepreneurship refers to the activities of the major group of stake-holders of this
service sector primarily designed for the effective and profitable interaction of demand for and
supply of tourism products.

Tourism Enterprise
Tourism enterprises’ refer to the different forms of tourist related business ventures permitted
within the government regulations. Like any other enterprise, tourism enterprises are also business
ventures having similar preparative principles, but working on a very wide scale.
Sinclair and Stabler (1997) have defined the tourism enterprise as “a composition of products
involving transport, accommodation, catering, natural resources, entertainment and other facilities
and services, such as shops and banks and other tour operators.”

Tourism Entrepreneur
A Tourism Entrepreneur is a person who undertakes a risk to start up their own business in tourism
industry. In other words, Tourism entrepreneur’ is a person or a group of persons producing and
managing tourism products. In this process the entrepreneur must have the commonly prescribed
entrepreneurial traits along with service sector specialties.

Types of Tourism Entrepreneurship

1. Travel Agents: Those groups or individuals who are providing information about various
travel destinations are called travel agents. They also provide suggestions to the tourists
about available holiday packages. They sell travel associated products or services.
2. Tour Operators: Those groups who are providing holiday packages are called tour
operators. They have good communication skills and ability. They organize tours for
holidays or historic places.
3. Lodging and catering service Providers: The groups who are providing
accommodations to the tourists are called lodging and catering service providers. They
may be marketed through tour operators or individually.
4. Transport Operators: The groups that are providing transport services to the tourists
are called transport operators.
5. Information and guiding: The groups who are providing essential tourism information
to the tourist are called information and guiding groups.
6. Attractions: It involves establishment of attractions to tourists and develop particular
tourism location. . It includes creation and management of museum, gallery, heritage
building etc.

Problems of Tourism Entrepreneurship

1. Lack of infrastructural development.

Nepal is a beautiful country with various natural scenarios, historical and religious sites,
arts and architecture. But due to lack of infrastructural development in most of the areas
of Nepal such as telecommunication, transport, roads, proper drinking water, electricity
etc. it is unable to utilize its features. The number of tourists could be much higher if we
could provide proper infrastructure to tourists.

2. Lack of conservation of cultural and religious sites

We can see that the historic cultural and religious sites are not properly managed. Due to
lack of conservation activities such sites are being deteriorated which directly hampers
the tourism development.

3. Lack of publicity

Most of the tourists visits Nepal only through word- of – mouth advertisement done
through their friends and relatives who have visited Nepal and explored the beauty of
Nepal. Apart from that, there is lack of publicity about the historical sites, culture and
beauty of Nepal in foreign land. Nepal is still unknown to many people in the world
which hampers the tourism development.

4. Lack of facilities and safety for tourists

Tourists travel to different countries in order to escape away from their day to day
working life. What most of the tourists desire when going for a vacation is that they
prefer to visit country where there are most of the services and security provided.
Unfortunately, we lack to provide better facilities and security to tourists which is
defecting tourism development in our country.

5. Lack of Political stability

 Due to internal conflicts and lack of political stability, such as strike, and political
movements there has been a damage of reputation of Nepal which directly affects the
development of tourism industry.

6. Lack of Proper tourism centers

We still do not have proper tourism centers to provide them necessary information.
Tourists does not want to visit any places without having proper information. Therefore,
tourism centers should be established not only inside the country but also in different
foreign countries.

Factors Affecting Tourism Entrepreneurship

1) Participation of Private sectors

2) Development of tourism infrastructures and facilities

3) Promotion of religious tourism

5) Security

7) Promotion of environment

8) Quality of services
 Chapter- 4
Entrepreneurship Competency Development (ECD)

Concept of entrepreneurial Competency:

Competency is the ability to do a task effectively. It is the knowledge, skills and behaviors that is
needed to get a job done. Generally, an individual characteristic of a person which leads to
superior performance is called competency. It is an underlying trait of an individual which leads
to his/her senior performance in a job.
United Nations Industrial Development Corporation (UNIDO) has defined competency as "a set
of skills, related knowledge and attributes that allow an individual to perform a task."

Entrepreneurial Competency
The underlying characteristics, qualities, skills and abilities of entrepreneurs which leads
superior performance are known as entrepreneurial competencies. All these traits are required for
setting up and operating new business ventures.
In other words, It is the total ability the entrepreneur to perform this role successfully.
According to Bird (1995), “Entrepreneurial competencies can be defined as underlying
characteristics such as generic and specific knowledge, motives, traits, self-images, social roles,
and skills that result in venture birth, survival, and/or growth.”
Thus, we can say that entrepreneurial competency is underlying characteristics possessed by a
person which result in new ventures creation, survival and growth. It is formed by individual
characteristics.
Personal Entrepreneurial competencies
The personal entrepreneurial competencies possessed by an entrepreneur are:
1) Hardworking
2) Information Seeking
3) Creative
4) Risk Taking
5) Opportunity seeking and Initiative
6) Efficiency & Quality
7) Persistence/Determination
8) Goal Setting
9) Networking
10) Independence and self - confidence.

Need for Entrepreneurial Competency Development (ECD) Programme

Each person has different level of capacity, ability and skills. Some are born entrepreneurs while
some are made. And the similarity is of skills. Both type of businessman have skills but later
doesn’t recognize their skills. Entrepreneur Development Programme helps them inculcate or
develop entrepreneurial skills. It is only after training that they learn these skills and able to
recognize their capabilities and start thinking about building a business.

Sometimes, people may have skills but it requires polishing and incubation. Entrepreneurship
Development Programme helps the individual develop essential skills required to run a business
successfully. The main objective of the programme is to impart (to make known) the skills and
knowledge that helps in starting and running business successfully. It helps participants in
enhancing their abilities and acquiring skills necessary for fulfilling their roles and
responsibilities as an entrepreneur.

Hence, entrepreneurship competency development programme can be defined as a programme,

formally designed to help an individual in strengthening his/her entrepreneurial motive and in
acquiring skill and capabilities necessary for playing entrepreneurial role effectively. The need
for entrepreneurial competency development is clear from the following points.

1) Develop Entrepreneurs
ECD programmes are essential for developing, creating and improving competencies of
entrepreneurs. These programs are the main tools for entrepreneurs development. It
develops entrepreneurs self-confidence to start new venture business.

2) Achievement Motivation:
ECD programmes are important to develop achievement motivation for potential
entrepreneurs. Effective education and training programs provide motivation to achieve
superior performance.
3) Provide managerial knowledge:
ECD programmes are needed to develop managerial skills, ability and knowledge for
entrepreneurs to make decision and to solve problems. Managerial knowledge is essential
for entrepreneurs to provide quality service and to get the jobs done.

4) Helps in Developing new venture:

ECD programmes create change through innovation, new product development and
modern technology which are applicable and helpful for development of new ventures.

5) Provide Information:
ECD programmes are storing different kinds of information related with
entrepreneurship. Such as production, finance, marketing, incentives, quality
improvement, legal provision and risk environment. All these information will be
benefited for entrepreneurship development.

In shortly, Entrepreneurship competency development programme helps in following

ways.
1) To provide long term direction to the business
2) To identify and recognize opportunities
3) To enhance organizational productivity
4) To solve organizational problems
5) To make effective decisions based on environmental analysis
6) To seek information.
7) To assess and manage risk
8) To be creative and innovative
9) To bring workplace competencies
Important ways for developing/ identifying entrepreneurial competencies

1. Gaining first hand knowledge about competencies. Various competencies cannot

be cultivated without clearly understanding their meaning significance and relevance.
An earnest attempt must be made to understand at length the various competencies
which are required for the efficient performance of the assigned task.

2. Competency Recognition. An individual’s behaviour or performance depends upon

the competencies he/she possesses. Therefore, in order to get desired behaviour we
should be in a position to know as to what are the competencies required in the
individuals to perform in a particular manner. Under this step an effort is made to
recognize the competency.

3. Self Assessment. After getting clear out idea about the competencies required for a
particular type of behaviour, it is for the entrepreneur to see as to what extent he/she
possesses these competencies and to what extent he/she is employing these
competencies for achieving the desired goal.

4. Comparison of Competencies. The next step is to compare individual competencies

with the competencies required for the desired performance. Wherever we find
deficiencies an earnest attempt is made to find out the reasons for the same.

5. Developing Competencies and feedback. Once it is realized that an individual does

not possess a particular competency required for a particular type of behaviour, the
next step will be to develop this competency. Assistance from various experts may be
taken for devising out ways and means for developing the required competency. In
order to ensure that the required competency becomes part of the individual’s
behaviour, he is asked to practice the needed competency repeatedly.
Types of Entrepreneurial Competencies
There are three types of entrepreneurial competencies such as analytical ,
interpersonal and emotional competency.
1. Analytical Competency: It is the ability of identifying, analyzing and solving
problems under condition of risk and uncertainty. Successful entrepreneurs may also
have exceptional analytical and problem-solving skills. This is because there can be
many aspects of building a business that can require difficult decisions, finding solutions
to obstacles and using creative thinking to develop plans and strategies that will help you
achieve your business goals.

2. Interpersonal Competency
It is the ability of leading, influencing, communicating and supervising and
controlling to the people. It is the trait to get along with people and motivate
people to perform jobs.

3. Emotional Competency: It is the capacity to get stimulated by emotional and

interpersonal crises. It involves bearing high level or responsibility. Entrepreneurs
should have perseverance to succeed in their purpose. It includes self- awareness,
self- control, and self- motivated.

Entrepreneurial Competency Development Programs (ECDPs)

Basically, the ECDPs are conducted for the development of entrepreneurial
competency of the entrepreneurs. These competencies make the entrepreneur
different from others and helps to perform their work effectively. Therefore,
participants will get the following things from the ECD programs.
1. General Introduction to entrepreneurship:
Through the ECDPs programs, firstly, the participants are exposed their
knowledge, experience and background of entrepreneurship for individual, social
and national development, required traits and nature of behaviour for
entrepreneurship, regulation guiding entrepreneurship, infrastructure and facilities
available etc.

2. Motivational Training:
After general introduction of entrepreneurship, the participants who need to
develop their entrepreneurship, this step motivate them through training and
development programs. Under this, They made to positive attitude, develop self
confidence and get inspiration to start new business.

3. Management Skills:
In this step, participants acquire management skills such as planning, organizing,
leading, decision making, motivating, communicating, supervising and
controlling etc. They also obtain the knowledge of manufacturing, marketing,
finance, accounting and staffing etc. All these skills are applicable for set-up new
business.

4. Support system and procedures:

In the step, the participants will obtain support from governmental and non-
governmental organization or institutions. There are different organizations which
provide support to the establish and operation of local, medium and large scale
entrepreneurship.

5. Feasibility Study:
The evaluation of capability of new venture in terms of resource acquisition and
utilization is called feasibility study. Effective feasibility study demands certain
physical and non-physical resources. Hence, in this step ECDPs measures
feasibility study regarding skills and knowledge of entrepreneurs.

6. Industrial Visit:
In this step the participants are involved in industrial visit to make them
acquainted with the actual situation. It exposes the participants with the real world
and they can better understand about the behaviour, personality and thoughts
required to be success entrepreneur.

Phases of ECDPs
1. Pre-Training Phase: It is the pre-design phase of ECDPs. This phase includes
preparation of following aspects:
a. Setting of goals and scope:
In this phase, the entrepreneurs should be stated clear goals and scope of
entrepreneurship. He/she should make clear vision of what competencies need to
be develop? which geographical area should be covered ?, which target group
should be selected ?, what should be the structure of ECD? and What should be
the duration of ECD? etc.

b. Infrastructure Needs:
In this phase they identified needed infrastructure for ECDPs. It includes In-house
or out sourced modality of delivery, Training aids needed, Transport facilities
needed etc.

c. Curriculum Design: In this phase they determined curriculum for ECDPs. It

includes what is the training methods to used ?, how many modules should be
provided?, What should be the mix of theory and practice and training materials
for participations etc.

d. Responsibility for ECDPs: This phase declared that who is responsible for
ECDPs ?, Who should be coordinate for ECDPs and How to get support top level
management for ECDPs.
e. Budget: This phase make clear plans about budget. It acknowledged how much
budget should be allocated? How should be participants pay a fee and should their
be allowances for participants and resource persons.

f. Publicity of ECDPs:
This phase fill-up application form for advertisement and prepared news for
media.

2. Implementation Phase: This is the delivery phase of ECDPs. Its main

objective is to bring permanent and desirable change in one's behaviour towards
need for achievement. It is concerned with following aspects:

a. Selection of participants for ECDPs.

b. Delivery of ECDPs by resource persons through various training methods.
c. Enhance and development of entrepreneurial knowledge and skills of
participants
d. Motivation, involvement and commitment express by participants.
e. Assesses discipline of participants during ECDPs delivery.

3. Post training Phase: This is the follow up phase of ECDPs. The main
objective of this phase is to prepare the participants for entrepreneurship. It is
concerned with following aspects:
a. Evaluation of ECDPs effectiveness by participations, trainers and experts.
b. Review for future improvement for ECDPs.
c. Audit of ECDPs expenses.
d. Follow up studies to track performance of participants.

Evaluation of ECDPs
Evaluation is the systematic and objective process of checking, measuring and
assessing effectiveness of programs. It is intended to improve current activities
and plans for future activities. ECDPs should be evaluate to ensure its
effectiveness. It provides feedback, suggestions, comments and complimentary
about ECDPs and verifies ECDPs success. The criteria for evaluation are given
below:
Criteria for Evaluation
1) Establish new venture.
2) Change in level of activity of enterprises
3) Number of persons employed.
4) Investment of capital (including fixed assets)
5) Quality of products or services.
6) Sales, profit, repayment of loans
7) Increase in achievement orientation.
8) Managerial skills developed
9) Sustainability of curriculum, training methods, trainers and logistics.
10) The activity level of respondents.

Methods of Evaluation
1. Observation Method: With this method, the participants are closely observed
in the period delivery of ECDPs by independent experts. He/she surveys
change in knowledge, skills, attitudes and motives .

2. Test -Retest Method: With this method, the evaluator test is administered
before starts ECDPs and again retest is administered after ECDPS ends. The
change in test score indicates ECDPS effectiveness.

3. Participant Survey: With this method, the evaluator asked different questions
to participants through questionnaires. The questionnaires are concerned with
following aspects:
-Achievement of ECDPs objectives.
-Content and methods of ECDPs.
-Physical facilities and logistics.
-Behavioural changes resulting from ECDPs
 -Suggestions for improvement in ECDPs.

4. Cost Effectiveness Analysis: This method assesses the benefits and costs of
ECDPs. The benefits are realized in future.

Different Institutions and Agencies Operating ECDPs in Nepal

Different Institutions and Agencies Operating ECDPs in Nepal are:
a. Government Sector
b. Non- Government Sector

A) Governmental Sector:

1. Agriculture Development Bank:

It is one of the commercial bank in Nepal. It provides financial support to agro

based entrepreneurs. It also supports the farmers through small farmer
development bank. It conducts various training and development programes for
the development of entrepreneurship in agriculture industry. The agricultural
training institute also provides training programes for the development of
entrepreneurial competency.

2. Micro Enterprise Development Program (MEDEP):

MEDEP is a collaborative effort of the government of Nepal and the United

Nation's Development program (UNDP) to promote employment and income
generating opportunities. Its main objective is to development of micro
entrepreneurs and creation of self employment through enterprises. It identifies
potential entrepreneurs and trains and guides them . Its main functions are given
below:

1) Provide skill and business training and other support to women, poor and
disadvantaged people to set up micro enterprises.

2) It works with the government to improve the policy environment.

3) It helps to business support services and representative organizations for micro
entrepreneurs.

4) It supports potential entrepreneur through skill enhancement, micro credit

support, service support, preparation of business plan and skill enhancement.

3. Department of Labour:

It is an agency of government of Nepal. It provides basic skills training for

employment in industry and non-agricultural self employment. It operates two
vocational training centers in Kathmandu and Biratnagar and one dozen labour
supply centers in various parts of the country. It gives training in following
subjects:

Manufacturing- Service Oriented

Oriented

Carpentry Hair cutting

Masonry General mechanics

Tailoring General electrical

Weaving, Knitting Automobile mechanic

Cane and bamboo Machine repair

Embroidery Plumbing

Shoe making House wiring

Ceramics Electronics
 Furniture Welding

4. Cottage and Small Industries Training Centre (CSITC) : It is one of the pioneer
of ECDPs in Nepal. It has 12 main branches and 36 branches offices.

Its main objective is to conduct skill development programs such as EDT

(entrepreneurship development training and skill training for the promotion,
expansion and strengthening of cottage and small industries in Nepal.

It also has a special training programs for women entrepreneurship development.

which are given below:

Bag Making Basketry

Bamboo Crafts Bee Keeping and Processing

Bicycle and Riksa Repairing Bidi Making

Box making Candle Making

Carpentary Carpet Weaving

Cement Roofing Tiles Carpet Weaving

Churi Ghee Processing Coffee Processing

Bakery Dairy Ghee

General engineering works Dalmoth and Potato Chips

Woolen Shawal Weaving Dhaka Weaving

 Solar Heater Envelop and File making

Radio TV Repair House Wiring

Product Design Photography

5. Industrial Enterprise Development Institute Nepal (IEDIN):

It was established in 1996 as a successor of industrial Enterprise Development
Center. It is committed to entrepreneurship development through training , research,
consultancy and enterprise education. Its main objective is to provide services to a
maximum number of organizations involved in enterprise development. It conducts
the following functions:

1. Micro enterprise creation training.

2. Training programes on market development.

3. Training programes on business management

4. Training programes on double entry book-keeping with VAT and office

management training.

5. Training programes on selling skill, marketing and corporate social

responsibility.

6. Local capacity building programes

7. Training on entrepreneurship development programs.

6. National Productivity and Economic Development Center (NPEDC):

The NPEDC was established in Feb. 1994. Its main objective is to participate in
the national development process by making efforts to increase the pace of
industrialization and productivity improvement in the country through planning ,
research, consultancy, training seminars and information services.
7. Nepal Academy of Tourism and Hotel Management (NATHAM):
It was established in 1972. It provides skill training in hotel and tourism such
as food and beverages, housekeeping, front office, trekking guide and
ticketing trainings etc. It also runs a bachelor level academic programmes .

B. Non-governmental Sector: The following non-government institutions are

involved in ECD programes:

1. Women Entrepreneur Association Nepal (WEAN):

This is a non-profit organization and was established in 1987. Its main objective is
to represent the collective efforts of women entrepreneurs in the economic
progress of the nation and decision making at national and international level.

Its vision is to contribute to nation building through socio-economic

empowerment of women and the mission is to promote women entrepreneurship
through advocacy, networking, information dissemination, capacity building and
promotion of women entrepreneurs throughout the country.

2. Federation of Nepalese Chamber of Commerce and Industry (FNCCI):

FNCCI is the nationally and internationally recognized umbrella organization of

private business in Nepal.

It was established in 1965 A.D. with the vision of development of women

entrepreneurs. Similarly, the FNCCI has lunched small and medium Enterprise
Development Project (SMEDEP) to support, promote and facilitate development
of small and medium enterprises.

It assists the existing entrepreneurs through management improvement programes.

It has also established agriculture center for the development, training and
consultancy of agro –enterprises and entrepreneurs.

3. Federation of Business and Professional Women Nepal (FBPWN):

It is a pioneer social professional and non-profit organization. Its main objective is
to encourage young women to initiate and develop their own business.

It increases skills, knowledge and attitude for the fulfillment of that purpose.

It offers opportunity to the women for the development of professional, social and
intellectual skills and increase their value in the work force.

4. Nepalese Young Entrepreneurs Forum (NYEF):

It is a membership based non-profit organization. Its aim to create outstanding

entrepreneurs through exchange of ideas, fellowships, education, training and
advocacy among the Nepalese youth.

It conducts different programs to enhance entrepreneurial capabilities in Nepal. It

provides the participants knowledge and experience in pursuing entrepreneurship.
 Chapter- 5
Entrepreneurial Venture Creation

Concept of Idea Generation:

Idea generation is the creative process of solving problem or exploiting opportunities. It involves
developing many thoughts, selecting a best idea, developing plan to implement the idea and
finally putting the idea into practice. It can be defined as an understanding and thought in one's
mind.

Idea is the plan for doing something. It may be tangible which can be touched or seen or
intangible which is symbolic. It may be both intentional and unintentional. Idea generation is one
of the innovating and creative process. It is needed to entrepreneurs to start and grow their
entrepreneurship. It can be possible through the vision, insight, observation, experience,
education training and exposure of entrepreneur. Idea can be generated through environmental
scanning and market survey.

Techniques/Methods for Generating Ideas

Ideas are the basis of new entrepreneurial venture. Thus, entrepreneurs should choose
appropriate method of generating new ideas. Some common methods of idea generation are:

1. Brainstorming
Brainstorming is an unstructured or less formal method of generating new ideas through group
creativity. In this method, a group of people meet together to generate ideas with focus on
specific product or market area. In this technique , free- wheeling of idea is encouraged, wilder
ideas are considered better, quantity in ideas is encouraged. During the brainstorming session,
criticism of the idea is not allowed, no one can dominate the discussion, and hence combination
and improvement of ideas are encouraged. All ideas are recorded, information are pooled,
judgments are derived and consensus is achieved.
2. Delphi Technique
It is a systematic forecasting method that involves structured interaction among group of experts
on a subject. Questionnaires are sent to the group members who record their answers in writing.
The group members do not meet face-to-face. Replies of all the members to the questionnaires
are summarized and feedback to them are sent for review. They are asked to make the decisions
again in view of the additional information. This process is repeated until a satisfactory decision
is made. The experts answer questionnaires in two or more rounds, they exchange ideas &
converge towards the common idea.

Delphi Method Process

First, the group facilitator selects a group of experts based on the topic being examined. Once all
participants are confirmed, each member of the group is sent a questionnaire with instructions to
comment on each topic based on their personal opinion, experience, or previous research. The
questionnaires are returned to the facilitator who groups the comments and prepares copies of the
information. A copy of the compiled comments is sent to each participant, along with the
opportunity to comment further. At the end of each comment session, all questionnaires are
returned to the facilitator who decides if another round is necessary or if the results are ready for
publishing. The questionnaire rounds can be repeated as many times as necessary to achieve a
general sense of consensus.

3. Focus Group Technique

This is a structured technique for making decisions where members are invited and familiarized
with new venture related issues to be solved. A moderator lead the group through open and in-
depth discussion. Group members carefully listen and study the issues. They are given 5 to 10
minutes of time to work independently to generate and write down their ideas. Then they
describe and clarify their ideas to other group members. Group members vote in order to reach
an agreement.

The group members are asked about their perception, opinion, beliefs and attitude towards a
product, service, concept and advertisement which lead developing of new ideas. In an
interactive group setting, the participants are free to talk with other group members. The
members come up with their ideas.

4. Library and Internet Research

Best ideas emerge when general idea is merged with extensive library and internet research. Best
approach to utilizing a library is to discuss your general area on interest with a reference
librarian, who can point out useful resources, such as industry-specific magazines, industry
reports trade journal on a topic that can spark new idea.

Surfing the Google or Wikipedia in the internet in your topic of interest may result in e-mail
alerts, update of press release, news article and blog posts based on your topic.

5. Problem Inventory Analysis

Under this technique, the customers are provided with a list of problems or ideas associated with
the existing products. They are asked to discuss about the products that have similar problems. It
may be used to generate new product idea or test new product idea. It is a method for obtaining
new ideas and solutions by focusing on problems. Results from this must be carefully evaluated
as they may not actually reflect a new business opportunity.

6. Scientific Method
Under this method, new ideas are developed through inquiry and testing. It consist of principles
and processes, conducting observation and experiments and validating the hypothesis. This
method involves the entrepreneur defining the problem, analyzing the problem, gathering and
analyzing data, developing potential solutions and choosing the best solution.

7. Checklist Method
It is a method in which new ideas are developed through a list of related issues or suggestions.
The entrepreneur can use a list of questions to guide the direction of developing entirely new
ideas.
 Sources of New Idea Generation
The entrepreneurs can develop or create new ideas from the following sources.

1) Situational Survey: Situational survey is the process of analyzing the external environment.
Under this, entrepreneurs survey the changes in factors of external environment. The factors are
as follows:

a. Technological Changes:
Technological changes can be taken as basic sources of generating new ideas.
Technology includes inventions and innovation. Invention means discovering new ideas
and innovation refers to practical application of idea.

Technological change leads to the introduction of new product, change in the method,
organization of product, change in quality of resources, new way of distribution, storing
and disseminating of information etc. The technological changes such as radio,
television, printing press, computer, internet, automation, robotics, informatics,
biotechnology and artificial intelligence has generated various ideas for entrepreneurs to
start something new.

b. Political-Legal Changes:
 Political – legal changes are also providing new ideas in following ways:
i) Changing in political ideology, philosophy, party system, government formation system,
role of parties create new ideas.
ii) Privatization creates opportunities and ideas in private sectors. The government service
and public utilities are going private in fast pace which will help the entrepreneurs to start
their own business.
iii) Many other legal provisions such as patents, trademark, copyright, franchising are also
generating new ideas.

c. Socio-Cultural Change:
Socio- cultural change also emerged new ideas and projecting demand for various goods
and services in following ways.

i) Social change is caused by changing life style, social norms, values, desire and needs
customers.

ii) The changing of social conditions, customers taste and preference provide new ideas
for business opportunities.

iii) Demographic changes reflected trends in size, distribution, age mix, urbanization and
migration of population. Such changes generate new demand which provide new ideas.

iv) A change in cultural aspects also provide new business opportunities. At present
people desire more luxuries and entertainment such as restaurant, dance bar, party palace,
resort, cinema, water part, rafting, cloths, beauty parlor, cosmetic goods and services
which has helped entrepreneurs to provide something new in these emerging markets by
finding a gap between people’s desire and actual services.

d. Economic Change:
The economic changes also provide entrepreneurial new ideas. Economy changes is the
shift in structure of economic system. The study of economy policy such as fiscal policy,
industrial policy, monetary policy, trade policy, tourism policy etc. helps generate new
 ideas. The changing in customers taste and preference provide new business ideas to
entrepreneurs.

2) Present Work Environment:

The following factors in the present work environment of entrepreneurs can be sources of new
ideas:
i) Entrepreneurs' mission, goals, strategies and priorities provide new ideas.
ii) Entrepreneurs' effort to overcome problem or identify opportunities provide new ideas.
iii) Entrepreneurs' creativity, experience, hobby and interest also provide new ideas.
iv) Products of existing companies can be a source of new ideas. Features, quality and
customer preference of those products give the new ideas.

3) Outside Sources:

i) Outside consultant and exports can provide promising new ideas to start new business
venture.
ii) Suggestions form friends, family and different groups generate new ideas.
iii) National and international trade fairs and exhibitions also provide excellent opportunity
to know about new products.
iv) Activities and strategies of competitors also can be provide new ideas.
v) Governmental rules, regulations, proposals, reports, plans, policies provide new ideas.
vi) Foreign countries can also be a good source of new ideas.
vii) Customers need and requirement can be an important source of ideas.
viii) Television, newspapers and other media or publications also source of ideas.

4) Research and Development:

Entrepreneur’s own R&D is the largest source of new idea. A formal and well-equipped research
and development department enables the entrepreneur to conceive and develop successful new
product ideas.
Selection of Best Idea
The entrepreneurs are acquiring different types of ideas through experience, observation,
experiment and different sources. But all kinds of ideas cannot be used as business opportunities.
Before selection of appropriate idea, all ideas should be evaluated. The steps of selection of best
idea are given below:

1) Evaluation of Ideas:
This is the step of assessing or measuring developed ideas. When the entrepreneurs generate
ideas through different sources, firstly they evaluate all ideas using the following criteria's:

i) Profit Test: Under this test entrepreneurs evaluate potential profit level of ideas. The potential
profit should be evaluated on the basis of production, marketing and financial aspects

ii) Constrains Test: Before selecting an idea, it should be ensured whether the resources
required for the idea would be available adequately or not. The idea should fit with raw
materials, financial resources, human resources, time, technology and other constrains. Similarly,
the idea should be compatible with the entrepreneur's interest, personality and resources.

iii) Risk Test: New idea should be tested in terms of risk level. This test evaluate idea risk and
process risk. Idea risks are associated with technical aspects of the idea whereas process risks are
associated with process, procedures, tools, techniques and performance of idea. Under this test,
potential risk is identified and evaluated to expect what may go wrong in the future.

2) Selection of Best Idea:

After evaluation of different ideas, choose a best idea on the approach of entrepreneurs
objectives, policies, availability of technology and finance. The evaluated ideas are classified
into three level:

i) Promising Ideas: They are possible alternatives for new opportunities. They can be selected.

ii) Marginal Ideas: They are stored for future uses.

iii) Reject Ideas: They are totally rejected or dropped.

Feasibility Study or Analysis
A feasibility study is an evaluation or analysis of the potential impact of a proposed project or
programs. This study is conducted to assist decision makers in determining whether or not to
implement a particular project. Feasibility study is used to analyze the strengths & weakness of a
proposed venture or uncover the opportunities and threats as presented by the environment. It is
the process of determining if a business idea is viable.
Feasibility analysis is the analysis and evaluation of a proposed project to determine if it is:

 is technically feasible,
 is feasible within estimated cost,
 will be profitable,
 has a market,
 is worth investing time and money, etc..

A feasibility study is a controlled process for identifying problems and opportunities,

determining objectives, describing situations, defining successful outcomes and assessing the
range of cost and benefits associated with several alternatives for starting any business
venture.

In conclusion, feasibility study means making evaluation as to whether the proposed project
should go ahead, be redesigned, or abandoned. It is an effective way to safeguard against
wastage of further investment or resource. It is conducted during the deliberation (careful
evaluation) phase of the business development.

Feasibility study evaluates a project on basis of product/ service feasibility, industry/ target
market feasibility, organization feasibility and financial feasibility.

Proposed Business Venture

 Spending the time and resources
necessary to move forward with the
business ideas depends on

Product/Service Industry/Target Organization Financial

Feasibility Market Feasibility Feasibility Feasibility

If yes in all four If no in one or

areas more areas

Proceed with Drop or rethink

business plan business idea

1. Product/Service Feasibility (Technical Feasibility)

Product/service feasibility is an assessment of the overall appeal of the product or service being
proposed. Feasibility analysis should start with identifying the technical feasibility for producing
products and services that will satisfy the expectation of potential customer. It includes
functional design and attractiveness of the product, competitive changes, durability & reliability
of the product, product safety, easy and low cost of maintenance, etc. Before developing a new
product or service, the firm should be sure that the product or service is what prospective
customers want.

2. Industry/Target Market Feasibility Analysis

An industry is a group of firms producing a similar product or services. The target market of the
firms is the limited portion of the industry it plans to go after/appeal.

Industry/target market feasibility analysis is an assessment of the overall appeal of the industry
and the target market for the proposed business. The analysis should include the description of
the industry, current market analysis, competition, anticipated future market potential, potential
buyers, sources of revenues, sales projection, etc. Most firms and certainly entrepreneurial start-
ups typically do not try to serve the entire industry, instead they select a specific target market
and try to serve that market very well.

3. Organizational Feasibility Analysis

Organizational feasibility analysis is the assessment of the professional background information

of the founders and principals of the business, and what skills they can contribute to the business.
It is conducted to determine whether the proposed business has sufficient management expertise,
organizational competence, and resources to successfully launch its business. The focus in
organizational feasibility analysis is on non-financial resources.

Organizational feasibility analysis should include

• The description of the business structure (Sole trading, partnership or joint stock
company)
• The description of organization structure
• Internal and external principles and practices of the business
• Professional skills and resumes, etc.
 4. Financial Feasibility Analysis

Financial feasibility is the final component of a comprehensive feasibility analysis. It is the

financial analysis of the proposed business venture. It is the assessment of the financial aspects
of the proposed venture. A preliminary financial assessment is usually sufficient. The purpose of
financial analysis is to identify the financial characteristics and to determine the financial
feasibility of the proposed venture. The components in financial feasibility analysis are:

• Total Start-up Cash Needed

• Financial Performance of Similar Business

• Overall Financial Attractiveness of the Proposed Venture

Writing a Business Plan

Concept of Business Plan

A business plan is a written statement regarding what the entrepreneur is going to do. It is a
document that is describing venture's opportunity, its product or service, context, strategy,
team, required resources and potential financial returns.

It is a written narrative, typically 25 to 35 pages long, that describes what a new business
plans to accomplish. It gives the answer about - where are we now? , Where do we want to
be? and how are we going to get there ? .

Acc to David H Holt ‘A business plan is a comprehensive set of guidelines for a new venture.’

According to Dollinger "A business plan is the formal written expression of the entrepreneurial
vision, describing the strategy and operations of the proposed venture.

For new ventures, the business plan is a dual-purpose document used both inside and outside the
firm. It can be used by managers and executives for internal planning, and it can be used as the
basis for getting loan from banks & other lenders. It can be used to persuade investors that the
venture is a good investment.
Thus a business plan is the vision of entrepreneur in written format and acts as a guideline for
creating a successful venture. It is read by employees, investors, banker, suppliers, customers and
consultants. It is a brief summary of expectations, objectives and essential activities.

Significance of Business Plan

1. To map the future

A business plan helps the entrepreneurs to manage the business more effectively. He can
understand the business better and also chart specific courses of action essential to improve the
business. It details future scenarios of the venture and set goals along with the resources to
achieve these goals. The importance of a business plan to an entrepreneur begins by helping to
identify the possible problems and challenges. It's one thing to aim for a goal of being profitable
in the first year of operation, but how will you achieve that? A business plan forces you to get
realistic and look at your numbers. This document often helps people to see where their real
challenges and obstacles lie, making for a more practical approach as the hard facts make their
way into the plan.

2. To support growth and secure funding

Most venture seek external funding for establishment & growth of the venture. A business plan
helps the potential investors to understand the future of the venture, make the investors feel
confident, and persuade them to make funding decision. It provides a mechanism for a young
company to present itself to potential investors, suppliers, business partners, key job candidates,
and others.Thus, it helps to support growth and secure funding.

3. To help manage cash flow

Management of cash flow is very important to all ventures, otherwise ventures will become
insolvent. A well structured business plan helps to manage the cash inflows and outflows, and
secure funding requirements in advance, specifically when cash outflow exceeds inflows. Also,
the business plan can quickly show you whether you will be making a profit or running at a loss,
and it shows how much those losses may be every month.

4. To develop and communicate a course of action

A business plan helps to assess future opportunities and commit to a particular course of action.
A business plan focuses on goals, and develops and communicates the course of actions to
achieve those goals. It helps the management to focus in key activities & monitor progress. It can
become a reference tool to keep management on track with sales targets and operational
milestones. When used properly and consulted regularly, it can help you measure and manage
what you’re working so hard to create.

5. To make the marketing plan.

A well-documented marketing plan is essential to the growth of a business. And the marketing
strategies and tactics you use will evolve each year, so revisiting your marketing plan at least
annually is critical. The well crafted business plan will help you to answer such questions as:
How are you going to reach your customers? How will you retain them? What is your
advertising budget? What price will you charge?

Elements of Business Plan

1. Executive Summary

The executive summary is a short overview of the entire business plan. It provides a busy reader
with everything that needs to be known about the new venture’s distinctive nature. In most cases
investors ask for a copy of the executive summary and will ask for the copy of the entire business
plan only if they are convinced with the executive summary. It is the most important section of
the business plan and should not be more that 3 pages. This part is usually completed after
completing the business plan. It describes company's business concept, financial requirements,
market opportunities, target customers, operations, technology, Project management, sales and
profit projections, plans of investors and current business positions etc.

2. Company Description:
This section of a business plan presents mission, vision, objectives and goals of the company. It
also provides current status, name, nature and future trends of the industry. This is the part of
business plan that includes the description of products and services and shows how they are
different in the marketable. It provides a brief history of the company along with the source of
business idea and driving force behind its inception (start). It should also includes:

– The name of the business

– The potential of the new venture

– Products and services to be offered

– Any unique or distinctive features of the venture.

3. Market Analysis

Market analysis breaks the industry into segments & target market to which the firm will try to
appeal. This is done through market segmentation. Most start-ups focus on servicing a specific
(target) market instead of the entire industry. Following points are to be considered while
developing a market plan:

– Market segmentation and target market selection.

– Competitor analysis. (The competitive analysis details the competitors strengths and
weaknesses )

– Customer analysis ( A customer analysis provides a picture of who buys and uses
the company's product or services)

– It provides a basis for discovering market opportunities.

4. The Economics of the Business

This section addresses the basic logic of how profits are earned in the business and how many
units of a business’s product & services must be sold for the business to ‘break even’ and then
start earning profit. This section should include following items:

– Revenue drivers and profit margins

– Fixed and variable costs

 – Operating leverage (the ability to earn high returns when operating at high
capacity) and its implications

– Start-up costs

– Break-even chart and calculation.

5. Marketing Plan

The marketing plan focuses on how the business will market and sell its product or service. This
section describes marketing plans, strategy and future sales of the company.

It describes how the entrepreneur plans to use various marketing tools, such as marketing
channels, price, advertising, personal selling and sales promotion. It also describes data wise
forecasting of sales in first three to five years. This section should include the following:

– Overall pricing strategy

– Product, price, place and promotion

– Sales promotion and sales tactics

– Sales promotion

6. Product/Service Design & Development Plan

The entrepreneur should choose the product or service that best fits his strengths and desires.
This section should include following items:

– Status of your development efforts for completely new product or service.

– Challenges and risks associated with the product development

– Projected development costs.

– Proprietary issues (brand names, patents, licenses, copyrights, trademarks).

– Product uniqueness.

– What the product/service will or will not do for customers.

– The needs the product/service will fulfill.

7. Management Team

The management team of the new venture consists of the founder/s and a handful of key
management personnel. A brief profile of each member should be provided. While going through
the business plan most investors look on the management team to assess the strength of the
people starting the venture. This section should include following items:

– Founder members & key management personnel.

– Board of directors.

– Board of advisors.

– Legal structure of venture.

– Duties and responsibilities of each positions.

– Their related experience, education and resumes.

8. Critical Risks

This is the section of risk analysis. At first, the entrepreneur should indicate the potential risks,
and next , he should discuss about what might happen if these risks are to become a reality.
Finally, the entrepreneur should discuss the strategy that will be employed to prevent such risks.

9. Financial Projection

This section of a business plan presents a firm’s pro forma (or projected) financial projections
such as cash flow statements, BEP, financial ratio, cost control, income statement, balance sheet and
budgeting plans etc.

The entrepreneurs must determine the amount of investment from own sources and from outside
sources. Entrepreneurs need to have scientific approach for planning the funds. It should include
items like:

– Fund requirement for the venture

– Sources & uses of fund

– Pro forma income statement, balance sheet & cash flows, ratio analysis, etc..
 – Budget

– Stages of financing, etc.

10. Overall Scheduling

This section provides key dates scheduling to finance, marketing and production. A schedule
should be prepared that shows the major events required to launch the business. The schedule
should be in the format of milestones critical to the success of the venture For example-

S.N. Particulars Months

1st 2nd 3rd 4th 5th 6th 7th

1 Project Report Formulation

2 Approve Bank loan

3 Land Purchase and building

construction

4 Machinery Installation

5 Trial Production

6 Commercialization

11. Summary and Conclusion:

In this section, key features are briefly summarizes and highlighted. It includes firm's overall
strategic, reasons for success, unique resources, sales and profit projection, capital requirements
and ownership percentage of investors. It describes all over title or stage briefly.

12. Appendix:

This section shows supplementary information such as organizational chart, important

calculation, patents, management resumes, advertisements and articles etc.

Venture Creation
Venture creation is the act of formation and development of a new business enterprise. It can be
define as the process of turning a new idea or technology into a new business that can succeed
and attract investors.

Venture creation simply consist of following steps:

1. Venture Project Formulation:

This phase of venture creation involves generation of new ideas, making plans, feasibility study,
industry analysis and development of an effective business model. It should be made detail plans
about venture project such as infrastructure, engineering design, routine budget and financial
analysis.

2. Venture Project Implementation:

It is the stage of attempts and activities are done to convert the business plan into action. At this
stage, venture project is implemented. It involves acquisition of fund, building relationship with
the staffs, suppliers and customers. It includes enactment ( to bring on effect) on production,
marketing, human resources and financial plans.

3. Venture Project Evaluation:

This is the phase of comparing the actual performance of the business with the predetermined
standard. At this stage, the real results are seen.

Under this stage, organizational performance or activities are monitored to ensure that the
direction of project implementation is in the right way. Evaluation ensures the adjustment
between venture project formulation and implementation.
 UNIT 6

LEGAL ISSUES OF ENTREPRENEURIAL VENTURE

Entrepreneurs need to establish their venture under the certain legislative framework. Such
framework creates opportunities and threats for the business ventures.

Successful entrepreneurs carefully monitor and check changes in laws and regulations in order to
take advantages of the opportunity. The following legal acts and provisions are needed to follow
for venture registration and operation. It also called legal structure.

Legal Structure

When beginning a business, you must decide what form of business entity to establish. Your
form of business determines which income tax return form you have to file. An organization’s
legal structure is a key determinant of the activities that it can undertake, such as raising capital,
responsibility for obligations of the business, as well as the amount of taxes that the organization
owes to tax agencies.

Before making a choice on the type of legal structure, business owners should first consider their
needs and goals and understand the features of each business structure. The four main forms of
business structures include sole proprietorship, partnership, limited liability company, and
corporation.

1. Sole proprietorship
Sole proprietorship is a type of business entity that is owned and run by one individual. There is
no legal distinction between the owner and the business. Sole Proprietorships are the most
common form of legal structure for small businesses. The sole proprietorship is the simplest way
of doing business. The costs to create a sole proprietorship are very low and very little formality
is required.

Pros of a Sole Proprietorship:

• Easy and fairly cheap to establish.
• Owner has absolute control over the business.
Cons of a Sole Proprietorship:
• Owner has unlimited personal exposure to risk, as the owner is responsible for all liabilities
incurred by the business.
• Banks can be hesitant to lend you money because this type of business is considered “high
risk.”

2. Partnership
Partnership is an association between two or more people in business seeking a profit.
Partnerships can be created with little formality, but because more than one person is involved, a
partnership agreement should be created. A partnership agreement specifies the terms of the
partnership by formalizing rules for profit/loss sharing, ownership percentages, dissolution
terms, and management rights among many other things.

Pros of General Partnerships:

• Fairly easy to create and maintain.
• More capital is available for the business.

Cons of General Partnerships:

• Partners are personally liable for business debt and liabilities.
• Disagreements may occur between the partners and this may slow down the operations of the
business.

3. Corporations
Corporations are the most complex business structure. A corporation is a legal entity that is
separate and independent from the people who own or run the corporation, namely shareholders.
Corporations are more complex entities to create, have more legal and accounting requirements
and are more complex to operate than sole proprietorships, partnerships. One of the major
disadvantages of a corporation is the high level of governance and oversight by the board of
directors. Often times, this prolongs the decision making when multiple shareholders or investors
are involved.
Pros of Corporations:
• Corporate shareholders have limited liability, meaning the entity is responsible for all liabilities
the company incurs.
•This business structure can be a good option for businesses looking to raise money because it is
preferred by outside investors and for IPO filings.

Cons of Corporations:
• The process to establish the business is more rigorous and costly.
• Earnings are subject to “double taxation,” first, when the company makes a profit, and again
when dividends are paid to shareholders on their personal tax returns.
 High level of governance and oversight by the board of directors.

Limited liability company

A limited liability company (LLC) is a relatively new type of business legal form that provides
some liability protection (like a corporation) and other features similar to a partnership. The
owners of a limited liability company (LLC) are called members. Each member is an owner of
the company; there are no owner shares, as in a corporation.

Pros:

 An LLC can protect you from personal liability.

 This can be a good choice for higher-risk businesses and owners looking to protect valuable
personal assets.

Cons:

 Regulations vary by state, and an LLC may need to be dissolved or reformed if a member
joins or leaves.

 Some businesses, such as banks, generally cannot be an LLC.

 Venture Registration

1. Sole Trading Concern Registration

Concept:

The business form which is established by a single person investing his own capital, active
participation in management, bearing risk of loss and sharing profit is known as sole trading
concern.

The Investor alone plays the role of an owner, manger, controller, decision maker and risk
bearer. Investor applies his/her own skills, intelligence, knowledge and capability for the
successful operation and management of the firm.

According to A.N. Agrawal “A person who establishes and manages a business for his own
account and risk is known as a sole proprietorship business.”

Procedures of Registration:

In Nepal, a sole trading concern is registered under the Private Firm Registration Act 2014. It has
following procedures:

i. Apply for Registration: Application form is needed to be filled up and apply for registration.
The application must include the following things:

• Name and address of the firm

• Nature and objectives of the business

• Amount of capital investment

• Name and address of owner including father's, mother's and grandfather's name.

• Other details as prescribed by the concerned department.

ii. Deposit Registration Fee:

 • After the submission of application form, amount of registration fee should be deposited
in the Nepal Rastra Bank in the account of the concerned department.

• The amount of registration fees depends upon the amount of capital investment in the
business.

Capital Registration Fee Renewal Fee

Up to 1,00,000 700 100

1,00,001 to 3,00,000 2100 125

3,00,001 to 5,00,000 4100 150

5,00,001 to 10,00,000 7600 200

10,00,001 to 50,00,000 10100 250

50,00,001 and above 15100 300

iii. Receiving the Certificate of Registration:

After the submission all documents and deposited voucher in the concerned department, the
authorized body check all the documents. If all the required documents are completed, he/she got
a certificate of registration. It is the evidence of registration and firm can start within six months.

2. Partnership firm Registration

Concept:

The business unit that is established by two or more members on mutual understanding through
joint investment, organization and management for mutual benefit. It is an association of two or
more persons to carry on a business with combined finance, skill and ability for the purpose of
operating business for mutual profit. The partners of firm, may be involved in management, they
share profit bear losses and pay liability as prescribed in agreement. They decided jointly the
objectives of business, amount of capital, ratio of investment and share profit and loss.

Procedures of Registration:

According to partnership act 2020 section 5 every partnership firm must be registered in Nepal.

It should be registered with the concerned government office within 6 months of its formation.

The registration gives recognition to the firm. In case a partnership firm is not registered within
time the transactions of the firms are not recognized legal.

The partnership act 2020 has determined the following procedures for the registration of a firm.

i. Apply for Registration: Application form is needed to be filled up and apply for registration
to concern department of Nepal government. The application must include the following
information:

a. Full name and address of the firm.

b. Full name and address of the partners.
c. Objectives of the firm and brief description of works.
d. Type of partner and capital invested by each partner.
e. Method of sharing profit and loss.
f. Process of computing profit and loss.
g. Duration of firm or agreement.
h. Other details as prescribed by the concerned department of Government of Nepal
i. The application must be duly signed by all the members, partnership deed and copy of
citizenship certificate must be enclosed along with the application form.

ii. Deposit Registration Fee:

Registration fee should be deposited in Nepal Rastra Bank in the account of the concerned
department.
The voucher of deposit should be submitted to concerned department along with the application
form.

The amount of registration fees depends upon the amount of capital investment in the business.

Capital Registration Fee Renewal

Fee

Up to 1,00,000 700 100

1,00,001 to 2,100 125

3,00,000

3,00,001 to 4,100 150

5,00,000

5,00,001 to 7,600 200

10,00,000

10,00,001 to 10,100 250

50,00,000
 50,00,001 15,100 500

iii. Receiving the Certificate of Registration:

After the submission all documents and deposited voucher in the concerned department, the
authorized body check all the documents. If all the required documents are completed and they
satisfied then he/she got a certificate of registration.

3. Company Registration

A company is a natural legal entity formed by the association and group of people to
work together towards achieving a common objective. A company is a body corporate
or an incorporated business organization registered under the companies act. It can be
limited or unlimited company, private or a public company, company limited by
guarantee or a company having share capital, or a community interest company.’’

Procedures of Company Registration:

i. Verify the company name: In the first step of company registration, The uniqueness of
the proposed company name should be verified in the office of the company Registrar.
Verification of the company name can be done online as well. To reserve the available
company name. The company name must submit an application to the office of the
company registrar.

ii. Verification essential documents: In this step of company registration, The

entrepreneurs normally verifying and drafting the memorandum, articles of association
and prospectus.

iii. Attached stamp to registration form: The entrepreneurs can buy a stamp to be
attached to the registration form for Rs 5 from the post office.
iv. Register at the office of the company Registrar:

To register a company, the promoter must submit an application as prescribed. After the
online filing entrepreneurs are required to visit the office of company registrar and submit
all the original documents for further verification. The registration fee is based on
following basis:

Capital Registration

Up to 1,00,000 1,000

1,00,001 to 5,00,000 4,500

5,00,001 to 25,00,000 9,500

25,00,001 to 16,000
1,00,00,000

1,00,00,001 to 19,000
2,00,00,000

2,00,00,001 to 22,000
3,00,00,000

3,00,00,001 to 25,000
4,00,00,000
 4,00,00,001 to 28,000
5,00,00,000

5,00,00,001 to 31,000
6,00,00,000

6,00,00,001 to 34,000
7,00,00,000

7,00,00,001 to 37,000
8,00,00,000

8,00,00,001 to 40,000
9,00,00,000

9,00,00,001 to 43,000
10,00,00,000

10,00,00,001 and 43,000 plus Rs 30 for each

above additional Rs 1,00,000

v. Make a Company Rubber Stamp:

The entrepreneurs can make a company rubber stamp at the seal maker.
vi. Register for VAT and Income Tax:

According to the value added tax act 2052, the company must disclose the office address and
withhold 10% tax of the rent for at least 3 months and deposit it to the tax office.

vii. Enroll the employees in the provident Fund:

Every month 10 percent is deducted from the basic salary of each employee.

The contribution is made to the provident fund and released upon employee retirement.

PAN Registration

Permanent Account Number (PAN) is a permanent account number of tax payer person and
company. It is a unique identification number, which is issued to all the taxpayers. It is allotted
only once in the lifetime of a taxpayer.

PAN registration procedures are given below:

) Agency: Department of Inland Revenue Office

2) Application Fee- Rs 10 (Ticket fee)

3) License Fee- No fees

4) Maximum Processing Time- 1 day

5) Validity – No time bound

6) Requirements:

- Apply application form

- Apply memorandum of Association and Articles of Association of the company

- Photocopy of the citizenship certificate, two passport size photo of the individual or
partners who signs in application form

- Hand drawn sketch of the business location or main office.

 - Power of attorney in case a representative is sent for registration .

- Proof of deposit if requested by Inland Revenue office .

- Company Registration Certificate from company Registration Office, Department of

Commerce, Department of Small and Cottage Industries, Village Development
Committee or Municipalities.

VAT Registration

Value Added Tax (VAT) is a form of indirect taxation. It is multi staged, commodity and
services based tax which is levied on the value added of business at different stages of
production and distribution. The main purpose of VAT is to increase revenue mobilization by
making effective process of collecting revenues required for the economic development of the
country. It collects revenues effectively by regulating the process of collection.

VAT was introduced on 16 Nov. 1997 in Nepal. It was implemented fully from the year 1998/99.
Vat replaces the old sales tax, contract tax, hotel tax and entertainment tax. The following are the
provision of VAT registration in Nepal.

1. Agency- Department of Inland Revenue Office

2. Application Fee- Rs 100 (Ticket fee)

3. License Fee- No fees

4. Maximum Processing Time- 1 day

5. Validity – No time bond

6) Requirements:

 Apply application form

 Apply memorandum of Association and Articles of Association of the company.

 Photocopy of the citizenship certificate, two passport size photo of the individual or
partners who signs in application form
  Hand drawn sketch of the business location or main office.

 Power of attorney in case a representative is sent for registration.

 Proof of deposit if requested by Inland Revenue office.

 Company Registration Certificate from company Registration Office, Department of

Commerce, Department of Small and Cottage Industries, Village Development
Committee or Municipalities.

Obtaining Intellectual Property Rights

Concept of Intellectual Property

Intellectual property is the product of human imagination, creativity and inventiveness.

It refers to creation of the mind such as inventions, literary and artistic works and symbols,
names, images and designs used in commerce. It consists of certain intellectual creations by
entrepreneurs or their staffs that have commercial value and are given legal property rights.

The laws which are related to protection of patent, design, trademarks and copyrights are called
intellectual property laws. Intellectual property rights are creation of the mind. They can neither
be seen or touched. The main forms of business intellectual property rights are Patents,
Trademark, Copyrights and Trade secrets.

1) Patent

It is an exclusive right granted by the government for an invention. It provides the patent
owner with the right to decide when and how the invention can be used by others. It denotes
the granting of limited monopoly power designed to encourage invention and innovation. It
grants right to the inventors to build, use and transfer or to keep with themselves their
invention.

A patent grant an inventor the right to exclude others from making, using, offering for selling
an invention for a fixed period of time.
 When the time period time is ends, the patent goes into the public area and anyone may use
it. According to Milton H. Spencer "A patent is an exclusive right conferred by a
government on a inventor, for a limited time period.

If an inventor obtains a patent for a new kind of computer chip, and the chip would infringe
on a prior patent owned by Intel, the inventor has no right to make, use, or sell the chip. To
do so, the inventor would need to obtain permission from Intel. Intel may refuse permission,
or ask that a licensing fee to be paid for the rights to infringe on its patent.

Types of patent

Utility Patent It is granted for new process, machines, manufactures

and compositions of matters.

Design Patent It is granted for any original ornamental design for an article
of manufacture

Plant Patent Any new varieties of plants that can be reproduced

asexually.

Steps of Patent Registration:

i. The first step in securing a patent is the filing of a patent application. He/she should submit an
application to the department of industry with the following particulars:

- Name, address and occupation of inventor.

- Manner and nature of right acquired, if applicant is not the inventor.

- Process of producing, operating and using the patent.

- Principle or formula on which the patent is based.

 - Map or drawing of the patent with description.

ii. No Registration: The Department does not register any patent under this act in the following
circumstances:

 Already registered in another person's name

 Not invented by the applicant or the right to patent not received.

 If the patent is likely to adversely affect the public health, conduct or morality or the
national interest.

iii. Term: The term of the patent is valid only for a period of seven year from the date of
registration. Renewal of a patent may be made for two times of seven years.

2) Copyright:

It is the rights that creators have over their literary and artistic works. The works are in tangible
forms such as books, music, paintings, films, computer programms, database, advertisements,
maps and technical drawings etc.

The copyright owner has the right to control how their material is used. Copyright owners can
prevent others from copying or communicating their material without their permissions.
Copyright does not protect ideas, concepts, styles, or techniques. For example, copyright will not
protect an idea for a film or book, but it will protect a script or even a storyboard for the film.
The creator has right to determine how the work is used and obtain the economic benefits from
the works. It is original creative works of authors, composers and others from unauthorized
copying of their works. It extends protection to form of expressing ideas.

It is an exclusive property right granted to authors and originators of artistic productions.

Registration of Copyright is not mandatory in Nepal, any work is protectable under the
Copyright Act 2059 B.S., however, registration of copyright will be fruitful to proof of copyright
against the possible infringement, piracy in future. Due to the registration of copyright, it is
sufficient to enter into any licensing, agreement with others in order to full enjoy of exclusive
right of copyright.

The time frame for filing to registration of copyright is normally 5 to 35 days and duration of
copyright is general life + 50 years.

What is protected by copyrights?

 Literary- Book, pamphlet, article, thesis, lectures, computer programmes etc.
 Artistic- Architectural design, photography, painting, sculpture, woodcarving,
lithography, work of applied art, illustration, map, plan etc.
 Musical- Musical notation with or without words, sound recording etc.
 Dramatic- Drama, dramatic music, dumb show, performance etc.

Filing requirements for Copyright Registration in Nepal

 Application form

 Power of Attorney, duly signed, sealed and countersigned by two witnesses of the
applicant/company.

 A document which approval ownership of such work.

 An agreement (if any)

 Detail description of the creation

 Four copies of the work

3) Trademark

A trademark is an individual word, name, mark, symbol, design, logo or device that a company
uses to identify and distinguish its products from others. Examples are: Dell, Nokia, Netflix,
Amazon.com, ebay.

It enhances the visibility of products and services. It also provides useful information to the
customers.
The owner has unlimited exclusive right to use the trademark as long as it is in use. The right of
use can be sold to others.

Steps of Registration:

i. Application for the registration of Trade mark

One who is willing to get registered any trademark of his trade or business under the act
shall apply to the Department in a prescribe format along with:

 Copy of registration or license of the business for product or service in which trademark
is used or intend to use.
 Four copies of model of trademark.
 Authorizations letter if somebody has been authorized to act on behalf of the owner to
register the trademark.
 If the applicant is a foreigner, certified copy of any foreign registration certificate and
address for service in Nepal must be submitted with application.
 Receipt of payment of prescribe application fee.

ii. Registration: After examination if it is found registrable, The Department register the
trademark in the name of applicant and issue a certificate.

iii. Prohibition: No trade mark may be used as a registered trade mark without registering it
at the department.

iv. Term: The title of the person in whose name a trademark has been registered remains
valid for a period of seven years from the date of registration.

v. Punishment: If one uses trademark of others without transforming the ownership or

written permission or the trade mark registered is not brought into use within one year from
the date of registration. The department imposes a fine not exceeding one hundred thousand
rupees and articles and goods concerned with such offense are also confiscated.

4) Trade Secrets:
 A trade secret is any formula, pattern, physical device, idea, process or other information that
are the sources of competitive advantages in the marketplace.

They include marketing plans, product formulas, financial forecasts, employee rosters,
customers lists, research and development, pricing information and laboratory notebooks etc.
The owner has the exclusive right to use, sell and license the trade secrets.

There is no registration process for the protection of trade secrets. Similarly to copyrights, the
information is protected through its creation. Therefore, trade secrets can be protected for an
unlimited period of time as long as the information remains undisclosed.

There are essentially four elements to the existence of a trade secret:

(1) It must be original.

(2) It must be commercially valuable information.

(3) Not in the public area.

(4) The subject of reasonable efforts to maintain it confidential.

Labor laws

The rules and regulations, that are related to wages, hours of work, payment of bonus,
dispute settlement, unions and labor relations etc. are called labour laws. Labor law is
legislation specifying responsibilities and rights in employment, particularly the
responsibilities of the employer and the rights of the employee.

Labor Act 2048, is concerned with making provisions for the rights, interest, facilities and
safety of workers and employees working in enterprise of various sectors. It has 11 chapter
and 92 sections to regulate the concerned field.

The major provision of the labor act 1992 are as follows:

i. Appointment: This act has defined formal selection of employees through advertisement
and appointment letter has to be provided to the selected workers.
 ii. Prohibition of engaging non Nepalese: Non Nepalese citizens are not permitted to be
engaged at work in any of the posts until the Nepalese citizens are available for
appointment.

iii. Security of Service: The service of any permanent workers may not be terminated
without given and prescribed procedures.

iv. Compulsory Retirement: The investor may compulsorily retire any worker who has
crossed the age of fifty five.

v. Working hours: According to this act, no worker is deployed in work for more than
eight hours per day or forty eight hours per week and they are provided one day as
weekly holiday for every week.

vi. Extra Wages: If the worker is engaged to work for more than eight hour in a day he/she
is paid overtime wages at the rate of one and half time of his/her ordinary rate of wages.

vii. Remuneration: A minimum remuneration fixation committee is formed to fix the

minimum remuneration, allowance and other facilities.

viii. Provision related to minor: No minor can be engaged in works without adequate
directives about the concerned working areas

ix. Welfare Fund: An entrepreneur should establish a welfare fund, as prescribed for the
welfare and benefit of the workers.

x. Labor Relation Committee: The entrepreneur should constitute a labour relation

committee in each enterprise in order to create friendly atmosphere between the workers
and the management and to develop healthy industrial relation.

xi. Labor Court: Nepal government can establish labor court by publishing a notice in the
Nepal Gazette. The authority and the location of such court is prescribed in such notice.

xii. Personal Claims or complaints: If any one or more workers have any personal claim or
complaint against entrepreneur relating to the service, the concerned worker may file it in
writing with the concerned proprietor.
xiii. Submission of Claims of collective dispute: The claims relating to collective right,
interest or privilege have to be presented in writing to the concerned proprietors signed
by at least fifty one percent of the concerned workers.

Contract Laws

The major provision of contract act 2056 are as follows:

i. Definition

Contract is an agreement to do something between two or more parties which is

enforceable by law. Similarly, offer is defined as a proposal made by one to another with
a view to obtain agree from that another. Acceptance is an agree given by the person to
whom it is made in the same sense as the offer has intended.

ii) Contractual capacity: It deals with the contractual capacity of the contracting parties
person of minor, persons of unsound mind and other persons disqualified by law are
treated as incapable to enter into a contract.

iii) Autonomous of Parties: The contracting parties have right to choose the subject
mater of contract to fix the nature and amount of consideration, the terms and conditions.

iv) Offer and Acceptance: It also has the provision to deal with the offer and acceptance
their communication, revocation and the different consideration when an offer and
acceptance is treated as cancelled.

v) Indirect and contingent contract: It has stated the different conditions where a
contract is made.

vi) Void and voidable contract: It provides a list of contract which are declared by law
as void.

vii) Specific contracts: It has provided the different provision for general and specific
contract.

viii) Performance of Contract:

 It has also provide different provisions relating to the ways and manner of performance,
time date and place of performance, persons who are bound to perform a contract, who
can demand for performance and the conditions where a contract need not to perform etc.

Ix) Breach of Contract:

This act also has the provisions of breach of a contract and the different preparation
available to the injured party in case of beach or non performance of contract where a
contract has been breached by one the another party can apply before the court for the
rescission of contract damages, specific performance and injunction.

Environmental Laws

The rules and regulations which are related to protection of environment is called
environmental laws. The main provision of environment protection act 2053 (1997) are
as follows:

i. Definition: This act has defined environment as the interaction and inter relationship
among the components of natural, economic, cultural, social systems and human
activities and their components. Pollution means the activities that significantly degrade,
damage the environment or harm on the beneficial or useful purpose of the environment
by changing the environment, directly or indirectly.

ii. Prevention and Control of Pollution: Nobody shall create pollution in such a manner
as to cause significant adverse impacts on the environment and people's health dispose or
cause to be disposed sound, heat, radioactive rays and wasters from any mechanical
devices, industrial enterprises or other places which country to be prescribed standard.

iii. Environment Inspector: In order to carry out or cause to be carried out the acts of the
mitigation, avoidance or control of pollution or the acts required to be carried out in
accordance with the initial environmental examination or the environmental impact
assessment report, the ministry may , by fulfilling the procedures prescribed by the public
service commission, appoint environmental inspectors
 iv. Protection of National Heritage: It shall be the duty of the concerned agency or
department to protect national heritage.

v. Environment Protection Area: Government of Nepal may be a notification in the Nepal

Gazette, maintain any place within Nepal containing natural heritage, rare wildlife,
biological diversity, plant and places of historical and cultural importance, which are
considered extremely important from viewpoint of environment protection.

vi. Establishment and Operation of Environment Protection Fund: A found named

environment protection fund shall be established for the protection of environment,
prevention and control of pollution and protection of the National Heritage.

vii. Power to constitute Environment Protection Council: Government of Nepal may to

provide policy guidance and suggestions to government of Nepal with regard to
environment protection and also to have coordination among different agencies,
constitute an environment protection council comprising of environment experts and
representation of the person form recognized political parties at national level as well.

viii. Compensation may be given: In case in consequence of the creation or disposal of

pollution, sound, heat or wastes by anybody opposing to this act or rules or guidelines
framed hereunder, any person or organization affected from such actions.

ix. Punishment: In case any person carries out any act contrary to the approved proposal,
the prescribed authority may stop such act immediately and if any person or organization
has done such act may according to the degree of offence punish him/her with a fine.
 Unit 7

Financing of Entrepreneurial Venture

Need for financial planning

Finance is one of the important prerequisites to start any types of enterprise. It is needed to
begin, maintain business venture and its operations. So, entrepreneurs should carefully prepare
financial planning and estimate initial capital requirements for start up of the venture. In such
planning the entrepreneur should clearly answer the following three questions:

- How much money is needed ?

- Where will money come from ?

- When does the money need to be available ?

Thus, financial planning deals with futurity of present decision in terms of financial aspects of an
entrepreneurial venture. In other words, Financial Planning is process of framing objectives,
policies, procedures, programmes and budgets regarding the financial activities of a firm.

Need of Financial Planning

Financial planning is needed due to the following reasons:

1. Ensure availability of required funds

2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of
funds so that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in companies
which exercise financial planning.
4. Financial Planning helps in making growth and expansion programmes which helps in
long-run survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market trends which
can be faced easily through enough funds.
6. Financial Planning helps in reducing the uncertainties which can be a hindrance to
growth of the company. This helps in ensuring stability an d profitability in concern.
Sources of Finance for Entrepreneurial Ventures

The capital requirement for entrepreneurial ventures can be arranged from two sources. They are:
1) Angel Investors

Angel investors are individuals who seek to invest at the early stages of startups. An angel
investor (also known as a private investor, seed investor or angel funder) is a high-net-worth
individual who provides financial backing for small startups or entrepreneurs, typically in
exchange for ownership equity in the company. Often, angel investors are found among an
entrepreneur's family and friends. The funds that angel investors provide may be a one-time
investment to help the business get off the ground or an ongoing injection to support and carry
the company through its difficult early stages. They investigate the venture carefully before
investing. They are invisible wealthy investors.

Angel investors are focused on helping startups take their first steps, rather than the possible
profit they may get from the business. Essentially, angel investors are the opposite of venture
capitalists.

2) Venture Capitalists:

A venture capitalist (VC) is a private equity investor that provides capital to companies
exhibiting high growth potential in exchange for an equity stake. It is the money that is invested
by venture capital firms in start-up and small business with a high growth potentiality. It is
different to angle investors as the venture capitalists invest in the later part of the business
whereas angles invest in start up. Venture capitalists look for a strong management team, a large
potential market and a unique product or service with a strong competitive advantage. They also
look for opportunities in industries that they are familiar with, and the chance to own a large
percentage of the company so that they can influence its direction. Venture capital firms collect
money from high net worth individuals, pension plan, university endowments, foreign investors
and other sources.

Types of Financing

1) Equity Financing
It is an important component of capital structure of a business. It is obtaining funds for the
business in exchange of ownership. It can also be obtained by the owner or his/her relatives,
friends and sales or shares. The angel investors and venture capitalists may also involve in equity
financing. The equity investors get return on their investment in the form of dividend and by
selling their stock or shares. The sources of equity financing are given below:

a) Personal Funds: They are personal resources or saving of the entrepreneur invested in
venture. This ensure control of venture. It provides credibility to the venture.

b) Relatives and Friends: The relatives, family members and friend might be interested to
invest in the venture. This type of contribution often comes in the form of loans or investment.

c) Sales of Shares: Public limited companies can offer shares in the market to raise long term
capital. The share can be two types- ordinary share and preference share.

d) Angel Investors: They are individuals who invest directly their own wealth in the ventures.
They investigate the venture carefully before investing.

e) Venture Capitalists: It is the invested money by venture capital firms and bankers to start of
small business with a high growth potentiality. They generally acquire shares or provide loans
with share options. They invest for five or more years.

2) Debt Financing:

It is another important source of generating fund for a business. It is borrowed capital . It comes
from the lender. It involves getting loan or issuing debenture or bond. It is also part of the capital
structure of venture. The sources of debt financing are given below:

a) Banks or Financial Institutions: Banks are main sources of debt financing. Specially
commercial banks or different financial institutions are major suppliers of short term loan to
ventures. Banks provide two types of funds- overdraft and loans. Overdraft means drawing more
than what is present in bank account. They are short duration of time. Bank loans are long term
source of finance.

b) Debentures: The ventures issueS debentures and bonds for financing. They carry fixed rate of
interest. They are form of long term loan obtained by a public limited company for a large sum
and paid back over several years.
c) Micro Credit: It is offered to small entrepreneurs. It involves relatively small amount. The
loan is provided in group guarantee basis. It is normally offered to deprived rural people.

d) Private Sources: Many entrepreneurs begin their business by borrowing money from friends
and relatives. Such lenders provide flexible terms of repayment than banks or other lenders. They
are also comfortable to invest in start-ups as well.

Sources of Short Term Loans for Ventures

Short term loan is that type of finance which becomes matured within one year. It is needed to
meet the day to day business activities such as purchase of raw materials, supply of goods and
services, payment of salaries and to make other regular basic expenses. The quantity of short
term fund required depends on the nature, size of the business, cost and time of production, terms
of sales and purchase etc. The main sources of short term loans for business ventures are as
follows:

1) Bank overdraft:

A bank overdraft is the facility extended by a bank to companies to withdraw funds from their
account in excess of the balance. The bank provide this facility against a certain fee and on the
basis of collateral. It allows the companies to withdraw money from the account even if there is
no balance. Therefore, establishing an overdraft facility with bank can help small business with
short term cash flows issues, and it needs to be repaid within a month.

2) Trade Credit

It is also known as accounts payable. Trade credit is the loan extended by one trader to the
companies when the goods and services are bought on credit. It facilitates the purchase of
supplies without immediate payment and it is most commonly used by business organization as a
source of short term financing. If the supplier allows a small business to delay payment on the
product or services it purchases, then it is termed as trade credit.

3) Accrual Accounts:
They are the expenses which have been incurred but not yet paid. These accruals represent a
liability that a firm has to pay for the services or goods, it has received. The most important items
of accruals are wages and salaries, interest and taxes. They arise automatically from the day to
day operation of the firm and are treated as a ‘cost- free’ source of finance, since it does not
involve any payment of interest.

4) Specialized Agencies:

They are agencies of government for promoting and assisting entrepreneurs. They generally
provide loan at subsidized rate of interest. Nepal agricultural development bank and rural
development Banks provide loans to small businesses. Some non-government organizations also
provide loans for income generating small businesses.

5) Advance from customer:

Advance from customers refer to money collected by a company prior to providing a product or
services. Many times the manufacturers and suppliers insist on advance payment from the
customers particularly in case of special orders or big orders. The customer may pay the advance
amount as a part of the price of the products ordered by them. So, this is an interest free sorce of
short term finance, A company can fulfill its short term financial requirements through this as
well.

6) Factoring:

Factoring is a transaction in which a business sells its accounts receivable to a third party known
as a factor. A factor is a finance company or bank that buys receivables from business for a fee
and then collects the payments directly from the customers. It is also called accounts receivable
financing.

7) Public Deposits:

Public deposits are the unsecured deposits invited by companies from the public for working
capital needs. A company wishing to invite public deposits makes an advertisement in the
newspaper. The public can fill up the prescribed form and deposit their money with the
company. The rate of interest on public deposits mainly depends on the period of deposit.
 Chapter- 8
Institutional Support to Entrepreneurship Development
Concept of Institutional Support
The institutional support refers to the support provided to the entrepreneurs by different
institutions. The institutions can be government, semi-government, partnership, cooperatives and
private organizations. They facilitate entrepreneurship development and growth by providing
various resources and facilities. We know that different types of resources and facilities are
required in order to establish business ventures such as finance, infrastructure, transport,
communication, consultancy service, marketing service, easy availability of raw materials,
training and development etc. The organizations unable to make such resources. So, in this
situation, the ventures need institutional supports from different sectors.
Need for Institutional Support
Institutional supports are essential and needed to the business ventures. Particularly, small
entrepreneurs need uppermost institutional support for the development of entrepreneurship. It
motivates small entrepreneurship for all over development. The following are the reasons behind
institutional support to entrepreneurship development.
1) Easy access to Capital
2) Development of competency
3) Development of Infrastructure
4) Supply of Raw Material
5) Access to Market
6) Government Policies
7) Information Support
8) Create Awareness
Financial Support Agencies
The agencies and institutions which are providing credit or loan facilities to the entrepreneurs
are called financial support agencies. There are many governmental and non-governmental
agencies that assist to financial support for entrepreneurship development. Some major agencies
are explained as below:
1) Rural Development Bank:
Nepal Rural Development Bank Limited was existence in 15 Aug. 2014 (30 Shrawan 2071). This
bank was established after the successful merge of five rural development banks which were
working in the five development region as a public limited company. This is regulated under
Bank and Financial Institution act 2063 It is a micro finance bank in national level and provides
micro finance service to the rural people. Its target group is rural women. It distributed loan to
the group of women without collateral. Currently it has 183 branches in 52 districts of Nepal.
Vision: The main vision of Nepal Rural Development Bank is to support the socio economic
status of the rural poor people through micro finance services and participatory self development
of the Nepal.
Mission- Its mission is to create income and generate self employment and to improve the socio-
economic environment through micro credit of the rural poor people.
Objectives:
i) To provide micro credit to the rural people for agriculture, industry and service business.
ii) To provide financial services to mobilize skill and resources available in the rural area.
iii) To encourage habit of saving.
iv) To provide service of financial intermediary through institutional investment.
v) To provide loan to deprived women without collateral in order to start a business.
2. Micro finance institutions
The history of microfinance in Nepal is relatively new. The Nepali government's attempt to
promote microfinance services dates back to 1975. It was recognized as an official poverty
alleviation tool only in the country’s Sixth Plan (1980/81-1984/85). The sector has gained
momentum after the restoration of democracy in 1991. Micro finance is often seen as an
effective strategy for extending financial services to the poor and disadvantaged groups not
reached by the formal financial sector.
Microfinance institutions are those institutions that provides access to various financial services
such as credit, savings, micro insurance, remittances, leasing to low-income clients including
consumers and the self-employed, who traditionally lack access to banking and related services.
Microfinance is an economic development tool whose objective is to assist the poor to work their
way out of poverty. Its main objective is to provide a permanent access to appropriate financial
services including insurance, savings, and fund transfer. It is rather an important tool for the
eradication of poverty.
Functions/ Roles of Micro Finance Institutions:
1) Supply micro-credit without collateral or security.
2) Providing credit or loan facilities to the individuals who are deprived from banking and other
services.
3) Granting the schemes of micro-credits.
4) Helps in engaging in micro-enterprises
5) Providing technical assistance and training to the individuals.
6) Accepting deposit with or without interest and refund such deposit.
7) Performing such other functions as may be prescribed of Nepal Rastra Bank.
3) Commercial Bank
A commercial banks is that financial institution, which is established to accept deposits and grant
loan to the industries, individual and traders with a view to earn profit. It provides various
financial service with collateral. Nepal Bank Limited is first commercial bank in Nepal which
was established in 30 Kartik 1994 B.S. At present 27 commercial bank in Nepal.

Commercial Bank Function

a. Accepting of Deposits: One of the important function of commercial bank is that it accepts
deposits from everyone who opens account from the bank.

b. Advancing Loans:
A bank lends a certain percentage of cash lying in deposits on higher interest rate than it pays to
the depositors. This is how it earns profits and carries on its business.

c. Credit Creation:
Credit creation is one of the most important functions of the commercial banks. In order to earn
profit the bank accept deposits and advance loans by keeping a small cash in reserve to meet the
day to day needs of the customers.

When a bank gives loan, it opens an account in the name of the loan taker and does not pay him
in cash but allows him to draw the money according to his requirements. By granting a loan, the
bank creates credit or deposit

d. Financing Foreign Trade:

A commercial bank helps in foreign trade by financing his customers and by accepting foreign
bills of exchangeFurther, it transact foreign exchange business and buys and sells foreign
currency

e. Agency Service:

A bank discharges agency services on behalf of its customers which are as follows:
(i) The bank collects payments of bills of exchange, cheques dividends etc. on behalf of his
customers.

(ii) It buys and sells shares, securities, debentures etc. for its customers.
(iii) The bank remits money to different places by bank drafts on telegraphic transfer (T/T) on
behalf of its customers.

f. Miscellaneous Services:
Besides the above mentioned services the commercial bank performs a number of other services
the important of them are as follows:
(i) It provides lockers facility to the customers where the customers can keep the valuable
documents and ornaments etc.

(ii) It underwrites the company debentures and shares.

(iii) It provides information’s about the customers.

Objectives of Commercial Bank

1) To mobilize savings through current, saving and fixed deposit a/c
2) To grant loans and advances.
3) To Facilitate cross border payment services.
4) To provide wealth management services and sales of investment and insurance products and
financial planning services.
5) To provide hire purchase and leasing facilities.
6) To provide any other business that central banks with the approval of Ministry of finance,
prescribe from time to time.

4) Micro enterprise development projects and programs :

Micro-Enterprise Development project and Programme is non-profit organization of Nepal to
translate the broader vision of the government's Ninth Five Year Plan, which is to try and address
poverty through the development of micro-enterprises among low-income families. The
Government of Nepal (GoN) and the UNDP started implementing Micro Enterprise
Development project and Program in 1998. Some of the Micro enterprise development projects
and programes in Nepal are mentioned as below:
i) Industrial Enterprise Development Institute (IEDI):
IEDI is a national resource organization committee to entrepreneurship development through
training, research, consultancy and enterprise education.
ii) Micro Enterprise Development Programme (MEDEP):
It has evolved as a model of entrepreneurship development with potentials of exciting thousands
of people out of poverty. Its Target group the rural poor, women and disadvantaged people.
iii) Small Farmer's Development Programme (SFED):
This programe was launched in 1975 by Agricultural Development Bank with the assistance of
Asian Development Bank. Its main purpose is to organize small farmers into group to provide
credit on a group guarantee basis. Nepal government policy is to convert SFDP groups into
cooperatives. GTZ of Germany is providing technical asistance to move SFDP groups into small
Farmers' Cooperative Limited .
iv) Micro Credit Project for Women (MCPW):
This project was initiated by the Ministry of Local Development in 1994with donor assistance. It
uses NGOs for service delivery to poor women. The target clients are poor women in rural and
urban areas. It financed both agricultural and non-agricultural activities.
Logistic support agencies:
Major logistic support agencies are explained as following:
A) Government Agencies
The government of Nepal provides a number of special facilities and incentives through its
various agencies. They are given below:
1) Ministry of Industry: The ministry of industry is the key institute for development of
industrial planning and policy making as well as their implementation. It conducts a number of
activities and programes for the growth and development of industrial sector in Nepal. Micro
Enterprise Development Programme is one of them. It focuses on the development of small and
medium scale enterprises for the economic development of the nation.
2) Department of Industry: It is one of the department under ministry of industry. It was
incorporated to implement the policy, rules and regulations of the government of Nepal to
enhance the Nepalese economy through industrialization. Its main activities are to assist in
industrial and foreign investment policies, grant permission to industries and register the middle
and large industries with capital above 30 million.
3) Department of Cottage and Small Industries: This is a department under the ministry of
industry. It is concerned with formulation and implementation of policies for the development of
cottage and small industries in Nepal. It has been organizing a number of skill development
programs for entrepreneurship development. Some of them are hosiery, sewing, furniture, wood
craft, textile, handicraft etc. It also performs some administrative functions such as registration,
renewal and offering facilities to cottage and small industries.
4) Office of the Company Registrar: This agency provides services of company registration,
monitoring and necessary advice from a place. It was established in 2049 to carry out all the
activities related to company administration. It conducts its activities according to Nepal
Company Act 2063.
5) Nepal Tourism Board (NTB): It is an autonomous institution devoted for the development of
tourism. Lacking of promotion, the tourism market is decreasing both in the domestic and
international area. Thus, this board is concerned with regulation and promotion of tourism
industry in Nepal.
B) Specialized and consultancy agencies:
Specialized agencies are concerned with promotional support to entrepreneurship. They are also
established by government to make available specialized services to the industries and business
companies. Major specialized and consultancy support agencies are given bellow:
1) Industrial Promotion Board (IPB): The IPB is being formed under the chairmanship of
Minister for industry. This board was incorporated industrial enterprise act 2049. Its main
objectives are
i) To increase the pace of industrialization in the country.
ii) To formulate the policy regarding industry and investment
iii) To coordinate between central and Implementing level.
Functions, duties and power
1) To render (provide) necessary cooperation in formulating and implementing policies, laws and
regulations for industrialization.
2) To give guidelines in attaining the objectives.
3) To maintain coordination between the policy and implementation level of the industrial
policy.
4) To make recommendation to government of Nepal for the inclusion of any industry in the
classification of industries.
2) One window Service Committee: It is a committee under the Department of Industry. It
makes necessary decisions for making available the facilities and concessions to any industry
under industrial Enterprises Act 1992 from a single place. It also perform such functions as may
be delegated by the Board under its functions, duties and power and recommends
3) Nepal Industrial Development Corporation (NIDC): Nepal government was established
NIDC in July 1959 to introducing many innovative concepts and development activities. The
objective of NIDC is to mobilize financial resources for economic development of the country by
way of providing financial, managerial and technical assistance for the establishment,
modernization, expansion of the private and public enterprises.
4) Industrial Enterprise Development Institute: IEDI was established in 1996 as a Industrial
Enterprise Development Centre. It is committed to entrepreneurship development through
training, research, consultancy and enterprise education. Its main aims is to provide service to a
maximum number of organizations involved in enterprise development.
5) Investment Board Nepal (IBN): It was established in 2011 by the investment Board Nepal
Act. It is formulated to promote economic development in Nepal by creating an investment
friendly environment. It also managing public private partnership (PPPs), cooperatives and
domestic and foreign private investment.
6) Nepal Tea and Coffee Development Board: It was established in 1993 for betterment and
enhancement of tea and coffee sectors. Its main objectives are
i) Assist to formulate and implement the tea and coffee development policy.
ii) Identify problems and ways to solve them for the development of tea and coffee sector.
iii) Mange import of tools and equipment for the tea and coffee production process.
iv) Conduct research and studies for the development of tea and coffee sectors.
v) Establish coordination and networking with all the stakeholders of tea and coffee sectors.
vi) Support tea and coffee industries.
7) Cottage and Small Industry Development Board (CSIDB): It was established in 1993. The
main objectives of CSIDB are to provide support services for promotion, expansion and
strengthening of cottage and small industries. The main target groups are potential entrepreneurs,
rural poor unemployed youth, women, Dalits, backward and disadvantages groups.
8) Export Council of Nepal (ECN): It was established in 1996 by a group of business
entrepreneurs involved in export business. It is a non profit association for the promotion of
export business. Its contribution is to development of national economy, foreign currency
earning, employment and increase in productivity. It organizes varieties workshop, training,
interaction, discussion, awareness program etc. which are related to export and export promotion.
9) Trade and Export Promotion Centre: It was established in Nov. 2006 with the objective of
promoting foreign trade in general and export trade in particular of the country. Its main
functions are:
i) Advice the Government of Nepal in formulating policies for the development of trade and
export
ii) Support in achieving the goal of poverty alleviation through the development of rural
economy.
iii) Lunch programes by establishing coordination among different agencies for increasing the
production of exportable products.
iv) Study and identify the problems of foreign trade and advice the government with appropriate
alternate.
v) Organize buyers/seller meet and conduct training seminar and workshop.
Industrial estates:
Industrial estates are specific areas zoned for industrial activity in which infrastructure such as
roads, power and other utility services are provided to facilitate the growth of industries and to
minimize impacts on the environment. An industrial estate is a group of factories
constructed on an economic scale in suitable sites with facilities of water, transport,
electricity, steam, banks, post office, canteen, watch and ward, first aid and provided
with special arrangements for technical guidance and common service facilities.
Nepal has established industrial estates to promote and support entrepreneurship. Such industries
are making available various facilities such as land, building, water, post office, health center,
warehouse, electricity, telephone, bank, canteen, security etc to the Nepalese entrepreneurs.
The history of Industrial estate in Nepal had started with the establishment of Balaju Industrial
Estate for the first time in 2016 B.S. After that ten industrial estates were established on after
another in Hetauda, Patan, Nepalgunj, Dharan, Pokhara, Butwal, Bhaktapur, Biratnagar,
Dhankuta and Rajbiraj. In addition, 65 industries estates are under construction in Nepal.

Objectives of Industrial Estates

The following are the objectives of setting up industrial estates:

1. Ensuring well planned and structured industrial development.

2. To provide the necessary infrastructure.

3. To provide common facilities to a number of industries.

4. To enable small business units to source products from one another.

5. To promote balanced regional development.

6. To ensure development of backward areas.

7. To provide a climate for smooth functioning of industrial enterprises.

Facilities provided by Industrial Estates.

1. Encouraging small entrepreneurs to establish their industries in specified areas by offering

various incentives and other facilities.

2. Enabling small business units to source products from one another.

3. Making available various facilities such as land, building, water, post office, health center,
warehouse, electricity, telephone, bank, canteen, security etc to the Nepalese entrepreneurs.
4. Providing a climate for smooth functioning of industrial enterprises.
5. Increasing employment opportunities.