Last week, there were two events that I got to anchor. The first was a panel discussion on making digital services happen at the base of the pyramid, and the second was the launch of the much-awaited Nepal Financial Inclusion Report. These two events provided some insights from the speakers on how Nepal is transforming in the digital space, but a lot needs to be done to accelerate the process.

With the work we are doing through the Centre for Digital Transformation at the Nepal Economic Forum, we can continuously emphasise two key issues. First, understanding the rapid positive transformation and adoption of technology or platforms; and second, the need for coordinated efforts. We need to understand how the landscape is transforming at a rapid pace. Aanchal Kunwar of Daraz revealed that 40 percent of their sales and 35 percent of the vendors were outside Kathmandu Valley. This shows that e-commerce platforms are connecting customers and vendors outside the capital. This reminds me of Prakash Iyer, former CEO of Kimberly Clark, India, telling me in Kathmandu that they were surprised that two thirds of the orders came from outside the big cities when they went online. While last mile logistics is a big challenge in Nepal, there are innovators trying to fix this, and perhaps the revival of the postal system would help in a big way.

VAT refunds

The digital payment ecosystem has pushed e-commerce platforms. You can buy from far-flung vendors like those selling the basket of Himalayan berries they have picked via an Instagram reel account. Amit Agrawal pointed out that they could get about Rs4 million in VAT refunds by paying their internet service provider vendor online. The government came up with a 10 percent VAT refund policy on online payments, but people are unaware of it. Challenges remain in terms of operating accounts for companies where two signatories are required. There are also many examples of challenges in coordination because any online payment you make puts you “on line” somewhere, be it at the passport office or the transport management office.

What Dipesh Bista, CEO of the National E-Governance Commission, a high-level government apparatus formed and chaired by the prime minister, said was like music to our ears. He spoke about this unit that will coordinate all efforts across different government agencies. He had this vision about being able to make the next census happen within a week and being able to count the cows on a farmer's farm in real time. The emphasis has also been on making the National ID the base for the delivery of digital services. He had an important point: If people can pay extra for food or goods delivered to their house, why don’t we also deliver government documents to their homes for the same cost?

Estonia is considered to be one of the world’s first movers in digital transformation, especially when it comes to delivering government services. They have even made voting go digital. The key lessons to learn from Estonia are that you make data move, not people; use technology to provide services to citizens, not create impediments; focus on people, not sophisticated technology only as they are the ones who will drive technology; and finally make giant leaps.

In the National Financial Inclusion Report for 2023, we pointed out the big transformation in access to finance in Nepal since we worked on the last report for the United Nations Capital Development Fund (UNCDF) in 2015. Access to finance, payment platforms and insurance have grown in the last eight years. There was a tweet from a bureaucrat, Gopi K Khanal, questioning the financial inclusion at double-digit interest rates. However, we forget that we were a country where bonded labour and a landlord-driven mindset existed just a few decades ago. Instead of taking loans from loan sharks at 48-60 percent per annum, is it not better if people can get access to formal credit at 15 percent?

Corruption money

If digital P2P platforms for lending are launched, where people can get money at slightly higher interest rates than banks, and most of it without collateral, will they not be better than the village loan sharks? We also tend to forget that the money that is peddled by the loan sharks mostly comes from the pot of corruption money of politicians and bureaucrats that cannot come to the formal system. If digitally transparent platforms proliferate and anti-money laundering regulations are strengthened, this graft money will not reach informal money markets. We also saw that despite the challenges of coordination with the Finance Ministry, Nepal Rastra Bank has to be given due credit for pushing the financial inclusion agenda, especially with the governor himself taking a keen interest in leading from the front. If our bank owners were not local business people who want everything in the finance space to become their domain but international players who just worked on banking, we could have accelerated the pace of financial inclusion by using non-banking platforms.

I sometimes imagine if the top leaders of the political parties were put into a room to listen to these conversations, how much they would understand or how many would make an effort to understand. The shift must now be towards educating parliamentarians and making them aware. Since we now have many parliamentarians who understand that the pursuit of knowledge is important, they can accelerate the pace of legislative reforms. These efforts can be part of the Digital Nepal framework of the government, and institutions like the World Bank that are supporting the government can provide resources from countries like Estonia where they have made it happen.