For anyone living in Nepal, it is all but normal to run to the shop next door quite often—need a kilogram of sugar, one match-stick box or a month long supply of essentials like rice, oil, biscuits and what not—you name it and those Kirana Pasals have it. I call it the shop(s) next door because the Kirana Pasals in urban areas exist in almost every house facing the street and it might not be an understatement to say that people like you and me run to these next door shops every now and then even for something as small as a one rupee worth of wrapped happiness—a chocolate.
Given this ‘deep’ significance of Kirana Pasals, has it ever occurred to you as to why year in and year out these shops go on and never really grow? Yes, most of these shops add new products, perhaps a few more sacks of rice but what I am taking about is a slightly different idea of growth—what my idea of growth entails is that these micro enterprises expand into medium or large-sized operations, like department stores or supermarkets. In saying so, I am not advocating for every shop next door to become a Bhat-bhateni (too wishful!). That said, why don’t they really grow can be attributed to a few causes—inability to access finance, regulatory hurdles or just a sense of content with a small shop (subjective to who the owner is, of course).
Talking about difficulties in terms of access to finance, it is important to understand that such shops are started with an investment of around NRs. 200,000 which mostly comes across in the form of savings and support from friends and family. Such shops are mostly run by a single individual who is both the owner and the manager. The fact that these shops have no elaborate book keeping or formal accounting and that the lines of separation between the owner and the business entity are slightly blurred makes it a little more difficult for formal financial institutions like banks to invest in such ventures, and hence the hindered growth. And minus the investment, there is not much that can come up from meager savings or even friends and family for that matter.
Now that access to finance has been a problem, what are the solutions? As banks have associated risks investing for the expansion of the shops, cooperatives can be a way out. If the insurance industry regulations are eased up, the risk associated with this sector would also be minimized. This would then provide an incentive for commercial banks to enter this market and provide loans on the basis of business plans rather than on collateral.
As much as such shops form a major part of our largely informal economy, these also have the do-gooder spirit as they create a healthy labor market, reduce income and social inequalities, and provide vital goods and services to local communities and markets. These overarching good deeds aside, I wouldn’t know how to survive minus the endlessness of these stores that make buying of goods so easy and efficient. So we do need to understand that these need to grow and not close down unnoticed, right?
Keep posted for I intend to write more on these Shop(s) next door in the upcoming posts!