Beed Insights Issue 2

beedinsights Issue 2 Inside this Issue:

Launch of Business Oxygen (BO2)

1.

Launch of Business Oxygen

2.

Doing Business In Nepal

3.

Interview with Peter Tropper, Chief Investment Officer, IFC

4.

2013: Year of Hope

The launch of Business Oxygen (BO2), a joint venture between Bank of Kathmandu and beed management was launched in January 2012. BO2 is a USD 14 million SME Venture Fund sponsored by International Finance Corporation (IFC).

5.

Nepal As I Travel

6.

Insights on Unleashing Nepal Unleashing You: Leadership Thinkshop

7.

Co Founder Profile

This initiative heralds a new era in providing equity funding for businesses that have limited access to equity financing. The advent of banks and other financial institutions have provided access to collateral

based debt financing in Nepal, but not financing without collateral. BO2 will be investing up to USD 500,000 (NPR 40 million) in Small and Medium Enterprises (SME) that have assets or turnover less than USD 3 billion (NPR 250 billion) or less than 50 employees.

22 February 2013

international bidding process. beed’s prior experience and involvement in structuring and managing funds along with the engagement of Bank of Kathmandu (BOK) in the SME sector provided the winning combination.

Website: www.bo2.com.np Email: info@bo2.com.np

BO2 will be making equity investments in companies that are in the growth phase or are expanding.

The fund manager was selected by IFC based on an

Doing Business in Nepal Released

Client Testimonial

beed has just released its electronic publication, Doing Business in Nepal, a handbook for investors interested in Nepal. The publication outlines the various legal, institutional and other requirements useful for investors.

The publication is available free on beed’s website.

“The Center for Reproductive Rights is an international advocacy NGO that uses the law to advance reproductive freedom as a fundamental human right that all governments are legally obligated to protect, respect, and fulfill. The Center began working with beed in 2011, and has relied on their local networks and expertise throughout the process of operationalizing a local office in Kathmandu. Overall, our experience has been positive. With our headquarters based in New York, in spite of significant time differences and tight deadlines, our project team at beed has proven professional, resourceful, responsive and supportive throughout our engagement.”

Heather Sumba International Operations Manager Center for Reproductive Rights

clients we have served: NMB Bank ● Clean Energy Development Bank ● Everest Bank ● Nabil Bank ● Laxmi Bank ● Rastriya Banijya Bank UNCDF ● DANIDA ● International Finance Corporation (IFC) ● GIZ ● The Asia Foundation ● Niti Foundation ICIMOD ● Word Wildlife Fund (WWF) ● DFID ● Practical Action ● USAID ● Helvetas ● Centre for Reproductive Rights ● SNV Surya Nepal ● Ennovent ● Altai-Himalaya ● Nepal Army Welfare Fund ● Nepal Gas ● Sherpa Adventure Gear ● Summit Trekking Gokarna Forest Resort● Godavari Village Resort ● Hotel Del Annapurna ● Summit Hotel ● Dwarikas Hotel ● Astrek Group Nepal Medical College ● BIOCOMP ● Furse Khola Farmhouse ● Himalayan Distillery ● f1soft ● Nimbus ● Shikhar Insurance Sujal Foods ● Yeti Airlines ● Tiger Tops Group ● Tiger Mountain ● Yeti Travels ● Premier Insurance ● SCT ● NLG Insurance Government of Rwanda, Ministry of Education

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Launch of Business Oxygen, a USD 14 million IFC SME Venture Fund Courtesy: Republica

Peter Tropper Chief Investment Officer, IFC

“Providing risk finance to small businesses in countries with limited ready access to sophisticated capital markets has been the key”

Peter Tropper is the chief investment officer, private equity funds, at the International Finance Corporation (IFC), and a member of the World Bank Group. He oversees a USD 2 billion fund in South Asia for the International Finance Corporation (IFC). He is currently in Nepal to launch Business Oxygen (BO2), the first small and medium enterprises venture fund, in which IFC has invested USD 7 million.

How did Nepal qualify for the venture fund project?

We were looking for countries that did not have a welldeveloped financial sector, especially those where equity markets for small businesses were not available.

Since nobody was providing this sort of support to small businesses, we stepped in.

What will be IFC´s role in the venture fund?

One is to train the fund managers. We will bring our experience from overseas and put it here so that these guys know what is going on.

It is also very important to take these people to other countries where venture funds are being operated in a similar environment. Sec-

ond is to provide technical assistance to people who have received the venture fund´s support.

What´s your stake in the venture fund?

It´s a $14-million fund and we´ve put in $7 million. So we are looking for other investors to put in $7 million in the fund.

Who will mobilize the remaining $7 million?

It´s the job of Business Oxygen, the fund manager. We want lots of individuals and companies here in Nepal to contribute to this fund.

You´ve entered Nepal at a time when the investment climate is not that great.

How optimistic are you about the venture?

IFC works in countries all over the world with all sorts of political situation. This is not new to us. What is important is that small businesses thrive regardless of what´s going around them.

The politics and the government do not matter much to them because they are focused on their own businesses. And on top of that they need money to grow. So investments in SMEs are really good investment.

So you´re confident about taking back your investment with returns.

Oh sure. That´s what we do.

Our job is to promote the private sector. And the only way to promote the private sector is by investing in companies that are successful.

Yes, sometimes we make mistakes, but not very often.

You manage a $2 billion fund at IFC. Are any more similar projects in pipeline for Nepal?

No. Not for now. We are going to put all our efforts into this one. And I´m hoping that this venture becomes successful, so that others can follow. So our priority here is not to promote one particular company (Business Oxygen) but to get the private sector going.

How do you evaluate SME sector here?

Over 90 percent of businesses in Nepal are SMEs. If you go to places like the US, 90 percent of businesses are big ones. It´s just the opposite here and from this perspective this is a deal flow for us. That means most of the companies operating in Nepal are eligible for the venture fund´s investment.

Sound Bites

“ We hope venture funds bring a new dimension to enterprise development in the country” -Ajay Shrestha, BoK

“ This fund will widen financing options for SMEs in Nepal, helping growth and sustainability” -Kyle K Kelhofer, IFC

“ Our main focus is developing the capacity of firms so that they can reach the next level” -Suman Rayamajhi, BO2

“ This is yet another leap for beed, an organization that believes in being associated with pioneering efforts and innovation” - Sujeev Shakya, beed

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2013: Year of Hope When one looks back at 2012, one keeps on wondering whether it was a good or bad year. If one goes just by newspaper headings and the endless discussions on television, it may seem things have become far worse than when we began a year back. However, there are lot of things to cheer about and, therefore, we at beed have christened 2013 as the “Year of Hope� for Nepal.

In 2012, people realized that their economic and social development was not really tied to politics. If there is stability, it is well and good; but six decades of Nepali political history shows that political instability is the only constant. Therefore, people, especially outside Kathmandu, have realized that we need to be entrepreneurial, try out new ideas and build a sustainable income stream.

Courtesy: The Kathmandu Post

sumption is right or wrong, but the reality is that consumption will only drive the economy.

The year 2012 has also shown that if there is a will, there is a way for the government to enforce law and order. The zero tolerance to drinking and driving celebrated its anniversary, but the liquor business and consumption did not decline.

Only the modes of distribution and consumption changed and saved many lives. We forget that only a small segment of Nepali society owns vehicles, so the law does not impact the majority. Women traffic cops stand on the roads late at night to check potentially male drunken drivers. Where else in South Asia can this happen? We have more

women taking on the reins of households, wheels and jobs. The time has come to change the views of gender experts, those who make money talking about gender mainstreaming at seminars, and yell at domestic women or their daughters-in-law at home.

The year 2012 saw the unearthing of financial crimes, the unfolding of more stories of the business-politics nexus, the loss of credibility of private sector associations and the occasional guts of the judiciary. This has made people wonder whether spending time to run around finding more designations to put on one's business card rather than focusing on the real stuff of growing one's business is not a waste of time.

Sujeev Shakya CEO, beed management

More people are realizing that it is better to corporatize, follow transparency and inculcate professionalism for sustainable growth.

People in rural areas and small towns, who are continuously taken to various donors, INGOs and NGO meetings, are realizing that is better to focus on one's business that has become successful rather than waste time at endless meetings, seminars and other programs.

People are also realizing that there is more economic growth; one sees fewer signboards of INGOs and NGOs. The business of poverty and yelling at the top of their voices that Nepal is poor does provide a few consulting jobs and sustains a few NGOs, but that will not change the tide for Nepal.

Nepal is a country of 26 million people, more than Australia and three-fourths of Canada. So the livelihood sustenance of so many people and the growth of their aspiration will continue to fuel growth. Of course, a lot of seminars will be organized to determine whether such growth fuelled by con-

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People are also realizing that one can do well and excel in the things one does without kowtowing to politicians or having a bureaucrat as a relative. Communication, the internet and social media have changed how people, in different parts of the country, perceive livelihoods. This change is permanent, and if politicians and private sector players cannot understand this, they will definitely be left behind.

Customers and voters are similar: if you cannot take care of them, someone else will.

The power of Glo-Yuva, the ever globalizing Nepali youth, will change the discourse and Nepal's course in the future. In the scene of the arts, literature and music, while the older generation gets felicitated at mutual admiration clubs, it is the younger generation that is laughing all the way to the bank. Younger IT entrepreneurs are making better bucks and are looking beyond Nepal, as the older ones are still busy seeking votes for the next association election. More young Nepalis are taking to education, changing the lives of many more younger ones.

Outside Nepal, icons like

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Prabal Gurung are shaping the ambition of Nepalis, and nothing in this world remains outside the realm of a young Nepali. Listening to college Nepalis gives you the best hope: they see the society, the world and Nepal prospering and changing for the better. In 2013, older leaders in all realms of life, should go and listen to these young minds, not go and lecture them on issues they are either not interested in ing enterprise to the sustainor are far from the reality ability of philanthropic and they live in. other development activities has begun, which will start The stagnation of the Euro- taking shape in a bigger way. pean economy is already The uniqueness of Nepal will letting foundations and strengthen community inother investors under the volvement with more public USD 10 million range to look private community partnerfor investment avenues. ships (PPCP) that will surely They are going to Africa; and push at least some hydroSouth Asia, where Nepal power projects to make hiscontinues to be the best tory by being the first to use destination for them. As in community as a comparative India, without USD 100 mil- and strategic advantage. lion, it is difficult to make any noise. We are already Tourism will continue to see seeing many of them doing growth; and it is time for their familiarization trips. In tourism entrepreneurs to 2013, some of them will start thinking on how we can actually materialize. tap the 10% of the 26 million Nepali population for The business of develop- domestic tourism rather ment will start shifting to than trying to figure out direct engagement with the one's pie out of the million issue, rather than continu- tourists that come to Nepal. ously writing reports, hosting With road networks increasseminars and conferences ing along with vehicle denor organizing junkets. Link- sity, domestic movement will grow in the years to come.

Whether or not a constitution is made or elections held, Nepal needs to focus on two things in 2013. One, the discourse has to shift from rights to responsibilities and becoming accountable to society. A new constitution will not force instant noodles or other packaged food sellers to pick up the trash they generate, but the

companies can definitely charge 50 paisa for collecting each packet through their dealer network and dispose it responsibly.

Similarly, the private sector can come out with a code of conduct that they can abide by. Labor unions can just think of one responsibility they can take on additionally for every 10 rights they demand.

Second, inculcation of civic sense can begin and be propagated. Companies and organizations that get posters stuck on to every open space they get without paying, should feel responsible for removing them. Vehicle dealers, who run profitable businesses, can help make people "realize" and not "train" them on issues of civic responsibilities while driving. Schools can start making this something their students grow up with, and perhaps teachers should inculcate the habit in themselves first. Nepal has moved a long way since it opened up to the outside world in 1950. In 2013, let us hope it will move further.

Of course, for Nepal to unleash its potentials.

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Nepal As I Travel...

They say Kathmandu does not define Nepal and nothing justifies it more when you experience it for yourself. Four years in beed and travel was the perk that came with the job. Over the past few years, I have travelled to places where I would never have set foot, traversed to about three dozen districts- across Mechi to Mahakali getting a good taste of the mountains, hills and plains of Nepal. Reminiscing on each of my journeys, I have much to speak of Nepal and its “Nepalipana”.

Many Nepalis have found opportunities beyond borders in the oil rich countries of the Gulf, leaving behind several prospects for other people to tap into. Unfortunately, with the younger generation going missing intermittently, the older generation and community’s incapacitated state leave few things to pin our hopes on.

Nonetheless, sparks of ideas and innovation (like the smokeless chulos) have been brought in by various social organizations to capitalize on the existing opportunities (especially in forestry and Non Timber Forestry Products, agriculture and dairy farming), however the impact has been lower than expected.

Strangely, it is not that people have little interest in taking on opportunities and making a change; it is sometimes the institutions that pay little attention to those that want to make a difference. Change requires significant investments; however institutions that provide

financing opportunities provide little to facilitate change, and continue to remain inclined towards traditional processes. Investments that deliver impact are constrained due to the lack of bankable clients (one

with adequate collaterals) and the unwillingness to diversify their portfolios due to the high risks associated with the nature of the loan requirement in remote areas. Banks and financial institutions have been

Sudip Bhaju beed

“Politics is the topic of discussion in most urban areas where people are supposedly very busy, and yet people continue to complain rather take responsibility and work towards facilitating positive change. ” established in almost every district headquarter, but they have not been able to localize themselves to the demands of the people and breathe life into the business operations that could make a significant impact in these areas.

Where banks have not extended its reach, one thing that has is Red Bull- the energy drink, which has reached every nook and corner of Nepal. Interestingly, the route taken by Red Bull continues to remain untouched and untried by the many domestic products in Nepal. Hinwa (a Nepali brand of wine from Sankhuwasabha) is one that has made it so far, with stocks lasting until Dasain every year. Also Kathmandu is not the only market, globalization has opened a whole new playing field wherein Nepal possesses the resources which can be developed to enter and compete

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page6 global products. If body shop can sell at a premium then a similar Nepali product like Lavanya can also reach this level. Products like these need to be infused with technical intervention and market linkages that would help in expanding their reach and acceptability. I often found people stuck or satisfied selling raw or semi finished goods that fetch meager returns when with a bit of value addition, these products could make it to the shelves. The major issue here is a lack of training and market linkages, and the well known Nepali short term psyche.

Several regions in the country are not connected by road or by air. There are roads that can barely be called roads (bulldozed, un-

beedinsights pitched, washed away and resurrected every year) and airports that are open meadows such as the Mahendranagar airport. These areas are far beyond reach yet flashes of their stories cover entire pages of a newspaper. They top the lists of every government’s action plan but are still kept far below the radar of the government.

These are the districts that have been deprived of basic social facilities- food, medicine, healthcare and transport, and yet the government continues to remain apathetic towards them and make a mockery of the little services they provide them.

In the light of such fate, communities in these areas have joined hands to build a network of resources they

need. For instance, communities have transferred ownership of natural resources from the state to themselves. This has led to proper management, improvement in their livelihood and overall development of the region. The micro hydro project in Ghunsa Valley or the wind energy project on the way to Nar-Phu village in Gorkha that light these remote villages for almost 24 hrs a day is a good example of successful community efforts.

Politics is the topic of discussion in most urban areas where people are supposedly very busy, and yet people continue to complain rather take responsibility and work towards facilitating positive change.

People living in the remote areas of

Nepal on the other hand have acquainted themselves to a life free of drudgery and complaints. The women, children and elderly lead simple, happy and composed lives. They are unaffected by power and politics, and unaware of what is happening or what a Constitution means. Yet they are, generous, hospitable and helpful, and religiously follow their belief in culture and tradition, constantly working to survive and maintaining a spirit of positivity. Perhaps this is what is missing in urban Nepal. It is only when you travel to these remote regions of the country that you find the people that continue to identify and represent the brand Nepal that truly was.

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From Left to Right: Top Row: Hira Maharjan, Raju Tuladhar, Shayasta Tuladhar, Rojesh Bhakta Shrestha, Sudip Bhaju, Puja Tandon, Raju KC, Atmaram Thapa, Ritu Shakya, Abhishek Pradhan Bottom Row: Suman Rayamajhi, Chandni Singh Karki, Pragya Ratna Shakyae, Suvash Thapa, Shristi Singh, Sujeev Shakya, Ramesh Pathak, Ritu Tamrakar, Anup Subedi

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Insights from Unleashing Nepal Unleashing You: Leadership Thinkshop beed leadership center launched the Unleashing Nepal-Unleashing You leadership thinkshop in early 2012. The thinkshop is a platform to spend two days thinking about you: where you are in life, where you want to be and how you imagine getting there. As part of the organizing team, I had the opportunity to watch the process closely and in turn use the time to reflect on myself. Following are some of my observations.

Re-defining Leadership I always found leadership to be an abstract term that I appreciated, but found difficult to break down and implement in everyday situations. Many of the participants seemed to be struggling with the same issues as me: Who is a leader? A simple sign on the doormat reading “Please wipe off your designations before you enter” threw off many people. Some people even admitted that despite being in a professional leadership positions they doubted they would have any followers, once they were removed from their professional positions.

I watched heated discussions to flesh out what leadership meant. Various definitions of what a leader should be were pointed out with firm beliefs but each persuasive perspective was shot down by other equally compelling perspectives. The discussions made me revisit my definition of leadership and in due course I developed a broad and inclusive definition: a leader is someone who takes initiatives,

whether it be to inspire one self or others.

Dreaming Big One of most striking lessons that I learnt at the thinkshop was that immediate goals can be frustrating. Although a goal such as getting a promotion to reach the next level in an organization would seem to be SMART (Specific, Measurable, Attainable, Realistic and Timely), it is so specific that it can be frustrating especially if you are not able to attain it. But with a big goal there are various avenues for you to reach the goal, so that if one fails you pick another one, till you find one that suits you. The goal is then flexible enough to stand the test of time and motivate us to push boundaries, both in ourselves and our surroundings.

If organizations that do not have a clearly stated vision and mission are thought to be directionless and chaotic, I realized that the same is true for individuals. Unlike with immediate goals, long term goals make it is easier to keep the momentum going and remain motivated.

Similarly, long term goals means that the habits that you inculcate in yourself are sustained efforts to reach your big goals over time.

Managing time Another important lesson I learnt at the thinkshop was that some of our issues with time management may be rooted in our culture and as such it is not a surprise to see that most people struggle with managing time.

Chronenics, the study of

time perceptions, differentiates between monochronic cultures and polychromic cultures. People from cultures that are monochronic Chandni Singh do one thing at a time and beed time is segmented into precise, small units and time is “If organizations that do scheduled, arranged and managed. Time is of abso- not have clearly stated vision lute essence in these culand mission are thought to tures. Contrarily, people from polychronic cultures do be chaotic, I realized that several things at the same the same is true for time and take a more fluid approach to scheduling individuals” time. In these cultures, people do not put a lot of em80% of your time and leave phasis on time.

20% for any unforeseeable We are clearly a polychronic issues that may arise. This society. Many participants model can provide both flexicomplained that they were bility and structure that we obligated to entertain cli- need to be efficient. Another ents, who want to chit chat, important lesson to manage when more important work time is to focus on the deis pending. Like many of the tails. By getting into the participants, I would fre- habit of looking at one hour quently feel duty-bound to as 60 minutes for example, attend all social functions it is possible to squeeze in a and every informal gather- quick phone call in the 5 ing. No wonder most of us minutes that we have becomplain of having a hard tween meetings for example. time completing work or lit- Accumulated efforts in this tle or no time left for family. regard can provide the addiAlthough there are a lot of tional time to fulfill the many positives of a polychronic obligations that we may society, (we have a strong have. tendency to build long-term relationships) we would benefit from learning a thing or two from the monochronics. As we get stretched thin by the various commitments, we must move away from looking at time commitments as an objective to be achieved if possible.

There is of course no point in planning to such detail that there is no scope of spontaneity. An interesting lesson is to use the 80-20 model, where you plan for

Most participants of the Unleashing Nepal Unleashing You thinkshop attested to the fact that they do not remember the last time they had spent so much time thinking about themselves.

The same is probably true for most others. It is very easy to get caught up in the demands of everyday life such that most of us find it taxing to take time out to plan, to dream. But a vision for the future may be all you need to motivate and perform to your full potential.

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beed management private limited p.o. box 7025 krishna galli pulchowk lalitpur-3 nepal phone: +977 - 1 - 5548405 e-mail: beedinsights@beed.com.np website: www.beed.com.np

The beed eco-system comprises of beed management, the flagship management consulting and advisory firm; beed invest, a portfolio management firm; beed leadership center, a division dedicated to work on thought leadership, beed reality, a division that works on real estate advisory; beed devCon, a division that manages development consulting assignments in conjunction with Nepal Economic Forum, the not-for-profit promoted by beed, and business oxygen, a fund management company. credit rating agency nepal (crane) is a credit rating agency to be operated through a joint venture arrangement with Care Ratings India.

beedinsights is an in-house production Š beed management private limited, all rights reserved.

co—founders profile

puja tandon is a management consulting specialist and has more than ten years of experience with the private and public sector. Due to her strong interest in private sector development, she has worked closely with international organizations, local nonprofits, institutions of the public and private sector including various ministries of Nepal throughout her career. She has extensive knowledge and skills in areas of the private sector related to corporate advisory and has led diverse teams on development consulting assignments.

She has varied exposure in international class legal documentation and project feasibilities for new business development.

sujeev shakya is the CEO of beed. With a keen economic sense and extensive corporate experience in developing strategy, business development, consulting and planning, as well as in direct line management for over fifteen years, Sujeev is essentially a Chartered Accountant and also has a Diploma in International Marketing from Boston University, USA. He is one of the few from the private sector to be awarded the Hubert H Humphrey Fellowship by the US Department of State. With extensive domain knowledge in various industries, good risk management and environment management abilities and a strong network within the financial and multilateral community, Sujeev is an enterprising corporate executive who believes in and delivers business excellence.

suman rayamajhi is the CEO of Business Oxygen, a USD 14 million IFC SME Venture Fund. He has over ten years plus of working experience in the corporate, capital market and financial sectors. Suman has experience working with the World Bank for the Financial Sector Reform Project, a Regional Manager at Rastriya Banijya Bank (RBB) for year and half, and expertise in enterprise valuation, deal structuring for merger & acquisitions, diagnostic studies of organizations, strategic planning, fund structuring / management and financing of hydro projects; and has a varied exposure in equity research and portfolio management activities.

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