On January 13, 2026, the Nepal Statistics Office (NSO) released Nepal’s first National Transfer Accounts Report focusing on lifetime deficit analysis. The report provides an assessment of age-specific consumption and labor income patterns of Nepali citizens and, in doing so, offers critical insights into how economic resources are generated and redistributed across generations in Nepal. While the report focuses on age-based income and consumption patterns, its findings have broader economic implications, particularly for savings, investment, and access to finance for entrepreneurship in Nepal.
Understanding the Life-Cycle Deficit in Nepal
A life-cycle deficit occurs when the average consumption of individuals in a specific age group exceeds the labor income they generate.
In per capita terms, the life-cycle deficit is calculated as:
Per capita life-cycle deficit = Per capita consumption − Per capita labor income
According to NSO, from birth to the age of 26, average consumption exceeds labor income in Nepal. Individuals only begin to generate a surplus between the ages of 27 and 46. After the age of 47, consumption again surpasses labor income, leading to a renewed deficit that continues into old age.
This means that, on average, Nepali citizens experience economic surplus for only about 20 years of their life cycle. The deficits experienced before the age of 27 and after the age of 46 are financed through a combination of savings and investment, private (familial) transfers, and public transfers. In practical terms, working-age individuals redistribute economic resources to dependent groups such as children and the elderly to address the deficit.
Implications for Savings and Investment
The narrow life-cycle surplus between the ages of 27 and 46 can limit an individual’s ability to accumulate capital and mobilize it toward risk-taking or entrepreneurial ventures. This is because this is the period when most individuals have responsibilities such as supporting their children and younger dependents, managing household expenditures expected of them, and accumulating savings for retirement, among others. Thus, the life-cycle deficit framework, in addition to being a demographic accounting tool, can provide insight into structural conditions affecting enterprise development in Nepal.
Entrepreneurship and the Funding Constraint
Improving access to finance is critical to strengthening Nepal’s entrepreneurial ecosystem. In developed countries, bootstrapping, or funding, your business can be a sensible idea due to social safety nets such as public healthcare, pension systems, and established insurance mechanisms. For instance, a survey conducted by Wakefield Research on behalf of Square, among 250 Gen Z business owners in the United States, found that nearly half (45%) used their own savings to start their businesses.
However, as aforementioned, the ability to rely on personal savings to bootstrap your business in Nepal is limited in Nepal due to narrow life-cycle surplus and responsibilities put on them during that period. Domestic financing patterns reflect this limitation as well.
According to the 2025 Asia Small and Medium-Sized Enterprise Monitor published by the Asian Development Bank (ADB), most ancestral property funded the largest share (33.1%) of micro, small, and medium enterprise (MSME) start-up financing in Nepal during FY 2024/25 AD (2081/82 BS). Income and personal savings accounted for 25.8% of start-up capital. Formal financial institutions such as banks contributed 16.0%, cooperatives 5.9%, and informal credit sources 8.0%. Remittance income financed 6.8% of start-ups, while venture capital accounted for only 0.5%. Other miscellaneous sources comprised 3.9%.
These figures provide a need for reflection for several structural characteristics of Nepal’s entrepreneurial financing landscape. First, the heavy reliance on ancestral property (33.1%) suggests that inherited wealth plays a significant role in business formation, implying that entrepreneurship may be more accessible to those with pre-existing assets, rather than those with innovative ideas but limited family wealth.
Second, personal savings and income contributing 25.8% suggests that capacity to accumulate meaningful savings for business investment is constrained for many households in Nepal. Third, formal financial institutions accounting for only 16.0% of start-up financing indicates limited penetration of bank-based credit for new enterprises, potentially due to collateral requirements and risk aversion. Fourth, venture capital’s share of just 0.5% underscores the near absence of institutional risk capital in Nepal’s MSME ecosystem.
Policy Implications
The findings of the National Transfer Accounts Report invite policymakers to address the challenges caused by the life-cycle deficit and the narrow window of surplus in the ability of individuals to accumulate capital and mobilize it toward entrepreneurial ventures. Some efforts are already underway to confront these challenges.
On February 10, 2026, Nepal Rastra Bank (NRB) and Rastriya Banijya Bank (RBB) signed a Memorandum of Understanding (MoU) to operate a “Revolving Fund” specifically designed to expand financial access and promote MSMEs in rural and semi-urban areas. This initiative aims to strengthen the local economy by expanding banking services to underserved populations and promoting small-scale enterprises through accessible financing. Ultimately, the project is geared toward stimulating sustainable economic growth and creating local employment opportunities.
The Government of Nepal, through banks and financial institutions (BFIs), has also been providing interest subsidies on 10 different categories of loans for the past seven years, including the Educated Youth Self-Employment Loan, Women Entrepreneurship Loan, and Youth Self-Employment Loan. However, the number of loans disbursed under these schemes has remained low. Challenges persist due to extensive paperwork, as well as a lack of awareness and limited access.
The Industrial Enterprise Development Institute (IEDI), under the Ministry of Industry, Commerce and Supplies (MoICS), has also been providing subsidized startup loans to support new and innovative business ventures by offering financial assistance without requiring traditional collateral.
However, additional policy reforms are needed to ensure that more individuals are willing to take risks and begin their entrepreneurial journeys. Social protection system of Nepal must be strengthened by providing proper insurance schemes, pension schemes, and other safety nets. This is because entrepreneurs are more likely to mobilize their funds toward risky ventures when there is assurance that they will be supported if their businesses fail. Savings and retail investments should also be encouraged to reduce dependency on ancestral properties, aid, subsidies. In Nepal, the life-cycle deficit is further exacerbated by the high unemployment rate of 12.7%. Therefore, job creation, productivity enhancement, and skill development programs are also essential.
Subsidies, concessional loans, and grant programs have supported many aspiring entrepreneurs in Nepal. Such interventions remain important components of enterprise promotion. However, as most startups ultimately fail, entrepreneurship requires a culture of risk-taking that enables individuals to mobilize their limited surplus resources toward uncertain ventures. While discussions around technology adoption, regulatory reform, financial inclusion, and targeted credit programs are essential, policymakers must confront more fundamental questions. Will entrepreneurs be supported only when they succeed, or also when they fail? Should access to entrepreneurship depend on ancestral property rather than innovative ideas? In a country where the life-cycle surplus is both narrow and burdened with intergenerational responsibilities, the state must go beyond isolated financing schemes and build a broader ecosystem that reduces the cost of failure.
Aaryan Kuikel is a Beed Fellow at beed management. He holds a Bachelor's degree in Business Administration from Kathmandu University with a major in Finance. Prior to joining beed, he interned at TEAM Ventures, an alternative investment firm, where he gained experience in financial markets, the private equity landscape, and climate investing.
