Highly developed countries often owe their economic success to their early adoption and integration of high-tech systems that increase efficiency and productivity. While digital tools and connectivity were vital to their growth, it was also significantly propelled by reliable electricity, time-saving household appliances (like stoves, filters, and washing machines), and inclusive labor force participation of women and people of all backgrounds. This is missing in the case of Nepal. And this might be just what it needs for greater push into industrialization.
Theoretically, such technologies should be even more profitable in developing countries due to lower labor and capital costs. Yet in practice, this transfer often does not occur. Nepal still remains trapped in a cycle where high-potential technologies have often failed to take root or scale. This is because technologies cannot simply be imported and “transplanted.” Without foundational capacities of markets and institutions, credit access, skilled labor, and infrastructure, many tech solutions fail.
The Contrasting Reality in Nepal
Digital technology is already taking huge strides in Nepal, with almost ubiquitous use of social media and a 131% mobile penetration rate. In 2022, the tech sector generated USD 515 million in revenue, contributing 1.4% to the GDP. Nagarik App and various other AgriTech software are improving how systems operate across public and private enterprises. But software alone does not constitute technological advancement. Nepal ranks 109th in the Global Innovation Index 2024. Further, digital growth has not translated to a substantial improvement in quality of life for many people, who still struggle with lack of electricity, water, and basic services. For actual industrial progress, technology needs to move beyond ICT exports for revenues. It needs to be integrated into daily life and work to solve such issues.
From unused smart boards in rural classrooms to high-end agricultural machines gathering rust, examples of the failure of tech integration are galore. These cases highlight a deeper lack of readiness. Traditional lifestyles and labor practices are still rampant which is a big barrier for broader industrialization. But why is this the case? Why has technology not been utilized to its full extent in businesses and daily life? This article explores some of the reasons that technology is not integrated in broader day-to-day uses for improved quality of life and considers short- to medium-term alternatives that prepare the population for gradual tech adoption without requiring massive upfront investment.
Key Challenges to Technology Adoption
- Fragmented Firms and Smallholders
Over 90% of Nepali firms are small and medium enterprises (SMEs), with more than 50% of those operating informally. Such firms often operate on minimal capital, leveraging social networks to survive without investing in training, equipment, or research and development (R&D).
This is most visible in the agricultural sector where the average landholding is just 0.55 hectares, meaning most agricultural activities are neither commercially engaged nor successful. Small and fragmented holdings make it economically unviable for most farmers to invest in modern machinery, irrigation systems, or other labor-saving technologies, as the benefits are spread over tiny and dispersed plots. Similarly, around 85-90% are family-run businesses, which have been increasingly suffering due to internal and external youth migration.
The manufacturing and processing sector also suffers due to their small scale of operation and fragmented working. Its share in GDP fell from around 9% in 1999/2000 to a stagnant level of 4.87% in 2023/24 AD. Most industries are small-scale with 51,594 out of 56,611 firms in industrial production being small industries. These firms are inherently risk-averse, producing mostly homogeneous goods with low profit margins, and ultimately low retained earnings for reinvestment in expansion with investment in technology. Thus, the ability and willingness of such small informal firms to adopt new technologies is severely constrained.
- Weak Financial Ecosystem and Incentives
Access to affordable finance is another roadblock for technology adoption. Despite the rise in branches of bank and financial institutions (BFI), with 11,650 branches across the country as of 2022, many SMEs remain outside the credit system. Cumbersome credit processes, requiring multiple verifications, involve a significant upfront cost like the credit information charge (CIC) – the cost for the valuation of the collateral, registration and insurance of the collateral, and other associated fees and charges. Informal enterprises, especially in rural areas, also face high interest rates, and often lack financial literacy or management oversight to navigate them.
Moreover, Nepali credit markets remain conservative. BFIs have been found to prioritize collateral over cash flow, penalizing firms without fixed assets or urban proximity. Frequent policy shifts, contradictory policy and budgets, weak enforcement, and bureaucratic hurdles make investors and farmers wary of long-term planning and investments that have higher payback periods, further undermining the incentive for investment in technology.
- Labor Market Dynamics
Nepal’s labor market also inhibits tech adoption. While lower wages have been an advantage for many developing countries, the case is not true for the current scenario in Nepal. Global value chains now make it harder for low-income countries to use their labor-cost advantage to offset their technological disadvantage, by reducing their ability to substitute unskilled labor for other production inputs. Low wages also make manual labor economically attractive compared to capital spending. This suppresses demand for productivity-enhancing machinery and perpetuates low-value, labor-intensive production. Nepal’s labor markets are also not inclusive. Recent data indicate that only about 28–30% of women aged 15 – 64 actively participate in the labor force, compared to 53–54% of men. As a result, a substantial portion of the potential workforce, especially women, remains underutilized. Without a better-skilled, formal workforce, the value of introducing advanced technologies remains unrealized.
Case Studies of Localized Success
To tackle obstacles Nepal faces in technology utilization and optimization, there are many successful examples around the world of technology adoption in developing countries. A compelling example of successful technology adoption in a developing country comes from Bangladesh’s Solar Home System (SHS) program. By 2018, Bangladesh deployed over 4.1 million off-grid solar home systems, providing electricity to 20 million people and contributed USD 474 million in taxes. The success came from tailoring tech to community needs, offering and monitoring micro-financing models, and leveraging institutional support
Another example is Kenya’s Huduma Program which integrated over 60 government services into centralized, tech-supported one-stop shops. By combining digital back-ends with physical centers, the initiative increased public satisfaction, reduced corruption, and improved service delivery. Nepal can take note as this proves that user-centric design, strong institutional coordination, and policy alignment can make tech adoption impactful, even in weak systems.
Similarly, software can also solve farming limitations despite being on a smaller scale. For example, Hello Tractor, a digital platform used in Africa, connects smallholder farmers to affordable tractor rentals via a mobile app. This system helps farmers overcome the high cost and limited availability of farm machinery by allowing them to book tractors on demand, transforming rural economies by making mechanization accessible and affordable.
These examples demonstrate that even in low-infrastructure settings, strategic tech adoption can scale over time and bridge the gap where mainstream infrastructural or institutional development may not yet be applicable.
Conclusion
Nepal should not blindly follow developed nations’ tech paths. Instead, a context-sensitive, inclusive, and adaptive approach is vital, focusing on building user familiarity, reducing resistance, and bridging gaps in skills, financing, and infrastructure. This means moving beyond ICT exports to include labor-saving and utility-enhancing technologies at the household and community level.
Nepal’s opportunity lies in a dual strategy: leapfrogging where possible (especially in ICT and household tech) and developing grassroots community-level solutions when needed. High mobile and broadband penetration, coupled with growing local governance experience, enables effective dissemination of adapted technology. By focusing on community-centered, bottom-up, inclusive innovations, empowering local actors and private firms, Nepal can not only catch up but genuinely leap ahead.
Sarahna Khadka is an economics student at Franklin and Marshall College, Pennsylvania, USA. She has previously interned with The Kathmandu Post, where she reported on small and emerging businesses. She also gained experience at Women LEAD Nepal, where she supported women entrepreneurship initiatives. She is passionate about sustainable urban development and natural resource management, with a focus on creating data-driven solutions for the Global South.
