Established in 2019, Governance Lab (GovLab) is a Nepal-based think tank that supports the government in making evidence-based policy decisions. GovLab focuses on conducting policy research, strengthening policy implementation capacity, and fortifying research and governance ecosystems. The organisation has undertaken research on topics including micro-small and medium enterprises (MSME) growth, the dignity of labour, Covid-19-related financial and health issues, and the political economy for inclusive growth, with funding from various development and private sector organisations. GovLab employs 13 staff members.

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Strengthening Public Governance System of Lumbini Province to Bolster the Business Enabling Environment for MSMEs

CASA partnered with GovLab to tackle the persistent challenges facing agri-SMEs in Lumbini Province, despite existing national and provincial policy frameworks. The collaboration focused on strengthening the capacity of provincial government officials by enhancing their consultative decision-making skills and enabling structured collaboration with business organisations, academia, think tanks, and development partners. Through regular workshops, joint research, and consultation sessions, the initiative aimed to create formal mechanisms for continuous and informed input into SME-focused policymaking.

The programme also emphasised building the capabilities of key provincial ministries, including Industry, Agriculture, and Energy, recognising their vital roles in supporting agribusiness growth and infrastructure development. By leveraging knowledge from academic institutions and international partners, CASA and GovLab sought to bridge expertise gaps, address regulatory complexities, improve access to finance, and overcome infrastructure challenges. These efforts were designed to create a more conducive business environment that supports sustainable development and the successful implementation of national and provincial agricultural strategies.

The rapid policy assessment of agri-MSMEs in Lumbini Province identified numerous systemic challenges, including weak policy implementation, poor seed quality, limited irrigation, financial constraints, and inadequate technical support for farmers. The assessment highlighted gaps in policy formulation, coordination among institutions, and market development, emphasising the need for integrated, market-oriented policies with stronger governance and targeted support for agro-enterprises. It also pointed out issues such as fragmented programming, cross-border trade challenges, and underutilised roles of key ministries, all of which hamper agribusiness growth and MSME development in the province.

Building on these findings, a stakeholder consultation was held at the Ministry of Industry, Tourism, and Transport (MoITT) in Deukhuri, Lumbini Province, engaging around 30 provincial stakeholders from key ministries and agencies. The consultation shared assessment results fostered dialogue on critical issues, and aligned policy priorities with stakeholder input. It also marked a political commitment to MSME support, with government leaders reaffirming budget allocation plans for FY 2082/83 (2025/26) under the Growth Entrepreneurship and Employment Promotion (GEEP) programme. This event laid the groundwork for targeted policy reforms and the selection of pilot municipalities to address the challenges identified in the rapid assessment.

The official launch of the Rapid Results Initiative (RRI) formalised efforts to strengthen the agri-MSME business environment, introducing a structured approach to selecting municipalities and defining roles for implementation teams. Strong political backing was secured, with commitments for necessary budget support and accountability measures. Complementing this, a Pre-Budget Policy Dialogue organised with the Office of the Chief Minister and Governance Lab ensured inclusive, evidence-based budget planning focused on entrepreneurship, job creation, and youth empowerment. The dialogue influenced the province’s FY 2082/83 (2025/26) policies and programmes, including a public commitment to entrepreneurship promotion and a dedicated NPR 3 million (£15,000) budget for skills-based self-employment and entrepreneurship development, signaling tangible progress toward fostering a more conducive environment for agribusiness and MSME growth in Lumbini Province.

While these achievements mark significant progress in strengthening the agri-MSME ecosystem in Lumbini Province, the implementation of these activities is yet to be fully monitored and evaluated. This foundation provides a valuable starting point for other development organisations to build upon, ensuring sustained support, continuous improvement, and greater impact in fostering entrepreneurship, inclusive growth, and sustainable development in the region.

Updated: August 2025