Average returns for microenterprises in Nepal have fallen below the country's minimum urban wage, according to a new report from the World Bank.
The findings highlight a structural challenge for the South Asian economy, where more than half of all microbusinesses operate without formal registration.
The report attributes the persistence of the informal sector to a combination of low owner incomes, limited job creation opportunities, and weak incentives for entrepreneurs to formalize their operations.
When the financial return on a microenterprise does not exceed the baseline wage available in the urban labor market, the economic rationale for maintaining a registered business diminishes significantly.
This development adds to a broader picture of economic headwinds in Nepal.
Recent data showed that merchandise exports to China contracted sharply in the first 10 months of the fiscal year, falling by more than 41 percent.