Nepal's digital finance and lessons from our mobile money revolution

In Kathmandu's iconic Thamel district, the rhythm of daily life feels steady, steeped in tradition. The narrow lanes buzz gently with scooters and the soft chatter of locals. Amid temples and tea stalls, signs of digital transformation quietly surface-QR codes (quick-response codes) propped up on vegetable stands, e-wallet apps visible on smartphones. Slowly but surely, Nepal is inching toward a digitised financial future. However, the pace remains cautious and measured compared to countries like Kenya. Nepal's economy, according to the World Bank's April 2025 Nepal Development Update, is expected to grow by 4.5 per cent this financial year, up from 3.9 per cent in the last financial year. This is despite setbacks caused by devastating natural disasters in late 2024. Growth will largely be driven by domestic trade, electricity generation, and an upswing in agricultural output, particularly paddy farming. Even with these economic gains, Nepal's digital finance sector is still playing catch-up with its peers. Unlike Kenya-where mobile money has been a game-changer for over a decade, Nepal's transition to digital financial services only began to gain traction during the Covid-19 pandemic. To better understand Nepal's economic landscape and the slow adoption of digital finance, The Standard sat down with Dikshya Singh, an economist and researcher at the South Asia Watch on Trade, Economics and Environment in Kathmandu. "We were late entrants to the digital currency ecosystem," explains Singh. "Platforms for In Kathmandu's iconic Thamel district, the rhythm of daily life feels steady, steeped in tradition. The narrow lanes buzz gently with scooters and the soft chatter of locals. Amid temples and tea stalls, signs of digital transformation quietly surface-QR codes (quick-response codes) propped up on vegetable stands, e-wallet apps visible on smartphones. Slowly but surely, Nepal is inching toward a digitised financial future. However, the pace remains cautious and measured compared to countries like Kenya. Nepal's economy, according to the World Bank's April 2025 Nepal Development Update, is expected to grow by 4.5 per cent this financial year, up from 3.9 per cent in the last financial year. This is despite setbacks caused by devastating natural disasters in late 2024. Growth will largely be driven by domestic trade, electricity generation, and an upswing in agricultural output, particularly paddy farming. Even with these economic gains, Nepal's digital finance sector is still playing catch-up with its peers. Unlike Kenya-where mobile money has been a game-changer for over a decade, Nepal's transition to digital financial services only began to gain traction during the Covid-19 pandemic. To better understand Nepal's economic landscape and the slow adoption of digital finance, The Standard sat down with Dikshya Singh, an economist and researcher at the South Asia Watch on Trade, Economics and Environment in Kathmandu. "We were late entrants to the digital currency ecosystem," explains Singh. "Platforms for mobile wallets like eSewa and Khalti were introduced around 2010 or 2011, but there wasn't a big push from financial institutions. The companies introducing them lacked the deep pockets to market their platforms." Kenya's digital economy has been largely driven by the widespread adoption of M-Pesa, a mobile money service launched in 2007 by Safaricom, and Airtel Money. Today, over 96 per cent of Kenyan households use mobile money, enabling access to financial services even in remote villages. Digital finance has become deeply embedded in everyday life, from school fees to public transport to government payments. Kenya's GDP stood at $111.7 billion (Sh14.47 trillion in 2023), with mobile money and fintech contributing significantly to its economic dynamism. Nepal, with a GDP of around $40 billion (5.46 trillion), is only just beginning to explore the full potential of digital financial tools. According to Singh, Covid was a turning point for Nepal's fintech sector. "People became more concerned about handling cash, and this led to a surge in QR-code adoption," she explains. "We've seen remarkable growth since then. Today, even small roadside vendors in Kathmandu use QR payment systems. It's convenient, it's growing-but we started late." Still, the transition was reactive rather than strategic, unlike in Kenya, where Safaricom's infrastructure and marketing muscle propelled M-Pesa to ubiquity. Nepal's platforms were introduced by smaller companies without large-scale capital or outreach capacity. But the ground is shifting. As smartphone penetration surges and younger consumers demand convenience, digital transactions are gaining popularity, particularly in urban centres. Nepal's economic outlook for the financial year 2025 and beyond appears cautiously optimistic. Growth is projected to average 5.4 per cent annually between FY26 and FY27, mainly driven by the services sector, according to the World Bank. A resurgence in merchandise imports is also expected to stimulate trade activity. The industrial sector will be buoyed by increased electricity generation and construction-two areas receiving policy and financial support. Efforts to export surplus hydropower to neighbouring countries are expected to generate revenue and reduce the fiscal deficit, which is projected to hover around 2.5 per cent of GDP through FY25, before inching up to 2.9 per cent by FY27. Agriculture, a key employer, is set to grow by 3.2 per cent in the financial year 2025, thanks to good monsoon seasons, and could reach 3.3 per cent by FY27. This growth is crucial, considering that many rural Nepalis depend on seasonal farming for their livelihoods. Inflation, too, is stabilising. From 7.7 per cent in FY24, it is expected to ease to five per cent in FY25 and average 4.4 per cent over the next two years. This is partly due to improved agricultural output and Nepal's currency peg to the Indian Rupee, which itself is benefiting from reduced inflation in India. Kenya's shilling is directly tied to global exchange rates, especially the US dollar, oscillating at a Sh130 to the greenback. Nepal, however, operates differently. "Nepal's exchange rate isn't directly pegged to the dollar-it's fixed to the Indian Rupee," Singh explains. "If the Indian currency depreciates, so does ours. We don't control our exchange rate; we follow India's lead." Kathmandu Valley, which encompasses three districts, is Nepal's economic heartbeat-contributing over 50 per cent of national GDP. The capital hosts nearly all corporate offices, government ministries, and financial institutions. But this overconcentration presents bottlenecks. "Kathmandu is congested and overstretched," Singh says. "The rest of the country misses out on development opportunities. Decentralising growth is now a national priority under our federal system." Efforts are underway to build regional economic hubs across the seven provinces, but meaningful change will take time. Singh believes it may take 10-20 years before other cities rival Kathmandu in terms of economic activity. One of the most defining features of Nepal's economy is its dependency on remittances. Millions of Nepalis work abroad, especially in the Gulf, Malaysia and India. The money they send home supports household consumption and keeps poverty at bay, but it is also draining the country of its youthful, productive workforce. "We're exporting our labour force instead of building domestic employment capacity," Singh says. "It's unsustainable in the long run." Remittances have helped cushion the current account balance, but the World Bank projects a narrowing surplus in the coming years due to declining migration and a growing trade deficit. Youth unemployment remains a pressing issue. Official figures suggest decent employment rates, but Singh points to widespread underemployment. "Many youths are working part-time in agriculture or informal sectors. They're technically employed but not meaningfully engaged." Tourism is a major economic driver, with Nepal welcoming over 1.2 million visitors in 2024. However, Singh believes the sector's contribution-currently listed at four to five per cent of GDP-is vastly under-reported. "The data mostly includes air arrivals, but thousands of Indian tourists enter by road through our open borders," she explains. "Their impact on local economies, especially in pilgrimage towns and border districts, is significant." Tourists fall into several categories - religious tourists from India visiting pilgrimage sites, adventure seekers climbing the Himalayas and cultural and eco-tourists from countries like China and Bangladesh. Still, tourism faces structural hurdles. Infrastructure in remote areas is underdeveloped, and policy execution remains inconsistent. Singh calls for targeted investment outside the Kathmandu Valley to disperse tourist traffic and encourage broader development. "Kathmandu is doing fairly well, despite everything. If we can decentralise growth, strengthen the manufacturing sector, and keep our youth engaged, Nepal can achieve more sustainable development," Singh noted. were introduced around 2010 or 2011, but there wasn't a big push from financial institutions. The companies introducing them lacked the deep pockets to market their platforms." Kenya's digital economy has been largely driven by the widespread adoption of M-Pesa, a mobile money service launched in 2007 by Safaricom, and Airtel Money. Today, over 96 per cent of Kenyan households use mobile money, enabling access to financial services even in remote villages. Digital finance has become deeply embedded in everyday life, from school fees to public transport to government payments. Kenya's GDP stood at $111.7 billion (Sh14.47 trillion in 2023), with mobile money and fintech contributing significantly to its economic dynamism. Nepal, with a GDP of around $40 billion (5.46 trillion), is only just beginning to explore the full potential of digital financial tools. According to Singh, Covid was a turning point for Nepal's fintech sector. "People became more concerned about handling cash, and this led to a surge in QR-code adoption," she explains. "We've seen remarkable growth since then. Today, even small roadside vendors in Kathmandu use QR payment systems. It's convenient, it's growing-but we started late." Still, the transition was reactive rather than strategic, unlike in Kenya, where Safaricom's infrastructure and marketing muscle propelled M-Pesa to ubiquity. Nepal's platforms were introduced by smaller companies without large-scale capital or outreach capacity. But the ground is shifting. As smartphone penetration surges and younger consumers demand convenience, digital transactions are gaining popularity, particularly in urban centres. Nepal's economic outlook for the financial year 2025 and beyond appears cautiously optimistic. Growth is projected to average 5.4 per cent annually between FY26 and FY27, mainly driven by the services sector, according to the World Bank. A resurgence in merchandise imports is also expected to stimulate trade activity. The industrial sector will be buoyed by increased electricity generation and construction-two areas receiving policy and financial support. Efforts to export surplus hydropower to neighbouring countries are expected to generate revenue and reduce the fiscal deficit, which is projected to hover around 2.5 per cent of GDP through FY25, before inching up to 2.9 per cent by FY27. Agriculture, a key employer, is set to grow by 3.2 per cent in the financial year 2025, thanks to good monsoon seasons, and could reach 3.3 per cent by FY27. This growth is crucial, considering that many rural Nepalis depend on seasonal farming for their livelihoods. Inflation, too, is stabilising. From 7.7 per cent in FY24, it is expected to ease to five per cent in FY25 and average 4.4 per cent over the next two years. This is partly due to improved agricultural output and Nepal's currency peg to the Indian Rupee, which itself is benefiting from reduced inflation in India. Kenya's shilling is directly tied to global exchange rates, especially the US dollar, oscillating at a Sh130 to the greenback. Nepal, however, operates differently. "Nepal's exchange rate isn't directly pegged to the dollar-it's fixed to the Indian Rupee," Singh explains. "If the Indian currency depreciates, so does ours. We don't control our exchange rate; we follow India's lead." Kathmandu Valley, which encompasses three districts, is Nepal's economic heartbeat-contributing over 50 per cent of national GDP. The capital hosts nearly all corporate offices, government ministries, and financial institutions. But this overconcentration presents bottlenecks. "Kathmandu is congested and overstretched," Singh says. "The rest of the country misses out on development opportunities. Decentralising growth is now a national priority under our federal system." Efforts are underway to build regional economic hubs across the seven provinces, but meaningful change will take time. Singh believes it may take 10-20 years before other cities rival Kathmandu in terms of economic activity. One of the most defining features of Nepal's economy is its dependency on remittances. Millions of Nepalis work abroad, especially in the Gulf, Malaysia and India. The money they send home supports household consumption and keeps poverty at bay, but it is also draining the country of its youthful, productive workforce. "We're exporting our labour force instead of building domestic employment capacity," Singh says. "It's unsustainable in the long run." Remittances have helped cushion the current account balance, but the World Bank projects a narrowing surplus in the coming years due to declining migration and a growing trade deficit. Youth unemployment remains a pressing issue. Official figures suggest decent employment rates, but Singh points to widespread underemployment. "Many youths are working part-time in agriculture or informal sectors. They're technically employed but not meaningfully engaged." Tourism is a major economic driver, with Nepal welcoming over 1.2 million visitors in 2024. However, Singh believes the sector's contribution-currently listed at four to five per cent of GDP-is vastly under-reported. "The data mostly includes air arrivals, but thousands of Indian tourists enter by road through our open borders," she explains. "Their impact on local economies, especially in pilgrimage towns and border districts, is significant." Tourists fall into several categories - religious tourists from India visiting pilgrimage sites, adventure seekers climbing the Himalayas and cultural and eco-tourists from countries like China and Bangladesh. Still, tourism faces structural hurdles. Infrastructure in remote areas is underdeveloped, and policy execution remains inconsistent. Singh calls for targeted investment outside the Kathmandu Valley to disperse tourist traffic and encourage broader development. "Kathmandu is doing fairly well, despite everything. If we can decentralise growth, strengthen the manufacturing sector, and keep our youth engaged, Nepal can achieve more sustainable development," Singh noted.

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