FUTURE FORWARD

HEM RAJ DHAKAL  

CO-FOUNDER & MD, IME GROUP

VICE PRESIDENT, CNI

Hem Raj Dhakal, Co-founder and Managing Director of IME Group and Vice President of the Confederation of Nepalese Industries, is a first-generation serial entrepreneur of Nepal. 

He co-founded the IME conglomerate along with his brother, Chandra Prasad Dhakal and has played a pivotal role in institutionalising the remittance business in Nepal.

Dhakal is of the opinion that to ensure sustainability and competitiveness of any business, innovation in products, services and processes must be prioritised to stay ahead of the competition and meet evolving customer needs. 

Personable and extremely focused on outcomes, Hem Raj Dhakal has his finger on the business pulse of the nation. 

The group has ensured strategic entry into businesses that can hardly fail; investing in projects that also fall within the nation’s development priorities. 

In this edition of Business 360, we spoke to Dhakal to learn about his entrepreneurial journey, some milestones of his business as they celebrate their 24th anniversary, and what keeps IME Group ahead of the competition in the sectors that it is involved in. Excerpts: 

IME is celebrating its 24th anniversary in June. As Co-founder and Managing Director of the group, could you share what actually inspired you to begin a business 23 years ago? 

Firstly, I would like to thank the Business 360 team for this opportunity to talk about our business. On this occasion, I would also like to extend my sincere thanks to our valued customers, regulatory bodies, business partners, agents and entire IME family for their unwavering support and trust bestowed upon us from the very beginning of our journey. 

In fact, our journey into entrepreneurship was driven by a combination of inspiration and necessity. Actually, I moved to Kathmandu from Baglung with my brother to pursue higher education. I enrolled at Tri-Chandra College as a science student aspiring to become a doctor. My brother worked in a bank back then. His income was not sufficient to cover my studies and family expenses. So, we started a cold store where I worked as a salesperson, while continuing my study. Actually, I gained basic entrepreneurial skills from there. Later, I joined a cargo company that was established by my brother and his friends. My experience of working in the cargo company exposed me to the fundamentals of the export business and also taught me how to communicate effectively with international clients. After I completed my intermediate degree, I wanted to go to the US to pursue my aspiration of becoming a doctor, but I could not due to various reasons. However, I soon realised that every experience is an opportunity to learn and grow. Determined not to give up, I persevered and worked hard.

With new hope and driven by the same aspiration, I went to Japan at the age of 19 for higher studies. In Japan, I started to do a part time job in a restaurant. It was during this time that I came in contact with a person named Nakamura, a bank manager, whom I consider as my second mentor. Through him, I came to know that language barrier was one of the major problems that Nepali individuals were facing in Japan, particularly in remitting money back home. Similarly, there was very limited banking access for people in rural areas of Nepal. Only government banks were operating remittance service in Nepal which were very few in number and limited to urban areas only. As a result, people had to walk several miles just for a single transaction. Most often as the family members would fail to receive the money in Nepal, it would be returned to Japan simply because of communication error, resulting in additional remittance cost. This realisation ignited an entrepreneurial spirit within me. Actually, I could envision national necessity and a prosperous business amidst that adversity. 

What were the initial challenges and opportunities when you started the business?

Actually, we wanted to begin our service from Japan, but there was no legislative provision to allow the private sector for remittance service at that time. Meanwhile, migration for foreign employment was growing exponentially in Nepal, and Malaysia was the top priority of Nepali youths. Additionally, the Malaysian government had also enlisted Nepal as one of the main source countries for human resources and it had eased the legislative procedures accordingly. Realising the pressing need for a formal channel to remit money back to Nepal, we decided to explore our service from Malaysia and briefed our legitimate business plan to the governments of both Nepal and Malaysia. Actually, it was very difficult to convince both the governments to initiate this bold step. We worked hard for this and especially my brother’s hard and persistent work was crucial to make it possible. Thanks to both governments; they trusted us and provided the licence to operate the service.

Initially, we had to face multiple challenges as the country was going through political and economic transformation. There was uncertainty and many regulatory frameworks were yet to be formalised. The concept of remittance service itself was pretty new. The greatest challenge was gaining the trust of people and making them believe the authenticity of the service. People, in general, were sceptical about the private sector’s initiative and the entire remittance process. We personally visited people, explained about our services and earned their trust. Another challenge was technology. We were not from a technology background and therefore we didn’t have much understanding about it. On the other hand, technology and innovation were just evolving in Nepal. People, mostly in rural areas, didn’t have easy access to technology. So, it was really challenging to provide remittance service in rural areas. Originally, we used fax machines, and then email service for every transaction. As we were always open to innovation, we kept investing and integrating technology into our services and subsequently adopted the online system which was, actually, a game changer in making remittance services faster, secured and real time. 

Actually, these obstacles served as opportunities for us to learn, adapt and grow in the industry. Likewise, the growing trend of foreign employment, urgent need of secured channel for sending money and industry gaps provided us a fertile ground for growth, and forging partnerships helped us expand our reach. 
Over the years, IME Group has transformed into a leading business house in the country. What are some of the milestones? 

Although we began our business journey by establishing a cold store in 1993, our entrepreneurial venture scaled up only after 2000 when we established IME Remit, Nepal’s first remittance company. As I mentioned earlier, we initiated it as an effort to formally bring in the hard-earned money of the migrant workforce directly into the reach of their family members living in Nepal in the fastest and safest manner possible. Now, we have been able to cater to people with complete financial services where traditionally, there was limited or no financial access, especially in areas outside the main cities. Actually, IME not only institutionalised remittance services in Nepal, it has become one of the major agents of socioeconomic transformation in the lifestyle of people.

As such, beginning with a remittance service, we have diversified our investment portfolio ranging from service to manufacturing, banking to hospitality, and hydroelectricity to infrastructure development and the group stands at the forefront of various sectors now. In the course of around three decades, we have ventured into remittances, banking, cable cars, hospitality and tourism, hydropower, automobiles, insurance, information technology, entertainment, etc., generating approximately 20,000 direct and 40,000 indirect employment opportunities.

What do you think has contributed the most to this success?

Of course, every opportunity we seized, obstacle we overcame, and experience we gained along our journey have served as invaluable lessons for our organisation’s growth. I firmly believe that the unwavering dedication of our team, unified by a shared vision and passion for excellence, coupled with our collective efforts, commitment to innovation, and adaptability, have played a pivotal role in driving the group’s achievements. Indeed, the trajectory of IME Group stands as a testament to the profound impact of perseverance, teamwork and an unyielding commitment to excellence.

Political as well as policy instability and economic slowdown have plagued the private sector in Nepal for a long time. It has badly affected the private sector when it comes to investments and expansion. Could you tell us about the future strategy of IME Group?

Political and policy instability not only affects the private sector, but also hampers the overall economic growth of the country. It creates uncertainty, reduces investor confidence and ultimately impedes economic growth. Actually, frequent change in government and policies creates an unpredictable situation which makes it difficult for businesses to formulate and execute plans effectively. Although the government claims to be concerned and is trying to improve the situation, policy instability still prevails in Nepal. As a result, the growth and expansion of industries and businesses have been hindered, leaving entrepreneurs and investors grappling with uncertainties. So, the government should seriously make policy stability its first priority. Political parties need to have minimum common agendas and agreements when it comes to sustainable development and economic growth. We have seen many countries which, having started economic transformation much later than us, have achieved next level of growth. It is all because of their stable politics and policies.

Despite prevailing challenges, our approach remains focused on enhancing resilience by diversifying our business operations across various sectors and investing in areas that are directly related to public necessity and can create positive impact on the lives of people. In fact, we are driven by the belief that challenges come with opportunities to learn and grow. So, we invest a lot in research and development, analyse market trends and make investment plans with a long-term perspective, aiming to overcome these adversities and emerge stronger. We are equally committed to innovating and adopting innovation. Therefore, digital infrastructure, automated operation and digitalised services will remain at the forefront of our business in the days to come.

What are some major projects that IME Group is currently involved in?

Building both physical and digital infrastructure for sustainable development and economic growth is our primary focus. Our recent focus of business expansion is in areas that have huge potential to directly benefit the public, and align with the national priority, and foster sustainable business growth. Accordingly, we have prioritised our investment in sectors such as tourism, IT and infrastructure development, especially green energy. 

Recognising the significant potential in the tourism sector, we have made strategic investments in cable cars, luxury resorts, hotels, travel services and theme parks. Chandragiri Hills, Lumbini Cable Car and Maulakali Cable Car are some of our cable car projects already in operation. Besides, aligning with our motto of building similar infrastructure in other provinces as well, currently we are building Pathibhara Cable Car in Koshi Province, Jalpadevi Cable Car in Karnali, and Sikles Cable Car in Gandaki. We believe these projects will serve as a game changer in Nepal’s tourism landscape. Similarly, considering the growing trend and need of digitization, especially in the financial sector, we are significantly investing in the IT industry as an effort to build an ecosystem and offer a complete fintech solution in the global markets. Likewise, following our commitment to infrastructure development, we are investing in hydroelectricity projects. Currently, two hydropower projects are in operation, feeding renewable clean energy into the national grid and two more are in the pipeline.

We firmly believe that investing in these sectors will not only generate revenue, but also create employment opportunities for people, thereby fulfilling the national need and leading to overall economic growth of the country. 

How do you ensure the sustainability and competitiveness of your business?

To ensure the sustainability and competitiveness of our business, we prioritise innovation in products, services and processes to stay ahead of the competition and meet evolving customer needs. By embracing new technologies and ideas, we maintain relevance in the market. We always place priority on new and innovative sectors for further investment and try to integrate sustainable practices in our operations, minimising our environmental footprint and contributing positively to society.
Similarly, we value team spirit and every individual in the team. We are committed to attracting, retaining and developing top talent that ensures a skilled workforce capable of driving innovation and delivering exceptional results. We believe that effective risk management, prudent financial practices, and transparent communication with stakeholders are some of the key strategies that help IME Group stay stable and resilient, even during this challenging economic situation.

IME is the pioneer remittance service provider in Nepal. How do you assess remittance growth trend? How are you promoting digital remittance? 

Definitely, our economy is a remittance-based economy. Nepal receives a significant share of personal remittances to GDP every year. And it is increasing day by day. The recent data of Nepal Rastra Bank states that remittance inflows increased 19.8% to Rs 1,082.62 billion in the last nine months of FY 2023/24 in comparison to the same period of last year. Actually, remittance has become a lifeline of the Nepali economy and people. It has made a significant contribution to the overall reduction in poverty particularly enhancing the quality of health and education. Not only that, it has become one of the major sources of maintaining foreign exchange reserves as well. Now, I think it is time to link remittance to investment and employment generation for sustainable economic growth of the country. For this, the government should formulate supportive investment policy and regulatory framework and provide incentives to remitters so that they can feel secure and motivated towards investment. 

Actually, digital remittance has increased significantly after the Covid 19 outbreak. As digital infrastructure, automated operation and secured digitalised services are at the forefront of our business model, we have integrated IME Pay wallet into our services for both inbound remittance and domestic digital payment. The wallet is serving more than four million people now and the trend of receiving international remittance through the wallet is also increasing by the day. Furthermore, we are constantly refining the mobile wallet to encourage digital adoption among migrant family members as remittance recipients and to offer linked financial services such as utility payments, insurance services, entertainment, ticketing, etc. Actually, we are developing it as a complete digital payment solution.

Are there any impactful corporate social responsibility initiatives that the Group has started?

As part of our corporate social responsibility, we have established the IME Foundation and actively engaged in philanthropic endeavours, especially in health and education. Accordingly, we made significant contribution to the Prime Minister’s Disaster Relief Fund following the devastating earthquake that struck central Nepal, including the capital city, on April 25, 2015. During the initial outbreak of Covid 19, the foundation stood at the frontline in offering humanitarian services within and outside the country. We not only donated to the Prime Minister’s Relief Fund, distributed health equipment to various hospitals and public health centres, but also launched ‘Bharosa Kosh’ to provide financial support to the bereaved Nepali families who had lost their family members, while working abroad, due to Covid 19. 

Moreover, we have initiated a special project to provide quality education and guardianship to orphans from remote areas of Nepal. Currently, we are providing school education to many children, primarily from disadvantaged families in regions such as Humla, Jumla, Dolpa and Kalikot. In addition to education, we are offering mental health and psychosocial counselling services to support their well-being. Additionally, we also provided support in constructing a school building in Baglung Municipality, Amalachaur. Besides, we have initiated a scholarship programme for two students every year to pursue Master’s degree in software engineering in South Korea.

You are now the Vice President of Confederation of Nepalese Industries; what has this journey been like?

I joined CNI in 2017. Since then, I have been actively involved and assumed various roles at CNI from NC member to vice resident. Currently, I am looking after four different committees and councils as the coordinating vice president. They are IT Council, FDI Committee, Nepali Diaspora Coordination Committee, and Medicinal and Aromatic Plant (MAP) Committee. These committees and councils independently work in identifying the potential and challenges in their respective areas and closely work with the government and other stakeholders for policy reforms to ensure sustainability and growth. We have actively pushed for regulatory simplification, investment incentives and infrastructure development to create a more conducive environment for industries to thrive.

Certainly, my experience within CNI has been both enriching and challenging. Over the years, I have had the privilege of engaging closely with industry leaders, policymakers and stakeholders from diverse sectors. This engagement has provided invaluable insights into the evolving dynamics of Nepal’s industrial landscape. It is really an opportunity for me to represent an organisation that advocates for conducive policy reforms, fosters collaboration and promotes sustainable and inclusive economic growth. 

Could you tell us about what CNI is advocating for in terms of policy changes with the government?

CNI is playing a crucial role in voicing the concerns and aspirations of the Nepali industrial sector. We are committed to fostering a conducive environment for overall industrial growth, emphasising foreign investment and technology transfer. Accordingly, we are consistently working with the government in areas of industrialisation, policy reform and inclusive economic growth. We have recently launched and submitted a comprehensive booklet of legal reform, titled ‘‘‘कानुनमा सुधार, समृद्ध अर्थतन्त्रको आधार’’, (Legal reform for prosperous economy) to the Prime Minister, concerned ministers, chief secretary, secretaries and regulatory bodies. This document puts forth recommendations for reforms in 28 existing laws, acts and regulations, the formulation of three new laws, and the repeal of five acts.

Notably, we have strongly advocated for the urgent consideration and amendment of both acts restricting contract manufacturing of primary products, and we have received a positive response from the government. Besides, we provide budget suggestions to the government incorporating industrialists’ and business leaders’ concerns collected from across the country every year. We would like to thank the government for addressing more than 42% of our suggestions in the budget 2081/82 as well. However, the implementation part is still comparatively ineffective. To keep watch and help the government in budget implementation through dialogue with related stakeholders, we organise a special event called Budget Watch regularly. Similarly, to promote domestic production and consumption we have launched a national campaign ‘Make in Nepal- Swadeshi’ in collaboration with the Ministry of Industry, Commerce and Supplies. More than 135 industries are associated with the campaign so far.

What are some major challenges the industrial sector in the country is facing at present?

Actually, Nepal’s industrial sector holds high potential to grow, backed by significant expansion of green energy generation, fostering a more conducive environment for industrial activities. However, the growth trajectory of the industry sector in Nepal has become a serious concern in the last few years. The contribution of this sector to GDP, which was above 14% at one time, is shrinking year by year. Currently, industries are running at very low capacity and the overall demand has also come down in comparison to last year as stated by CNI Flash Survey Report. Many small enterprises have shut down. The ratio of NPL of banking and financial institutions is increasing day by day, i.e. 3.73% as of Fagun-end, as published by Nepal Rastra Bank. In such a situation, it is definitely difficult for small businesses to sustain and thrive. As I have already indicated, even big investors are not ready to expand their investment at the moment.

In fact, it is not just one single factor that is responsible for this situation. There are several causes. The foremost among them is the persistent political and policy instability, which creates uncertainty and delays long-term planning and investment. In fact, frequent changes in government policies, regulations and taxation causes bureaucratic hurdles and administrative delays in obtaining permits and approvals, further complicating business operations

Additionally, Nepal’s inadequate infrastructure, including unreliable power supply, poor road networks, and limited or no access to ports is another challenge that has increased production costs and made our products less competitive both domestically and internationally. Similarly, lack of access to finance especially for small and medium scale industries, shortage of skilled human resources, unauthorised trade, limited market access and trade barriers remain some other critical issues.

What can the government and private sector do to cope with economic challenges and drive economic growth in Nepal?

Of course, to enhance the business environment and stimulate investment, the government should simplify regulations, minimise bureaucratic hurdles, and create a more conducive atmosphere for both local and foreign investors. Most of the industrialists are hesitant now for further investment and expansion of their business. First of all, this low confidence needs to be boosted. A business conducive environment needs to be created. For this, stable policy, a concrete plan and priority are required. The government can play a crucial role here. Participation of the private sector in policy formation has to be ensured. Actually, Nepal’s private sector is a major contributor to our GDP. The private sector has more than 80% contribution to GDP and more than 85% of the total workforce is employed by the private sector.

Therefore, mutual collaboration and cooperation between public and private sector is a must to come out of the current economic slowdown.

Secondly, prioritising infrastructure development is crucial to improving business efficiency and reducing operational expenses. Public-private partnership model can be deployed for infrastructure development. Similarly, initiatives aimed at facilitating access to finance, particularly for small and medium-sized enterprises, can foster entrepreneurship and economic growth. The government and private sector should work together to maintain balance between demand and supply of workforce. Skill development programmes to bridge skill gaps, promotion of domestic investment to create more employment, and incentives to returnee migrant workers to stay and utilise their skills in the country can be some measures to help create balance and sustainable growth of our economy. Actually, the government has to formulate an integrated industrial development strategy taking industrial ecosystem from financing to market access into consideration. 

As a successful first-generation entrepreneur, what is your advice to aspiring and young entrepreneurs?

Over the years, I have learned that entrepreneurship is rewarding but requires dedication, hard work and consistency. I have faced several challenges, failed multiple times in the course of this journey. But I never gave up and kept pursuing my passion and dream. Ups and down are a natural part of the entrepreneurial journey. I accepted every challenge and failure as an opportunity to learn and grow even stronger. Actually, I adapted, persevered and became more motivated.

Today’s youths are fast learners, tech-savvy and full of entrepreneurial spirit. They can achieve far more than we have. To succeed, they need to follow their passion, create sustainable business plans, stay resilient, learn from failures, and keep moving forward. With unwavering passion, persistent effort, and a commitment to continuous learning, we can translate our entrepreneurial aspirations into tangible success.