Rajendra Khetan leads the Khetan Group, one of the oldest business-families in Nepal. The oldest of three brothers of Khetan family, he is the Chairman of Laxmi Bank and PrimeLife Insurance, and the President of Nepal Britain Chamber of Commerce and Industries and Everest Insurance among others.
In the Last Thursdays interaction program, jointly organized by the Entrepreneurs for Nepal and Samriddhi, the prosperity foundation in March 2012, Mr. Khetan voiced his belief that entrepreneurship is the only way for development in Nepal, he admits he is just adding bricks on top of the business that his ancestors started more than a century ago.
The Khetan family business started in Nepal almost 170 years ago during the Nepal-Tibet War, popularly known as Bhot ko Ladai, when Mr. Rajendra Khetan’s great, great-grandfather Mr. Kishun Ram started supplying rice and salt to the Nepalese soldiers. Since then the Khetan family never looked back.
After starting their family business in 1845 as small traders, the Khetan family started importing fabrics from India in 1910. Finally, in the mid 1937, they registered their firm and became one among the first 32 registered business firms in Nepal. Mr. Khetan proudly shares the legacy of their family business being one of the first tax-payers practically starting the modern tax regime in Nepal. In 1970, they started their first diversion by exporting jute and lintels. Then, in 1989 the family entered the manufacturing business collaborating with foreign multinationals by establishing Gorkha Brewery. Expansion of their business empire followed in the coming years. In 1993 and 1994, they stepped into banking and insurance business and in 2000 they created their presence in the food processing and manufacturing business. In 2002, Laxmi Bank started. These are only some of the keystone initiatives, among other investments and businesses, the Khetan Group has headed over the business history of more than 170 years.
The Khetan Group has become an part of the economic development of Nepal over the years. Khetan Group was one of the first to start a private bank completely locally owned, named The Himalayan Bank, and the first to start an aviation company by the name of Nepal Air Charter Service (NACS).
Khetan believes their family’s business journey since 1845 reveals that even more than capital, technology or resources, the most important need to becoming an entrepreneur is the thought or belief in starting up a venture!
(Lesson #1) Believe in yourself and the courage to dream are the first and the most important step towards becoming an entrepreneur.
This dream can start to materialize in the form of a small shopkeeper, a trader or a merchant. As these small ventures grow, capital development became the main focus. Once this generates enough capital, then the capital is invested further into making larger ventures growing the profit scale as well as the capital return. This is how, he tells, Khetan Group has reached its stage today.
“Being focused in your work is very important. This has been one of the major key in our success” says Khetan.
Besides profit-making, Khetan Group has also been actively involved in number of welfare works. Kathmandu University and Late Hari Khetan Multiple Campus in Birgunj, both non-commercial investments in the educational sector, are some of the examples of welfare works the family is involved. They are also establishing a non-commercial trauma center in Naubisey for people of Dhading and surrounding area to recognize the respect given to his late father by the state.
Mr. Khetan shared the working structure of the group as well. There are two main components: one the Khetan Group itself and the other is a group of public shareholders, investors, etc.
- Between these two groups lies a panel of experts that evaluates the viability of the new projects before implementing them.
- Every business of the group has a board and an executive team. The board overlooks the policy level decisions while the operation of the business is entrusted upon the Chief Executive Officer (CEO).
- However, to make the decision-making process simpler and effective, a Management Committee/Thematic Committee is formed with the CEO, two board members and sometimes two executive team members.
- This committee is above the CEO in the organizational hierarchy and overlooks the major policy decisions. However, the CEO is given enough freedom to run under the guidelines drawn by the five-year visions and the annual plans.
- And, groups of experts bridge the gaps between the CEO and the departments.
Khetan is now focused on improving the financial oversight of the businesses of the group and is working hard towards establishing a one-stop financial solution center.
Questions from participants
Q. Why hasn’t the family-run big business houses of Nepal opened up their businesses to the public by listing themselves in the stock market?
A. Yes, the rich and leading private sector and business houses of Nepal are not open to public. They fear this. There are three main reasons for this-
- lack of account transparency,
- lack of confidence to face the public with reasons for their actions, and
- quick money or short-term plans.
We are one of the biggest public shareholding companies with 57,000 shareholders trusting us and we have been able to deliver. Yes, it is very important to include people despite their investment capacity to take part in the investment process. This will not only make capital collection fast but also make sure higher responsibility to the business, since shareholders are far more involved than banks, whose loans are used for investment. Both the private sector and the government must promote public investments culture.
Q. Are your financial institutions catering in the field of education and health services?
A. Yes we have, but very low. Since there has always been a constant discussion on the health and education sectors being nationalized, the financial institutions are hesitant to invest much in these sectors. However, wherever there is viability, they have invested in these sectors. Recently, since the Nepal Rastra Bank (NRB) requested the financial sectors to give more in social and grassroots economy, I think the investment will grow in these sectors. If NRB includes health and education in the priority sector lending, the investment will grow hugely in both these sectors.
Q. What skills do you suggest young want-to-be entrepreneurs to learn or develop to become successful in the future?
A. First, an entrepreneur should understand the basis of entrepreneurship or business, which is, wherever there is a market demand, supply. Second, manufacture something, innovative or new that can cater to market.
(Lesson #2) So my suggestion is that one should learn to take risk, innovate and access the market.
Q. I think manufacturing sector is the most important sector for the development of economy. Why are you diversifying only in service sector and not in manufacturing sector?
A. Yes, we are currently focusing on service sector, not manufacturing sectors. The huge amount of under-invoicing and corruption in the customs makes our industries and manufacturing companies unable to compete with the foreign products. This will not stop because the cartels in customs have enough power to topple the government. Further, the corrupt political party leaders, lawmakers and bureaucrats are making import-dependent policies. They even ask bribes to fix a meeting. How will industries and manufacturing companies survive in an environment like this? We need to work together to fight against this corrupt regimes and import-dependent policies. Thankfully, the licensing system was abolished earlier in Nepal, or else whatever we have in the name of industries would not have even existed. Tired and frustrated with all this, we have decided to concentrate on the service industries for sometime, until the environment gets better.
Q. You are involved in lots of different businesses and organizations. On top of it, you are also a Constituent Assembly Member. How do you manage your time?
A. As I mentioned earlier, I am not involved in the day-to-day operations of my businesses. There is the CEO and the executive team to do so. As a board member I hardly sit for a meeting in 15-30 days, that too only for the policy level or highly important decision-making. This is how I could keep myself free in-spite of running various companies. So, I could devote more time in social work, constitution building, and give more time to my family, etc. To work doesn’t mean selling yourself; it means to manage better.
(Lesson #3) We need to learn how to delegate work and create employment.
If I had stayed as a CEO, what would my CEOs do besides going abroad to look for job? Can’t Nepalese manage? Do we always need a foreigner to manage? No, we don’t. We are capable of it. In The Himalayan Bank, we had foreigners working under Nepalese managers; same in the case of Gorkha Brewery.
Q. What challenges do you see in the businesses of Nepal due to political instability?
A. There is a big challenge being faced by the business houses from current political parties. Let me give you an example. Where there is a factory, the state politician first gets the local political units to extort money from the factory owner. When the business person does not comply, they get the same units to stop the business. Then the business person negotiates with these units and fixes the problem. Now, the politician uses the trade unions to create disturbances in the factory. The business person once solves the issues with the trade unions. Then the politician becomes a minister and uses his staffs to create hindrances in the operations of the factory to extort more money from the business person. In this way, the business person gets extorted again and again by the political parties and their leaders. This is also the reason the business houses don’t want to come to public.
Q. When do you think is the right time for the young entrepreneurs of today to invest in Nepal given the years of political and social instability that now exist in the country?
A. (Lesson #4) First of all, when you see a demand-gap and think you can bridge it with your supply, then is the time to invest. Secondly, if you have a new and innovative idea then it is the right time to invest. The right time is now, if you can see either of these two things.
If you divide your brain into four parts, one part will think about the demand-gap and supply opportunities available, another will think of a new and innovative idea, the third one will use risk and the fourth one will manage this. Once you have all the four segments, you are an entrepreneur. You aren’t just born to follow or work for someone else. Each and every one of you has that entrepreneur in you. It is just about recognizing it.
Q. Based on your remark of the lack of skilled workforce in the country, what role do you see in the coordination between the educational institutions and the business enterprises to fulfill this gap?
A. Yes you are right. Now is the time for both the education institutions and the business enterprises to get access to where the national, regional and international economies are directed and develop the required personnel in mutual understandings. I am associated with Kathmandu University and I ask my deans about the development of human resources, and they answer me that we are doing better than Tribhuvan University and we have more faculty than them. There are a bunch of business schools now producing good products. However, there is a massive shortage of skilled workforce – MBA graduates, Chartered Accountants, etc.
Q. Lot of established entrepreneurs say that you don’t need much capital to start a business. Following the same thought, I started a company for office supplies eighteen months back. But, now I face a serious crunch of capital for expansion of my business. However, without enough the collaterals the banks in Nepal do not give loans. In this case, how can young entrepreneurs like us move ahead?
A. Yes, I agree that capital is not the hindrance in starting a business. But however capital is required for expansion. The banks here give loans based on collaterals. This is wrong. The loans must be given to the ideas, based on their potential of success. Our financial sector has shortcomings in this area. It is because of Nepal Rastra Bank’s rules for these institutions for not allowing them to give loans without collaterals. Secondly, because of the lack of cost accounting experts and financial analysts, we are not able to assure the success potential of the projects. Physical property should not be the criteria for collaterals. Instead, ideas and innovations should be regarded as collaterals for the loans. However, I see we are very far away from this scenario. Yet, we all need to work together to create this environment.
Q. Lot of business leaders here are associated with some associations, foundations, chambers and even political parties. Are they doing so to make their own business operations easy or for the larger good of many?
A. Before 2046, during the license raaj, everyone had to be bribed. After the end of license raaj, they were to be bribed for not disturbing the work. Now, the bribes are given to stop them from looting the work itself. Some who could fight they are still fighting against these system, and whoever couldn’t they got merged in it. These two groups are still fighting. We will have to wait for another decade to see who wins. But, in today’s date, more than half of the economy is a part of the political nexus. Not being a part of it is not an option owing to lists of hindrances they present to stop your work. The industries have become a war zone today.
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This is based on a summary is taken from a transcript made by Samriddhi, The Prosperity Foundation from the video taken during the talk program “Last Thursdays with an Entrepreneur”.
Last Thursdays is a regularly monthly entrepreneurs networking session organized by Entrepreneurs for Nepal with the Samriddhi Foundation. This program is supported by Biruwa Ventures and DECC.
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