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E-Commerce Study in Nepal

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B. Sc. (Honors) in Computing (UOP) This assignment paper mainly aims to identify the differences between the E-Commerce prevalence in UK and Nepal, and some various factors influencing so in both the countries. UK, being one of the developed European Countries, has diverse usage of ECommerce throughout its territory.

According to recent survey, one fourth of total population of UK, take internet as an integral part of their life. Most of them use internet as a source of making online transactions, buying and selling goods through E-Commerce Systems.

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Likewise, Developing Countries like Nepal have also moved a step forward to implement different features of E-Commerce, but it has yet to face a number of challenges. This paper, therefore, intends to put light on some major issues as to how ECommerce can be implemented and promoted in Nepal, comparing and contrasting those issues in UK, where E-Commerce has already been a culture.


“E-commerce is the conduction of business communication and transactions over networks and through computers.

As most restrictively defined, electronic commerce is the buying and selling of goods and services, and the transfer of funds, through digital communications. ” Citation: www. pcblues. co. uk/help_glossary. html As cited above, E-Commerce is an electronic means of business conduction, empowering the potential of Information Technology in it. E-Commerce has left an indelible mark in today’s world of business.

IT has revolutionized every aspects of life, and business is surely not an alternative. E-Commerce has raised the standards of businesses and which, in return, has comprehensively facilitated consumers throughout the world. The evolution of E-Commerce goes back to mid 90s’, due to the unexpected growth of Internet usage in that era. The growing emergence of E-Commerce at that time benefited mostly the developed American and European Countries. The influence of it also got over some developing countries like India, China, Thailand etc. hich saw rising number of business companies embracing E-Commerce. Even today, the growth of E-Commerce throughout the developing countries has indicated the potential of E-Commerce to boom the economy of third world countries. Despite some marginal failures, the rise of ECommerce in developing countries seems to be inevitable, with its long term benefits and influences intact.

Issues and Challenges of E-Commerce in Nepal

compared to UK Nepal is one of the developing countries, still on her way to create economic foundations towards holistic development. While doing so, she has initiated her ambitious journey towards the establishment of E-Commerce Market, but the culmination of its mission is still at large. The growth as expected has been reluctantly slow because of various reasons like slow internet bandwidth, not adequate infrastructures, computer illiteracy, lack of nvestment, unawareness of benefits of E-Commerce in businesses etc. Most businesses in Nepal generally consist of Small and Medium Scale investments. Although the implementation of IT infrastructure has been pretty satisfactory in those businesses, the E-Commerce integration is still unobvious. Ironically, implementation of ECommerce is believed to be easy here because of lack of government regulations which would impose taxes in the transactions done online. Businesses imperatively need to understand this fact and cash in the benefits.

Whereas in UK, three fourth of the total population uses Internet and according to a recent survey, and as depicted in the diagram below, 150 Billion Sterling Pounds were acquired through E-Commerce by various businesses in UK. Further, the rise in the coming years has been expected to be many folds.  For developing countries like Nepal, it is hard to achieve such figures in short span of time but, if gone steady, nothing is impossible.

There are a number of factors that is to be considered seriously in order to cash in the benefits as in UK. The issues as well as challenges, which have to be taken into serious consideration, are:

Technical / Infrastructural Issues and Challenges

  • Internet Connectivity

Compared to UK (75% Internet Penetration), the figure is miserably poor. But the report made by NTA also concludes that in the recent years, the growth has been quite satisfactory and for the coming years, the growth can well be expected to whoop up.

  • Telecommunications

Telecommunication has really taken rise in Nepal, compared to other technical infrastructure. From the time when the government Nepal Telecommunications Authority was commercialized and turned into Nepal Telecom, the development of telecommunications and its touch even in rural areas has been considered revolutionary.

To add up, Mobile Telecommunication has redefined the communication here, like any other South Asian countries. While there were 30000 mobile subscribers in Nepal in the year 2002, it has now gone up to 48,02,482 active mobile subscribers throughout the country. Commencement of other telecommunications like Mero Mobile (Spice Nepal Pvt. Ltd. ), UTL (United Telecom Limited) etc. has added up to the development. This has created a very good foundation for the development of E-Commerce as well as M-Commerce here.

Payment Methodologies/ Delivery Issue

This is where the challenges arise when it comes to realistic and inspirational implementation of E-Commerce. There is no clear government regulation and clearance system, which has resulted to international mistrust amongst transactions done online here in Nepal, making the E-Commerce practically paralyzed, unlike UK, where most people are capable of holding credit cards used for online payment.

The key impediment of E-Commerce development in developing countries has been lack of affordable and workable e-finance. (Source: ITC/UNCTAD/WTO). We would come to this topic in detail in the answer to the question b) following.

Socio Economic Issues of Nepal

Socio Economics is one of the most important issues that have direct influence in the E-Commerce market here in Nepal. It hasn’t been long, that the market of E-Commerce has come into bud in this small nation but since then, the socio-economic issues have been one of the major bottlenecks, and on the contrary, at times, has had a great potential as well.

Some of the SocioEconomic issues and challenges are described briefly below in points: Lack of Investment (Economic Issues): The political traumas, still on going in the country, have its major share in creating uncertainty in the conduction of even conventional business. People are reluctant to invest, and despite having abundant potential, new business ventures end up being a failure. Before the peace got finally re-established in this part of the world, the vision of new innovative business was impossible. The national economy was a complete mesh; much of the budget was allocated for so called Peace Restoration, but actually for violence.

Now it’s a slightly different story. The peace, at least politically, is finally here and the economy has eventually found its way back on track. Now, the culmination of the vision of E-Commerce has slowly started to materialize, but the bottlenecks still exist when it comes to realistic implementation of the ECommerce here. Businessmen still hesitate to invest, specifically in new ventures. They don’t want to risk their investment on something new like E-Commerce, because no government authority stands before them to provide economic security.

It may be their unawareness towards the benefits of E-Commerce, but the political insecurity has also some major shares. So, one of the major economic challenge would be lack of investment towards E-Commerce ventures due to various political causes.

The growth of E-Commerce is fundamentally associated with the social influences it beholds. E-Commerce is rather a technological term and if it doesn’t have social influences in the traditional society, its’ existence is hugely in verge.

Definitely, E-Commerce is for consumers as well, as much as it is for the business. But if the consumers are not socially aware of its benefits, nothing is of any use. It all depends upon how IT has made an effect on the society. The more technology savvy the society is, the more opportunities for E-Commerce to blossom. In UK, as already told, three fourth of the population are computer educated, not just literate, and have a very good internet culture, which has largely contributed for the ECommerce development there. But in Nepal, as below statistics shows, 0. % of the total population has access to the computer and the number of total internet users (not necessarily for E-Commerce purposes) are somewhat 0. 48% of the total population ,as already stated somewhere above.  The statistics shows that the society of Nepal is still far away from being ECommerce friendly.

Further more, the computer illiteracy in most part of the country, has also contributed to the unwillingness of people towards ECommerce. The country consists of various indigenous localities, with variety of cultures and religions intact, but still deprived of most basic infrastructures like drinking water, transportation and electricity. So, it’s ridiculous to aim E-commerce market on people living in such areas. However, the people living in urban areas, and 0. 48% of the total penetration who use internet, can still be targeted.

And by doing that, number of businesses can raise their standards and go on to make profit. Even in that, the challenges are there to overcome. The rising number of extravagant shopping malls in the city offering plenty of services can also distract customers from buying online, and even worst, they do not trust the security and aren’t sure if what they pay, would really materialize. Good section!

“Electronic Payment is any digital, financial payment transaction involving currency transfer between two or more parties. (Source: World Bank) As already discussed Proper System plays a vital role in the development of ECommerce in the development country like Nepal. According to UNCTAD, a traditional bank-to-branch transaction costs no less than US$ 1; Automatic Teller Machines (ATM) reduces the cost to US$ 0. 20; and an online transaction brings it down to US$ 0. 01. Keeping these in mind, it is quite encouraging with the fact that card based payments have been increasing recently but the problem arises when it can’t address the majority of population, requiring a solid strategy further.

In recent days, despite political immaturity and uncertainty, some efforts have been made by private as well as government sectors to provide technology based payment services to the people interested. One good example is the Information Technology Policy 2000, where government sees its role as facilitator, promoter, and regulator. The policy also confirms the legal recognition to Electronic commerce (e-commerce) and electronic finance (e-finance). The Electronic Government Procurement (e-GP) program of the government of Nepal is also another good example of government initiative towards development of ECommerce.

Payments Methods prevailing currently in Nepal: The past 10 years have seen growing aggressive competition of banking sectors in Nepal, the competition being more productive and beneficiary to the people they target. Cash transaction is still very much in use, but some technological services like ATM, Debit Cards and Credit Cards have very much taken rise in recent days. Though, the Electronic Payment through Internet still doesn’t exist at all, the practice of POS (Point-Of-Sale) based payments have increased most considerably.

International Monetary transactions in terms of banking level are quite matured, with the help of various financial applications like ACH, GIRO, CHIPS, and SWIFT etc. Since Nepal doesn’t have its own International Payment Gateway, it’s hard for the banks to provide their customers the connectivity with the international entities using the credit cards provided locally. These and some other bottlenecks in the payment system of Nepal are briefly described below in points: Lack of standard InterBank Network, with overnment body Nepal Rastra Bank with other commercial Banks. Lack of International Payment Gateway and International Clearance System. Limitation in Fund Transfer abroad. E-Payment is not studied, nor mentioned distinctively in the Electronic Transaction and Digital Signature Act 2006. Complicated financial administrative procedures related to international payment mechanism. Silence of Nepal Rastra Bank in this issue.


Proper Cyber laws, which could be an enhancement of Electronic Transaction and Digital Signature Act 2006, should be formulated in the upcoming new constitution being drafted by Constitution Assembly. Security Standards should be defined; protocols should be imposed so as to standardize the e-Payments. Nepal Rastra Bank (NRB), controller of financial matters in Nepal, should act like a hub for all the banks and payments made by online or offline whatsoever, and NRB should regulate all kind of payment systems.

Credit and Debit Cards issued by Banks in Nepal should be standardized and should be able to be used in the Internet and also in ATM/POS. A new Payment Gateway for the national E-Commerce, capable of international transactions, should be setup. For specific Internet (Online) payment purposes, various concepts have been developed like E-Rupee, a new concept where there will be provision of prepaid virtual card, anonymous and accessible to banking current account holder, could be used for various purposes like Internet purchasing goods and services, ATM money withdrawal, Point Of Sale payment (POS) etc.

Some Critical Success Factors that could be implemented for the development of E-Commerce in Nepal are:

More E-Commerce Ventures: One of the major bottlenecks of E-Commerce in Nepal has been lack of proper E-Commerce Sites. The growing computer literacy, at least in urban areas, has indicated large potential in E-Commerce, but business houses still aren’t able to stand the risk on their investment. Though, success of some ECommerce ventures like Muncha House (http://www. muncha. om) has slightly tried to change the trend. Government should encourage the companies intending to switch to E-Commerce sites by various means like loosening tax, business friendly cyber-laws etc.

Development of Internet Culture: Though the recent years have seen unexpected rise of internet users in Nepal, the quality of internet connection hasn’t lived up to the expectation of its users. Due to limited bandwidth, people are reluctant to surf high-end E-Commerce websites, due to which new E-Commerce websites are compelled to cut off different features, which otherwise, would have really eased the customers.

A number of educated people, even in urban areas, are not computer literate, because IT hasn’t been included genuinely in the education system of today. Even if the internet is easily available, they couldn’t think about making use of it, apart from specific services like Email. Hence the development of Internet Culture, by making people computer literate, would be another Critical Success Factor for E-Commerce in Nepal.

Vigorous Marketing/Enhancements in Customer Relationship: This could be another most important CSF on the way to establish ECommerce in Nepal, keeping in mind the limited market she carries. First of all, E-Commerce should be made familiar to almost all the internet users here. They should be made aware of various benefits they would acquire while switching to online shopping. Plus, various discount schemes, cut-off in prices should be offered to them. The sites should also be user-friendly and less hazardous to get into. The business should ensure that their online customers entertain equal customer care like physical customers have. They should also ensure that there are not any hidden costs.

The customers also should be guaranteed that the products they buy are of good quality, since while buying online, they can’t feel the products on their own! More Payment Options: While online payment (e-Payment) is imperative to E-Commerce, Nepalese customers should be provided with alternative options as well like paymenton-delivery, payment on credit, reservation systems POS etc.

As already talked, E-Commerce has huge potential in Nepal, like in any other developing countries. Though, statistics now show that its too early for us to visualize its culmination, we shouldn’t give up all now. The destination might be far, but the pathway towards it, if made precise, is relatively easier. There are a number of steps which if materialized right away, can help us foster maximum opportunities in turning Nepal into a real E-Commerce market.

As I studied and researched through out the completion of this assignment, I figured out some strategic steps, described in appropriate phases given below:

Planning: In planning phase, a vision would be created, in order to record this country into the global e-world. The vision would include designing policies and strategies which are quite applicable in the current political, economic and social scenario of Nepal without being overwhelmed with the international success history, predominantly with the success of E-Commerce of some developed countries like UK. For e. g. he strategies, in my opinion, should be concentrated in the intensification of B2B and B2G E-Commerce rather than B2C, because of the challenges while targeting common consumers in Nepal, as already described above. Another most important strategy of mine would be giving emphasis to the commerce part of the E-Commerce rather than Electronic part, because, of course, eventually E-Commerce is all about buying and selling; technology just pops in later on. Also, e-Payment should be setup and made internationally viable by carrying out several steps like creating International Payment gateways, International Clearance Systems etc.

As already mentioned a number of times above, proper policies and legal frameworks must be formulated in order to encourage as well as facilitate E-Commerce here. Knowledge and Experiences can be shared with countries that have friendly alliance with us and have made remarkable achievements in E-Commerce. Implementation: In implementation phase, all the visions created in the planning phase would be materialized. First step would be setting up various E-Commerce ventures and encouraging investments in it. Small and Medium Scale Businesses, generally termed as SMEs, would be encouraged to switch to E-Commerce, with relatively less investment.

As the number of ventures increases, government should have set up a regulatory body, most appropriately NRB now, which will have legal foundation to provide the standard while the SMEs and even big businesses go into implementing E-Commerce. Various technical infrastructures like Internet, Telecommunications should be made relatively cheaper and affordable even in rural areas. Specific businesses of Nepal which is popular in the world like  Thankas (Tibetan and Newari Religious Paintings), Pasmina (a special woolen fabric), Carpets, handicrafts etc. should be highly encouraged to implement ECommerce. Operations: While most of the plans would be implemented, the continuation of them is also very important. For the smooth operation of E-Commerce here, various steps should be taken like consistent government legislation, proper marketing of businesses adopting E-Commerce, user-friendliness of E-Commerce sites, very well maintained customer-care and customer relationships, inclusion of ICT education in all level of education system etc.

Export diversification is also an integral issue for the continuation of E-Commerce here, which includes assistance on product development, product certification and quality assurance while businesses participate in e-business. Conclusion: Concluding this paper, it can well be asserted that E-Commerce has abundant potential in Nepal despite various challenges. E-Commerce has the potential to yield numerous tangible benefits, in relatively short period of time.

Ironically, it is well believed that it has multiplier effects on other key areas of development, like education, technical infrastructure development, enhanced governance etc, of developing countries like Nepal, which makes it quite attractive. Hence, it is high time for us to realize its potential and make an initiative from government as well as private sector to implement E-Commerce here in Nepal. Relevant international monetary as well as tactical helps and aids also should be sought, as mentioned in the answer above.

If adequate steps are taken now, Nepal can also be a role-model in development of E-Commerce and can very well be on the right side of the growing digital divide.


  1. E-Commerce in UK. Retrieved 20th June 2009 from http://ecuk. co. uk/docs/ec04072002_11. asp
  2. Recent news of E-Commerce Boom in UK. Retrieved: 20th June 2009 from http://econsultancy. com/blog/1731-uk-e-commerce-solutions-market-worth400m-new-report . E-Commerce law in UK. Retrieved: 20th June 2009 from http://www. outlaw. com/page-431
  3. E-Business, E-Payment, E-Readiness Issues. Retrieved: 20th June 2009 from http://www. nepalit. com/Rajib-E-Business Forum. pdf
  4. , http://www. nepalit. com/Rajib_Subba_Nepal_eFinance_Forum. pdf
  5. http://www. nepalit. com/e-readiness-report. pdf MIS Reports in Nepal’s Telecommunication Issues. Retrieved: 20th June 2009 from
  6. http://www. nta. gov. np/articleimages/file/NTA_MIS_25. pdf
  7. Recent ICT Statistics of UK. Retrieved: http://www. statistics. gov. uk/pdfdir/ecom1108. pdf 20th June 2009 from

Cite this E-Commerce Study in Nepal

E-Commerce Study in Nepal. (2018, Feb 26). Retrieved from https://graduateway.com/e-commerce-study-in-nepal/

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