Report on Social Security Fund (SSF) Integration for Micro and Small Enterprises in Nepal

Aligning Social Protection with the Sustainable Development Goals

Seven years following the implementation of Nepal’s contribution-based social security scheme, significant challenges persist in integrating the nation’s businesses, particularly Micro and Small Enterprises (MSEs). The Social Security Fund (SSF) is a critical instrument for achieving several Sustainable Development Goals (SDGs), including SDG 1 (No Poverty), SDG 3 (Good Health and Well-being), and most notably, SDG 8 (Decent Work and Economic Growth). However, the sluggish uptake among MSEs, which form the backbone of the Nepali economy, threatens the comprehensive realization of these goals. This report analyzes the barriers to participation and outlines strategic interventions aimed at enhancing social protection coverage.

The Central Role of MSEs in Nepal’s Pursuit of SDG 8

Micro and Small Enterprises are fundamental to Nepal’s economic landscape and its progress towards sustainable economic growth. Their contribution underscores the urgency of their inclusion in the national social security framework.

• According to the 2018 Economic Census, MSEs constitute 99.5% of the 923,356 operational enterprises in Nepal.
• They contribute approximately 22% to the national economy.
• They are a primary source of employment, providing jobs for about 1.8 million people.

Ensuring these 1.8 million workers have access to social protection is a core target of SDG 8, which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all.

Analysis of the Social Security Fund (SSF) Framework

Contribution and Benefit Structure: A Tool for SDGs 1, 3, 5, and 10

The Contribution-Based Social Security Act 2017 establishes a framework designed to provide a comprehensive safety net, directly contributing to multiple SDGs.

Contribution Schemes:

• Formal Sector: A total of 31% of the employee’s basic salary, with the employee contributing 11% and the employer contributing 20%.
• Informal Sector: The worker contributes 11%, supplemented by a 9.37% contribution from the local government.
• Self-Employed: A 31% contribution based on income.

Benefits and SDG Alignment:

The benefits offered by the SSF provide a crucial safety net that aligns with several development goals:

• Medical Treatment, Health, Accident, and Incapacity Protection: Directly supports SDG 3 (Good Health and Well-being) by ensuring financial access to healthcare.
• Maternity Protection: Promotes SDG 5 (Gender Equality) by supporting women in the workforce.
• Old Age, Dependent Family, and Unemployment Protection: Acts as a vital mechanism to achieve SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities) by preventing individuals and families from falling into poverty due to loss of income.

Current Participation and Financial Status

Despite the legal mandate, MSE participation remains low. As of July 23, 2025, the SSF’s status was as follows:

• Total Registered Establishments: 21,031
• Registered MSEs: Approximately 3,000 (14% of total)
• Total Contributions Collected: Rs. 86.93 billion
• Total Claims Paid: Rs. 15.79 billion

Barriers to MSE Participation: Hindrances to Achieving Decent Work (SDG 8)

Several factors deter MSEs from joining the SSF, creating a significant gap in social protection coverage and hindering progress towards universal decent work.

Economic and Regulatory Hurdles

• Sustainability Concerns: Employers, particularly in the current economic climate, are apprehensive about their ability to sustain the 20% contribution.
• Stringent Penalties: Non-compliance carries severe penalties, including a 10% interest charge on overdue amounts, the potential freezing of bank accounts and assets, suspension of licenses, and the freezing of passports. These punitive measures discourage enterprises that lack stable revenue streams.

Operational and Awareness Deficits

• Lack of Financial Literacy: A recent survey revealed that many MSEs lack proper bookkeeping practices, and some do not even have dedicated bank accounts, making compliance difficult.
• Low Awareness: A segment of unregistered businesses remains unaware of the SSF and the different schemes available for formal, informal, and self-employed workers.

Strategic Interventions and Multi-Stakeholder Partnerships (SDG 17)

Addressing these challenges requires a collaborative approach, exemplifying SDG 17 (Partnerships for the Goals). A committee led by the Ministry of Labour, Employment and Social Security (MoLESS) and the Federation of Nepalese Chamber of Commerce and Industry (FNCCI), with technical assistance from the International Labour Organization (ILO), is spearheading efforts.

Key Findings from a National Survey

1. Financial Capacity Exists: Nearly half of non-contributing MSEs were found to have good financial health, indicating a potential to participate if properly supported.
2. Need for Subsidies: The survey identified a need to consider carefully designed subsidies, potentially financed through tax mechanisms, to ease the financial burden on MSEs without disincentivizing formalization.
3. Call for Financial Literacy: The findings highlight a critical need for business management and financial literacy support for MSEs.

Collaborative Awareness Initiatives

Based on these findings, a targeted awareness program has been launched. This initiative is a partnership between:

• Federation of Nepalese Chamber of Commerce and Industry (FNCCI)
• Ministry of Labour, Employment and Social Security (MoLESS)
• Social Security Fund (SSF)
• International Labour Organization (ILO)
• European Union & United Nations (via the Empowered Women Prosperous Nepal programme)

This multi-stakeholder collaboration is crucial for disseminating information, building trust, and facilitating the registration of MSEs, thereby strengthening the institutional framework for social protection as envisioned in SDG 16 (Peace, Justice and Strong Institutions).

Conclusion: The Path to Inclusive Growth and Social Protection

The Social Security Fund is a cornerstone of Nepal’s strategy to achieve the Sustainable Development Goals. Expanding its coverage to the MSE sector is imperative for ensuring decent work (SDG 8), reducing poverty (SDG 1), and promoting well-being (SDG 3). The path forward requires sustained, collaborative efforts focused on targeted awareness, financial literacy support, and the exploration of sustainable subsidy models. By strengthening these partnerships (SDG 17), Nepal can bridge the coverage gap and ensure that the benefits of economic growth and social protection are shared by all.

Relevant Sustainable Development Goals (SDGs)

The article on Nepal’s Social Security Fund (SSF) and its challenges with Micro and Small Enterprises (MSEs) addresses several Sustainable Development Goals. The primary focus is on social protection, decent work, economic growth, and the partnerships required to achieve these aims.

• SDG 1: No Poverty

  The article connects to SDG 1 by discussing the implementation of a national social security scheme. Social protection systems are a key strategy to prevent individuals and families from falling into poverty due to unforeseen circumstances like illness, disability, old age, or unemployment. The article states the scheme offers benefits for “medical treatment and health benefit, and various protections like maternity, accident, incapacity, old age, dependent family and unemployment,” which act as a safety net against poverty.

• SDG 8: Decent Work and Economic Growth

  This is the most prominent SDG in the article. The discussion revolves around extending social security to all workers, particularly in MSEs, which is a core component of “decent work.” The article highlights the importance of MSEs to the economy, as they “contribute about 22 per cent to the national economy and employ about 1.8 million people.” The effort to formalize these enterprises through the SSF and ensure “employment security” directly supports sustainable economic growth and productive employment for all.

• SDG 10: Reduced Inequalities

  By aiming to include all business establishments, “both in formal and informal sectors,” as well as the self-employed, the social security scheme works towards reducing inequalities. It ensures that workers in smaller, less stable enterprises have access to the same social protections as those in larger corporations, thereby mitigating income and security disparities among the workforce.

• SDG 17: Partnerships for the Goals

  The article explicitly details a multi-stakeholder partnership to address the challenges of SSF implementation. It mentions a committee led by the “Ministry of Labour, Employment and Social Security (MoLESS)” that includes the “Federation of Nepalese Chamber of Commerce and Industry (FNCCI)” and receives “technical assistance from the International Labour Organization (ILO)” and support from the “European Union United Nations Empowered Women Prosperous Nepal programme.” This collaboration between government, the private sector, and international organizations is a clear example of SDG 17 in action.

Specific SDG Targets

Based on the article’s content, several specific targets under the identified SDGs can be identified.

1. Target 1.3: Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable.

   The entire article is about Nepal’s “contribution-based social security scheme,” which is a nationally implemented social protection system. The focus on including MSEs, the informal sector, and the self-employed demonstrates the effort to achieve substantial coverage for vulnerable segments of the workforce.

2. Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises.

   The article’s central theme is the challenge of integrating MSEs into the formal social security system. It mentions the “National Action Plan on Formalization” and the promotion of “registration of MSEs into SSF,” which directly aligns with encouraging the formalization and growth of these enterprises.

3. Target 8.8: Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, and in particular women migrants, and those in precarious employment.

   The social security benefits described—such as protection for “maternity, accident, incapacity”—are fundamental to creating a secure working environment. The scheme is designed to protect labor rights by ensuring employers contribute to the welfare and safety of their employees, thus reducing the precariousness of their employment.

4. Target 17.17: Encourage and promote effective public, public-private and civil society partnerships, building on the experience and resourcing strategies of partnerships.

   The article provides a direct example of this target. The collaboration between the Nepalese government (MoLESS), the private sector federation (FNCCI), and international bodies (ILO, EU, UN) to implement the “National Action Plan on Formalization” and run awareness programs is a textbook case of a public-private-international partnership.

Implied Indicators for Measurement

The article contains data and descriptions that can be used as indicators to measure progress towards the identified targets.

• Indicator for Target 1.3 & 8.3: Proportion of enterprises/population covered by social protection systems.

  The article provides specific numbers that can be used to calculate this indicator. It states that out of “923,356” MSEs in operation, only “3,000 (about 14 per cent)” of the 21,031 establishments registered with the SSF are MSEs. This data directly measures the coverage of MSEs within the social security system and highlights the gap that needs to be closed.

• Indicator for Target 8.3: Proportion of informal employment.

  While not providing a direct percentage, the article implies the scale of informality by noting that MSEs, which constitute “99.5 per cent of total” enterprises, are “lagging” in joining the formal SSF. The mention of “informal sector schemes” and the need for a “National Action Plan on Formalization” points to the high level of informal employment as a key challenge. Progress would be measured by the number of MSEs and their employees transitioning from informal to formal status by registering with the SSF.

• Indicator for Target 8.8: Social security benefits paid out.

  The article mentions that the SSF has “paid Rs. 15.79 billion against the claims for medical and health treatment, accident and disability, dependent family protection and retirement facility.” This financial data serves as a direct indicator of the functioning of the social protection system in providing a secure environment and responding to workplace-related contingencies like accidents and health issues.

• Indicator for Target 17.17: Existence and nature of multi-stakeholder partnerships.

  The article describes the partnership between MoLESS, FNCCI, ILO, and the EU/UN. The existence of the “committee led by the Ministry of Labour, Employment and Social Security” and its joint activities, such as conducting a “sample survey” and implementing a “targeted awareness programme,” serves as a qualitative indicator of an active and effective partnership aimed at achieving a common development goal.

Summary of SDGs, Targets, and Indicators

Source: risingnepaldaily.com