Nepal’s business community is mounting resistance to a government proposal that would strip companies of direct control over their corporate social responsibility spending, warning that centralising the funds into a state-managed pool risks repeating the failures of past public expenditure schemes and severing the link between businesses and the local communities where they operate.
The proposal, included in Prime Minister Balendra Shah’s 100-point governance roadmap, would require industrial enterprises, banks and financial institutions to deposit their mandatory CSR allocations into a designated government fund, which the state would then deploy in sectors of its own choosing. The government has said the necessary legal amendments will be completed within three months.
Industry bodies argue that the private sector should be permitted to spend CSR funds independently under clearly defined standards, pointing out that the state has a poor track record of effectively disbursing money through centralised funds. The core objection is one of ownership: because CSR contributions are drawn from post-tax profits, critics contend that the government has no legitimate claim over how that money is spent, and that its role should be limited to defining eligible sectors and strengthening audit mechanisms rather than taking custody of the funds.
Under the Industrial Enterprises Act 2020, medium and large industries are already required to allocate at least one per cent of annual net profit to CSR obligations, with the existing framework stipulating that at least half of that amount be spent in areas directly affected by the industries concerned, in coordination with local governments. Banks and financial institutions are subject to a similar requirement under Nepal Rastra Bank guidelines. The central bank has expressed support for a unified fund, arguing that pooling resources could make spending more effective, though critics remain sceptical.
The Supreme Court has also shaped the debate. In December 2024, the court barred the government from directing CSR funds towards large development projects, ruling that such money must be targeted at communities in extreme poverty and spent on essentials including housing, education and healthcare. The court further ordered the Ministry of Law to draft a dedicated CSR law, though that legislation has yet to materialise.
The wider context is one of persistent misuse. Businesses have previously faced allegations of channelling CSR money to acquaintances and politically connected groups under the guise of social responsibility. Industry representatives acknowledge the problem but argue the remedy lies in stronger independent monitoring and clearly defined investment criteria, not in transferring control of the funds to the state.
