Image: Bloomberg
A country famed for moose, meatballs and minimalist design might seem an odd model for capital-market reform in the Himalayas. Yet Sweden, with its deep, dynamic stock market, holds a lesson for Nepal, whose own bourse, the NEPSE, is as thin as mountain air.
Sweden has turned stock ownership into a civic virtue. Over the last decade more than 500 companies have gone public on its exchange—more than France, Germany, the Netherlands and Spain combined. Nepal has less than 270 listed firms in total.
Sweden’s success is underpinned by broad participation, clever regulation and relentless simplicity—concepts Nepal could borrow with interest.
Start with culture. Financial literacy in Sweden begins in primary school. Children are taught how to budget, save and invest before they reach the legal drinking age. In Nepal, by contrast, financial education is sporadic and left to banks’ CSR departments. A government survey pegs financial literacy at 57.9%, though some suspect the figure is flattered by optimistic sampling. Either way, investing remains the preserve of a narrow class. Less than 25% of Nepalis have opened DEMAT accounts, the gateway to equity investment.
The fallout is a shallow market. Trading volumes on the NEPSE are anaemic with turnover ratios far below regional peers. Investors, wary of volatility and spoiled by high bank interest rates, prefer to stash savings under mattresses or in fixed deposits. Sweden’s households, by contrast, are Europe’s most equity-exposed: with more than a third of their savings in shares. That provides not only market depth but ballast against shocks, too.
Much of this comes down to product design. In 1984 Sweden introduced Allemansspar (“savings for all”), a scheme that allowed citizens to invest in equities via mutual funds. It was a stroke of democratic finance, channelling savings into small and mid-cap firms. In 2000 the Premium Pension System let Swedes direct part of their state pension into a range of private funds. By 2012 Investment Savings Accounts (ISKs) further removed friction, eliminating the need to track holdings or declare capital gains. The taxman was appeased, the investor liberated.
Nepal’s regulatory regime meanwhile excels at complication. A thicket of red tape deters firms from listing and punishes those who try. The country also lacks a reliable base of institutional investors. In Sweden pension funds and insurers are market mainstays—cornerstone investors in new offerings and long-term holders in listed firms.
In Nepal pensions allocate less than 5% of assets to equities; insurance firms too are allergic to equity investments. Urging more institutional participation as well as incentivising IPO participation could lure reluctant companies to list, especially from sectors—like IT—that grumble the domestic market undervalues innovation.
There is also the small matter of making listing worth the effort. Sweden provides not only a deep pool of capital but also prestige as well as liquidity and a chance at global visibility. The NEPSE, by contrast, offers companies modest capital and a fickle crowd of retail punters.
Policymakers have floated worthy ideas: tax breaks for IPO-bound firms, simple listing protocols and reforms to diversify sector representation. But without execution, they’ll go the way of most policies here: into a filing cabinet, never to be seen again.
True, Sweden’s market reforms took decades. But they began with a simple premise: that investment is not only for the elite. If Nepal can build that conviction—through education, incentives and smarter regulation—it might yet turn its moribund exchange into an engine of capital. Failing that, it risks being left with a stock market in name only: less a marketplace and more a museum.
At least the view will be nice. ■
