Importance of Cottage and Small-Scale Industries:
Even Nepal is an agricultural country; there is high unemployment because of the seasonal nature of agriculture. This unemployment problem can be solved by establishing cottage and small scale industries. Due to the low level of saving, people can’t invest a large amount in industries. Thus in Nepalese context, cottage and small scale industries are very important in economic development which is as follows:

1. Easy to establish:
Cottage and small-scale industries are easy to establish because these industries do not require more capital and good technical knowledge. Such industries can be established and run by the household.

2. Increase in employment opportunity:
Agricultural sector alone can’t create a large number of employment opportunities. Agricultural provides only seasonal employment and the rest of the period, people remain unemployed. Cottage and small scale industries provide employment during the off agricultural season and other time also.

3. Utilization of local resources:
Various types of raw materials are found in different parts of the country. The local raw materials like stone, woods, herbs bamboos, etc. can be used by establishing cottage and small scale industries in rural areas.

4. Basis of development of large scale industries.
Cottage and small scale industries are the basis for large scale industries. People learn management techniques and skills from these industries which help to establish and develop large scale industries.

5. Preservation of local is and culture.
Cottage and small scale industries play an important role in preserving local arts, skills, and culture. The productions of goods from these industries depict local arts and skills and culture of different parts of the country. The handicraft goods of Nepal have become popular in foreign markets.

6. Source of National income.
The products of the cottage and small scale industries can be exported to the foreign countries which help to increase the national income. The government also receives fee charge and tax from cottage and small scale industries.

There are other important roles of cottage and small scale industries such as support for poverty alleviation, the basis of foreign trade, source of earning foreign currency, development of tourism industries, etc.

Problems of Cottage and Small-Scale Industries:
There is a favorable condition for the establishment, operation, and development of cottage and small scale industries in Nepal. There are high possibilities of expanding production from cottage and small scale industries, which could help to develop Nepal’s industrial sector. But, the position of cottage and small scale industries is not satisfactory due to the following problems:

1. Lack of capital:
Adequate capital is required for the development of cottage and small scale industries. Even the entrepreneurs have the skill and other resources; they do not have enough capital to mobilize the industries. As a result, the cottage and small scale industries couldn’t be developed.

2. Shortage of raw materials:
Generally, raw materials needed for cottage and small scale industries are exported to foreign countries in large quantities and remaining most of the raw materials are captured by large scale industries. Thus the cottage and small scale industries have to face the problem of regular supply of raw materials.

3. Unable to compete with large industries:
Cottage and small scale industries are used traditional technologies for the production of goods. So, the low quality and more expensive goods are produced in comparison to the goods produced by large industries. Therefore, goods produced by these industries cannot compete with the goods produced by large industries.

4. Lack of transportation and advertisement:
Transportation and advertisement both are the most essential factors in order to develop these industries. Due to the lack of these factors; consumers are unaware of their products. So, the demand for their products could not be increased. As a result, such industries can’t be developed properly.

5. Limited market:
The market for the products of cottage and small scale industries is small unorganized and unmanaged. Due to the low quality and production cost, the products of these industries are unable to compete with foreign products. So, their demand would not be increased in foreign and even in the national market.

6. Lack of protection policy:
Cottage and small scale industries are the foundation of large scale industries so; each country should adopt a policy of protection for these industries at the beginning. But these industries do not have any protection or subsidies for their protection. So, due to the lack of protection policy, these industries are in the stage of a death bed, instead of being developed.

There are other problems of cottage and small scale industries such as lack of skilled manpower, lack of modern technique of production, lack of fuel, no diversification in production, etc.