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Boosting Sustainability of the Nepali Carpet Industry and Creating Self-Employment Opportunities for Returnee Migrants

Nepal is considered as one of the leading destinations for the production of contemporary handmade carpets. For more than fifty years, the Kathmandu valley (and the nation’s capital) has served as the creative hub for the manufacturing of handmade rugs.

Nepal is considered as one of the leading destinations for the production of contemporary handmade carpets. For more than fifty years, the Kathmandu valley (and the nation’s capital) has served as the creative hub for the manufacturing of handmade rugs. However, in recent years the production environment in the valley has become increasingly challenging with the emergence of a booming real estate market. Additionally, pressure on the production locations and labour shortage has probably become the number one problem for most manufacturers. Given the industry’s notable contribution in generating foreign exchange earnings (USD 67 million in 2017/18) and employment generation, shifting parts of the production outside the valley seems to be the most promising way forward for the industry that has an internal migrant population as its major workforce. Under this context, Label STEP in close collaboration with a few pioneer carpet exporters, investors and international buyers, along with UKaid Skills for Employment Programme’s (सीप) co-funding support, is recreating the success model of Nepali carpets by setting up Artisan Villages in rural areas of Province 2.

The forming of this partnership is timely, given the artisanal industry’s downward trend (-8.5 % year over year) exacerbated by a decline in labour supply and productivity (from 3,326,375 SQM in 1993 to 359,000 SQM in 2018), low motivation among weavers as well as reduction in prices (Nepali carpets are increasingly getting expensive, and advance payment to attract weavers in this job has also significantly added to the costs). Therefore, the current initiative in skilling and employment is a critical step to recuperate the annualised average decline in exports through reinvigorating the industry with new, highly motivated and qualified weavers – enabled through skilling on artisanal rug weaving.

With UKaid सीप’s support, Label STEP is taking Nepal’s carpet manufacturing hub to underserved geographic areas in Province 2 – Sarlahi and Siraha. These districts have traditionally served as the origin of Nepal’s weaving community and also exhibit the highest rates of foreign employment migrants. STEP, along with two leading Nepali carpet manufacturers and a design company, namely NP Rugs, Kaju Rugs, and Adhishree House of Design, are developing high-quality weaving workshops linked to the carpet value chain, aimed largely at migrant households, to cater to the growing global high-value luxury carpet industry. Here migrants – current and returnees, and mostly women – are engaged as weavers and master weavers.

Our efforts go beyond addressing production bottlenecks. To promote Nepali fair-trade carpets and the Artisan Villages partnership supported by UKaid सीप, in January 2020, Label STEP took our story and products to Domotex, the largest trade show of rugs and floor coverings in Germany—garnering greater interest for the Nepali carpet industry and the weavers behind them. Similarly, to support innovation in carpet designs, in February 2020, representatives from the renowned international rug brand Jan Kath, visited the workshops in Sarlahi to orient weavers on rug weaving and to promote weaving as a high-value artistic vocation.

Maximising the Socio-Economic Impact of Return Migration Majority of weavers in the Nepal’s carpet industry are internal migrant workers. After the oil boom in the 1970’s in the Middle East, new destinations other than India opened up for Nepali migrants in the Middle Eastern countries. Additionally, the outflow of Nepali workers for foreign employment significantly increased with the restoration of democracy and adoption of the economic liberalization policies in 1990 in Nepal. Most of those migrating for foreign employment also comprised weavers in the Kathmandu based workshops belonging to Tamang and Magar ethnic communities. Therefore, carpet industry in Nepal has a historical linkage with migration (in various forms). In 1959, Chinese invasion of Tibet resulted in thousands of Tibetans walking through the Himalayan mountains in search of a new home. Many settled in Kathmandu, and in the vicinity of Siraha and Sirlahi, and brought their carpet weaving skills with them. In ensuing years, Tibetan carpet weaving factories proliferated in Kathmandu Valley. There was gradual transfer of skills to Tamang and Magar ethical communities who enrolled into the weaving industry primarily owned by the second generation of Tibetans living in Nepal. Internal migrants and migrant household members have comprised a large part of the industry’s workforce

In the current context, UKaid सीप and Label STEP’s partnership is laying the foundation for migrants, who now primarily migrate to Gulf Cooperation Council (GCC) countries for work, to invest their hard-earned remittances and skills, productively, in setting up the workshops, independently or in collaboration with the Kathmandu-based exporters. The aim is to maximise the socio-economic impact of return migration in Nepal. The returnee migrants are involved in the project in various capacities – as investors, master weavers, weavers, and aspiring entrepreneurs. Our goals are common: generating productive livelihoods, restoring dignity of labour in this specialised industry, stemming internal migration of the weavers to difficult working conditions in the Kathmandu valley, and revitalising Nepal’s carpet industry. Within a year, STEP with support from its partners plans to establish eight fair-trade artisan workshops in these districts with at least 400 women and 100 people with disabilities employed, at least 60% of whom come from migrant households.

The artisan villages established in Sarlahi (with expansion plans to Siraha) aim to re-create the success stories of the handmade carpet industries by mobilising migrants and their households to both replicate and shift the artisanal carpet manufacturing hub from Kathmandu to the weaver’s origin communities. Few stories of our stakeholders, on the ground and driving the project and the workshops, are illustrated in the testimonials. The participation of international buyers, rug manufacturers and the weaving community have been encouraging. However, decentralising an industry that has been concentrated largely in Kathmandu Valley for over 50 decades takes time and sustained efforts, especially when coupled with the recent market downturn as a result of COVID-19 crisis.

The current pandemic demonstrates the need for fair trade clearly. “Label STEP has always promoted good working conditions and raised awareness for safe, healthy and hygienic workplaces. We are also pushing for living wages - salaries enabling weavers and workers to not only cover basic needs but also save 10% of their earnings - as reserves for times of crisis like this, explained Reto Aschwanden, Managing Director of Label STEP. STEP and सीप’s partnership also provides financial literacy courses for weavers, improving their capacity for responsible management of their finances and supporting their access to bank and savings accounts. Under the current health crisis, the advantages of the Artisan Village concept are even more obvious. Not only are the cost of living in rural areas cheaper than in the capital, but it also seems like a good idea to bring employment and decent work to where the weavers originate, instead of making thousands of people travel all across the country. “The Artisan Village project also has the potential to offer an attractive alternative to earn a livelihood for migrant workers who are currently returning to their hometowns and villages," Aschwanden shares.

Following the completion of the trainings, Label STEP and its partners will introduce a fully functional international value chain connected to the workshops in Province 2. NP Rugs industries and Kaju Art Rugs, who have been part of the carpet industry for more than 20 years and have secured ‘Best Artisanal Rug Exporter’ awards, will be the linchpin connecting the Sarlahi based artisans and their hand-woven rugs to the international market. The Label STEP and UKaid सीप partnership has embodied the following key factors to ensure long-term sustainability:


  • Involvement of private sector partners/carpet manufacturers, bringing in their investment, technical knowhow and market reach to skill and position weavers from Sarlahi (and Siraha) in an integrated global value chain.
  • Employers-led training and use of international quality controller as well as phased wise training of master weavers and weavers.
  • Use of information technology to accurately assess the weaver’s performance including their regular appraisal and quality tracking system.
  • Involvement of returnee migrants and migrants’ households in the weaving/carpet manufacturing sector.
  • Establishing Artisan Villages that serve as model for fair trade standards and linkages with the actors/buyers in the international value chain.