Factors Affecting Financial Condition of Urban Municipalities in Nepal

The study attempts to examine the factors affecting the financial condition of urban municipalities in Nepal. This cross-sectional study employs quantitative approach and is based on field survey using structured questionnaire. A field survey was undertaken from 12th November 2022 to 5th May 2023 to collect data from urban municipalities in Nepal located in all seven provinces. The 37 sample urban municipalities were selected employing stratified random sampling method. From the sample municipalities a total of 267 responses were collected from municipal leaders, officers, administrators and academicians. Data was collected from field survey using self-administered questionnaires consisting of 5-point Likert scales. Data was analysis using correlation and multiple regression analysis. The financial condition of urban municipalities was found to be satisfactory. Metropolitan cities have relatively better financial condition in dimension of ability to meet short-term obligation (M=3.72), revenue generation capacity (M=3.94), and financial independence (M=3.75). Positive impact of governance factor (β = 0.32, p <.001), economic factor (β = 0.18, p <.001) and structural factor (β = 0.06, p <.001) was found on financial condition. The study identified several dimensions that influence the financial condition of urban municipalities. Factors such as immigration, quality of life of citizens, and literacy rate have emerged as critical factors in shaping the financial condition of municipalities. Economic factors, including the capacity to meet commitments, resource availability, and cost management were also significant. Effective municipal governance, characterized by strong leadership, good governance practices, and transparency, played a crucial role in financial sustainability. In contrary, external factors, such as central government policies and municipal independence didn’t influence financial condition.