Nepal’s startups face challenges as government delays loan approval process

KATHMANDU: The government has finally unveiled the long-awaited provisions for facilitating startups, which had been limited to mere speeches and announcements until now. Several months ago, in the Chaitra month of the previous fiscal year, the government introduced the “Startup Venture Loan Fund Procedure 2079.”

With this procedure, the path to obtaining an interest-free loan of up to 2.5 million Nepali Rupees for a maximum of seven years was opened to qualifying startups, satisfying the criteria set forth by the new entrepreneurs who had met the standards of the government’s 3% interest rate.

Alongside the procedure’s introduction, the Industry Department had also called on startups to submit project proposals on Chaitra 16th of the previous year. According to the procedure, startups in sectors meeting the prescribed criteria could submit their proposals for the startup venture loan.

During the application period, a total of 382 applications were received, out of which 213 startups did not meet the standards, resulting in their exclusion from the program, as announced by the Startup Committee under the Industry Department.

However, the remaining startups were unable to secure loans. Consequently, with the conclusion of the fiscal year 2079/80, the government withdrew the procedure it had introduced for startup loans.

According to Ramila Bhandari, Information Officer of the Industry Department, the “Startup Venture Loan Fund Procedure 2079” was established according to the provisions of the Budget Act.

It was only applicable for one fiscal year, and with the beginning of the new fiscal year, the procedure was automatically revoked in 2080/81.

“Previously, there was a considerable delay in disbursing loans after the initial application,” Bhandari said. “After the end of the fiscal year, the procedure itself was discontinued. Now, with the approval of the new procedure, the process will move forward.”

The government has also declared in this year’s budget that it will encourage startups. This announcement marks the continuation of a decade-long aspiration that was initiated in the budget for the fiscal year 2071/72 when the then Finance Minister Dr. Ram Sharan Mahat had allocated NPR 500 million for the establishment of a fund for startups.

The decade that followed saw several announcements and initiatives related to startups. Finally, a procedure for providing loans to startup businesses was formulated in the fiscal year 2079/80.

Yet, despite these developments, startups are still left wondering when the procedure will be approved and when they will be able to access loans.

As per the Industry Department’s recent call for applications, startups that applied in the previous fiscal year and met the criteria will receive loans under this year’s procedure, which is currently in progress. However, the delay in implementing the procedure has raised concerns among startups and applicants.

Regarding the approval of the procedure, Bhandari stated, “We have forwarded the procedure to the Ministry for approval for the new fiscal year. Once the Ministry finalizes it, the process will move forward.”

The question remains: when will the procedure be approved, and when will loan disbursement commence?

Bhandari emphasizes that startups registered under the new fiscal year will have the advantage of a smoother application process for loans. The Department will review some aspects and make amendments as necessary.

Yagya Raj Koirla, Chief of the Industrial and Investment Promotion section of the Department of Industry, also confirmed that discussions had been held within the Department regarding amendments to the procedure and potential revisions to the criteria. The Department has been exploring the possibility of involving other financial institutions or organizations apart from designated banks for the disbursement of startup loans. Koirla stated, “This is a matter of discussion. After making revisions, we will proceed.”

The Industry Department has also proposed changes to its existing areas of work and capacity. If successful, the startup venture loan program may be handed over to another financial institution or organization. Koirla said, “This is under discussion. After making changes, we will move forward.”

According to the Industry Department, with the introduction of the new procedure, startups in the pipeline for the coming fiscal year will need to wait for the process to be finalized. This delay will occur regardless of whether the existing procedure is amended or the same process continues.

In conclusion, startups are still awaiting the approval of the startup loan procedure, and the delay in its implementation raises concerns about the potential hindrance of their operations.

The government’s efforts to facilitate startup financing are well-intentioned, but the practical execution of these initiatives is crucial for supporting the growth of the startup ecosystem in Nepal.