Government launches startup loan scheme offering up to Rs 2.5 million at subsidized rates

KATHMANDU: In a significant move to bolster entrepreneurship and stimulate innovation, the government has approved the “Startup Enterprise Loan Operation Procedure, 2081,” designed to provide financial assistance to emerging startups in Nepal. The new policy, ratified by the Cabinet on August 14, paves the way for startups to access loans of up to Rs 2.5 million at subsidized interest rates, fostering a conducive environment for entrepreneurship and innovation.

The Industrial Enterprises Development Institute, operating under the Ministry of Industry, Commerce and Supplies, has been entrusted with the implementation of this startup loan program. This initiative is a part of the government’s broader strategy to empower entrepreneurs equipped with cutting-edge knowledge, skills, and abilities, and to drive the startup ecosystem in Nepal.

Key Highlights of the Procedure

Under the new Procedure, startups can secure concessional loans designed to facilitate their growth and sustainability. The initiative will kick off with the Industrial Enterprises Development Institute issuing a public notice to invite applications from eligible entrepreneurs. Each entrepreneur is allowed to submit a single proposal, and it is mandatory to include a self-declaration confirming that no concessional loans have been received from other agencies. Entrepreneurs who have previously obtained such loans will be ineligible until the repayment of the prior loan is complete.

A committee of experts will meticulously evaluate the submitted proposals. The evaluation will focus on several criteria, including the incorporation of innovative thinking, the use of technology in the enterprise, the robustness of the business proposal, job creation potential, utilization of indigenous raw materials, the availability of infrastructure, and the financial capacity of the entrepreneur to manage and repay the loan.

Loan Details and Eligibility

The Procedure outlines that loans will be available at a concessional interest rate, starting from a minimum of Rs 500,000 and going up to Rs 2.5 million. These loans will have a maximum repayment period of five years. Entrepreneurs must begin repaying either the principal or interest one year after receiving the first installment of the loan.

A distinctive feature of this Procedure is the provision to offer loans at a reduced interest rate of three percent, with the enterprise or project itself serving as collateral. To facilitate this, one or more banks will be appointed to administer these loans. The Procedure also ensures that the allocated loan amounts are safeguarded, with provisions made for the payment of any unused funds back to the Federal Reserve Fund at the end of the fiscal year.

Targeted Startups

The Procedure specifically targets enterprises that have been registered for no more than 10 years. Additionally, these businesses must not have an annual turnover exceeding Rs 150 million in any fiscal year since their establishment. The startup must also be a new venture that has not been dissolved or reconstituted in any form.

Eligible entities include enterprises registered as private firms, partnership firms, companies, or cooperative organizations with the industry registration body. However, the loan will not be extended to unregistered industries, businesses that import and distribute goods and services from abroad, or those that have been blacklisted. Furthermore, enterprises registered as holding and investment companies under the Industrial Business Act 2020 are also excluded from receiving this startup loan.