Eight years after it first announced funds for startups, the government has finally issued the procedure to provide financing for such businesses. The Ministry of Industry, Commerce and Supply on Sunday issued the long-awaited ‘Startup Enterprise Loan Fund Procedure 2079’ which will enable startups to get loans from the government at subsidized interest rates.
This has paved the way for startups to get loans up to Rs 2.5 million at an interest rate of three percent for a maximum period of seven years.
While the government has issued the procedure, whether it will come into implementation is still a million-dollar question. For the past eight years, the government made announcements for startups but failed to bring them to implementation.
In the budget for the fiscal year 2015/16, the government announced a Rs 500 million fund to groom startups and innovators. Again, in FY 2019/20, the government announced a cash subsidy of up to Rs 5 million for promising new businesses. While the government did some work in this regard, the work procedure did not see the light of day.
In FY 2020/21, the government again formed a Rs 500 million startup fund to issue loans at a two percent interest rate. The National Planning Commission was designated as the agency to implement the fund. However, the plan to provide loans to startups at subsidized interest rates got stalled. In the federal budget of FY 2021/22, the government provisioned a fund of Rs 1 billion for startup promotion.
With loan procedure 2079 coming into effect, the Startup Enterprise Implementation Committee led by the Director General of the Department of Industry will invite proposals from interested entrepreneurs and prepare details of the proposed projects for loans. The committee will have representation from the Company Registrar’s Office, Nepal Rastra Bank, and the private sector.
The committee has been mandated to evaluate the business projects and recommend them to the central bank for lending. NRB will authorize certain banks for the disbursing loans for startup entrepreneurs. As per the procedure, such loans will be provided in two installments based on the recommendation of the Startup Enterprise Implementation Committee.
In the first installment, entrepreneurs will get 50 percent of the loan amount. The designated banks have to sign an agreement with startup entrepreneurs within three days of the NRB recommendation. And, the entrepreneur will receive the first installment of the loan within three working days of signing the agreement.
The loan procedure has set certain criteria for getting the loans. Businesses that have not exceeded seven years of establishment or operation of an enterprise or business can get loan facilities. Similarly, the paid-up capital of the startup business or enterprise should not be more than Rs 5 million, the total income of the enterprise should not be more than Rs 5 million per annum, the fixed capital (excluding the value of land and house) should not exceed more than Rs 20 million and the number of full-time workers in the enterprise should not be more than 10.
According to the procedure, such loans will be provided to start-up entrepreneurs involved in agriculture and animal husbandry, tourism, communication, IT, and the education sector.