With traditional jobs shrinking and youth migration rising, entrepreneurship offers new hopes for Nepal. In light of this, the Government of Nepal has launched the Startup Enterprise Loan Programme to support start-ups with collateral-free loans of up to Rs2.5 million at 3 percent interest.

Envisioned in 2015 and finally implemented in FY 2023-24, startups received over Rs190 million. This fiscal year (2081-82), the government allocated Rs1 billion and was matched with an overwhelming response from over 5,000 applicants: 661 startups secured the loans, which is a nearly 300 percent rise. On paper, the government’s push to foster entrepreneurship is commendable. Yet deeper challenges lie beneath this encouraging surge.

More than just a buzzword

The term “startup,” borrowed from global discourse, is misaligned with Nepal’s structural realities. The recent amendment to the Industrial Enterprise Regulation defines a startup as a business under 10 years old, with annual revenue below Rs150 million and a “self-declared innovation and use of technology.” However, age and turnover miss the point. Startups are defined by scalability and market disruption, not their market size or years of establishment. What about enterprises that have solid ideas with transformative potential but do not fit into these arbitrary parameters?

Further, what constitutes innovation and technology when basic digital tools are ubiquitous? If a fruit shop uses a QR code, a coffee shop tracks inventory with Excel, a local kirana store takes orders via social media, or a farm uses a weather app, do they all qualify as startups? Across Nepal, we see small kutani-pisani mills and bakery cafes perched on remote mountain slopes. Returnee migrants and young graduates are entering commercial agriculture, offering unique value propositions. So, where do we draw the line? Are these startups, or simply new businesses with modest ambitions? This broad definition risks lumping together corner shops, cottage industries and high-growth ventures.

Innovation in constraints and opportunities

Agriculture still contributes around 24 percent to GDP and employs around 61 percent of the population in Nepal. Manufacturing is small and fragmented. Even digital infrastructure heavily relies on India, with nearly 90 percent of internet traffic routed through our southern neighbour. Given the context, the potential for disruptive, high-growth innovation is real but constrained by infrastructure, connectivity and market access.

Given the context, youth-led entrepreneurship that leverages Nepal’s unique strengths should be encouraged. Consider businesses manufacturing niche, high-value products like black cardamom or speciality textiles like Allo Nepal, ventures that transform local resources into global opportunities. Yet under the current definition, such enterprises fall into regulatory limbo, with their eligibility dependent on officials’ interpretations rather than clear criteria.

Reimagining startup strategy

The 16th National Plan targets 7.1 percent annual GDP growth, with the coming decade declared as one of information technology and agricultural investment. This vision, overtly bold, overlooks a fundamental requirement: Nepal must first identify its comparative advantages before pursuing broad sectoral goals. And start-ups lie at the centre of sectoral intersections. Agri-tech firms will encourage precision farming, software startups will power digital infrastructure, and tourism growth will depend on innovation in travel-tech and hospitality. Even logistics, payments and data essential to these plans are startup domains. Yet, policy continues to treat startups as a separate agenda, rather than a targeted investment that will bring to fruition the overarching ambition.

Nepal is already committing significant resources to this space, with Rs730 million proposed for FY 2025-26. But without a unifying vision, these investments risk falling short—a cohesive targeted policy that aligns startup growth with wider national priorities. Given the investments, this requires grounding decisions in data, defining outcomes and projecting long-term impact.

Reducing programme overlap

There are already many existing concessional loans, such as the youth self-employment loan, women entrepreneurship loan, foreign returnee youth project loan and educated youth self-employment loan, among others. This creates a landscape where multiple schemes cater to similar beneficiaries, duplicating efforts and resources. Further, the startup programme, in its current form, is essentially a repackaged traditional loan that assesses financial projections, evaluates repayment capacity, disburses lump-sum amounts and expects regular instalments.

Moreover, startups may require alternatives to concessional loans, which are better suited for scaling. To turn ideas into impact, seed funding, equity investment, and a robust support system that includes incubation centres, mentorship programmes and market exposure might be relevant. The government does not need to perform all these roles directly. It should be a clear facilitator, creating the environment and incentives for such support systems to emerge.

Robust delivery and accountability

We need crucial shifts to make the startup loan programme truly effective. First, it must move beyond Kathmandu-centric bottlenecks. Requiring applicants to travel to the capital for live presentations shows the government’s intent to engage directly, but it also reinforces the centralisation that limits access for rural entrepreneurs.

Second, there should be clear definitions of startups and no opportunities for duplication of resources under various schemes. Third, it should bypass bureaucratic delays through decentralisation. We must also empower provincial and local bodies with clear mandates and resources to accelerate implementation and improve access. This enhances efficiency and allows the programme to align with regional economic strengths, from agribusiness in the Tarai to tourism in the mid-hills.

Fourth, the token size must be reconsidered. The current cap of Rs2.5 million is often too limited for startups developing scalable, disruptive solutions. For tech-enabled businesses or high-growth models, this ceiling restricts ambition and forces early compromises. A tiered financing approach—tied to sectors or milestones—would better align capital with potential.

Fifth, the programme must rebuild public trust in governance by creating a transparent, accountable, consistent delivery system. When public confidence in government systems is fragile, showcasing successful case examples and tracking their long-term growth with social and economic impact can help shift public perception and demonstrate that well-managed programmes can deliver real, lasting change.

It is time to position startups at the centre of Nepal’s development strategy. With vision, execution and support, they can drive inclusive growth, innovation and long-term national transformation.