‘All governments lie’, Nepali startups and innovators sayLast week, Finance Minister Janardan Sharma promised to implement the Business Credit Flow Work Procedure 2021 to groom the startups and innovators as soon as possible. But innovators say it’s another lofty promise.
Seven years ago, the government through its 2015-16 annual budget had announced setting up a fund worth Rs500 million to groom startups and innovators.
The government’s policy was aimed at influencing investors' decisions and building the confidence of entrepreneurs in the post-earthquake recovery process as world economies were experiencing a massive boost because people were fast adapting to the concept of entrepreneurship and innovation.
This would also have put less pressure on the government to create jobs. But the plan did not come to fruition.
Again in 2019-20, the government announced a cash subsidy of up to Rs5 million for startups and innovators. It then started to prepare a working procedure or guideline. The plan did not materialise.
Then the Covid-19 pandemic came. The government in the last fiscal year 2020-21 allocated Rs500 million as a startup fund, to be lent at a 2 percent interest rate in order to support and encourage innovative entrepreneurs hit by the pandemic. But startups were left disappointed once again.
This fiscal year 2021-22, the erstwhile KP Sharma Oli administration announced providing seed capital of Rs2.5 million to innovators at 1 percent interest. The government then drafted the Business Credit Flow Work Procedure 2021 that was expected to get implemented from mid-July.
The budget, however, was subsequently revised by the Sher Bahadur Deuba-led coalition government on September 10 because the country’s annual financial plan was brought by the Oli administration through the ordinance route.
Last week [on October 8], Finance Minister Janardan Sharma held an interaction and said that the Business Credit Flow Work Procedure 2021 would be implemented soon and it would be “simple and quick” to promote startups and innovators.
But most of the startups whom the Post talked to do not think it will be implemented as they have been hearing lofty pledges from the government for a long time with nothing to show for it.
For startups it’s all about timing because if they are not able to invest, they will die in the thriving market.
“Obviously, a delay in the implementation of such key programmes kills business ideas. It also discourages emerging young entrepreneurs,” said Roshan Shrestha, co-founder of Daami Music, a Nepali song streaming mobile app.
Shrestha’s start-up business is a new concept and an experiment in the country. But he has not been able to excel because he is not able to generate enough income from it. This is because he lacks the funds to grow further. A lack of financing options hinders innovation in small scale enterprises in Nepal.
“We have our own set of business plans and we need money for each step according to the plan. But the government is least bothered. This definitely kills innovative ideas. It also impacts ideas that are emerging,” said Shrestha.
The ripple effect of the Covid-19 pandemic led shutdown had a key impact on Nepal’s economy, as all business sectors were affected, resulting in low revenue generation due to a slump in sales.
Nepal saw a negative growth rate of 2.1 percent in 2019-20 for the first time in nearly four decades and the growth rate in the last fiscal year has been estimated to be at around 1.8 percent, according to the World Bank latest report.
The report said that Nepal could witness a growth of 3.9 percent this fiscal year, ending mid-July 2022.
Mahesh Bhattarai, joint secretary at the Ministry of Finance, told the Post that a draft of the work procedure is still under discussion at the ministry after the budget was revised.
“We have been reviewing the draft as per the directive of the finance minister,” he said. “It has been delayed but we are planning to bring it into operation as soon as possible.”
Bhattarai said that the Cabinet has been expanded now and as some cross-cutting issues need a coordinated approach with other ministries, the implementation plan has been delayed.
Minister Sharma last week directed the ministry to prepare the working procedures to facilitate youths of rural areas too. “We deemed it necessary to reduce the hassles. Rather than forming various committees, it will be suitable to provide startups with a loan through a one-door system,” he said. The National Planning Commission will be a viable option to look into the issue, Sharma said.
Ram Kumar Phuyal, a member of the commission, during the same event, said as the programme is new, there is a need to formulate a simple working procedure based on international practices.
Entrepreneurs say the government has on different occasions prepared the document to make subsidised credit flow simple, clear, organised and effective in a bid to encourage youth entrepreneurs. But it has never been implemented.
“The truth is much more likely to be that too many cooks spoil the broth,” said an entrepreneur.
“Even if the subsidised credit flow is implemented, we doubt it will benefit genuine innovators. People with political connections will receive the benefits.”
Due to prolonged lockdowns and political instability, the business environment has not been positive for start-up entrepreneurs.
According to the work procedure draft, which the Post has seen before, the sectors eligible for the subsidised loan are businesses based on agriculture and livestock, forest (herbs), tourism promotion, entertainment and guest welcoming, alternative energy production and distribution, science, information and technology and communication.
Startups engaged in health service, education and teaching (excluding consultation, tuition centre, coaching class, language centre) will also get the loan.