Government’s start-up loans scheme loses its shineThe Department of Industry said it had received 425 proposals. Among them, half, or 213 applications were disqualified during the first screening itself.
The government received a substantially lower number of proposals for concessional loans meant to help start-up enterprises.
Half of those applicants' proposals, however, have been disqualified.
The Department of Industry said it received 425 proposals. However, half of them or 213 applications did not qualify.
The government is providing subsidised loans of up to Rs2.5 million at 3 percent interest, for the start-ups.
On May 15, the department issued a notice, informing the unqualified applicants. They also have been informed about the reasons for their non-selection in the scheme.
“Most of the applicants do not have innovative business ideas that we sought. As a result, they were not selected,” said Khagendra Bahadur Basnet, director of the department.
“It will take more than a month to evaluate the applications that have passed the first screening,” Basnet added.
On March 30, the department invited start-ups with innovative knowledge, idea, skill and capacity to submit proposals by April 19.
This followed the approval of the Start-up Enterprises Credit Fund Working Procedure by the Industry Ministry on February 22.
A budget of Rs250 million has been allocated for the programme.
“As the procedure has not precisely defined the innovative business ideas, we are working on preparing standard operating procedures to evaluate the applications that have qualified,” Basnet said, adding that the evaluation team is preparing the standard operating procedure.
“The applicants will be shortlisted without any bias,” said Basnet.
The evaluation committee consisted of a nine-member team from the government, including the private sector like the Federation of Nepalese Chambers of Commerce and Industry, Federation of Women Entrepreneurs’ Association and Federation of Small and Medium Enterprise in Nepal.
He said that there would be no limit on the number of startups who seek the loan.
“We have to allocate the fund by mid-July, before the end of this fiscal year,” said Basnet.
The department has requested for the allocation of human resources with the Ministry of Industry, Commerce and Supplies for a temporary period to fast-track the process.
The insiders, however, said that as always, the government has brought the proposals hastily.
They said it is highly unlikely that the government will complete the selection process by the end of the fiscal year in mid-July.
“Why did the government announce the scheme without any proper preparation,” questioned Kavi Raj Joshi, founder and managing director of Next Venture Corp.
“The department should have started their internal preparation after the scheme was announced, " said Joshi. “It shows the government’s unplanned decision-making and lack of priority.”
He said the lower number of applications received by the government for loan schemes shows that it has lost the credibility and the trust of entrepreneurs.
“If a small startup competition is organised, there will be more than 1,000 enterprises,” said Joshi.
According to the latest credit scheme unveiled by the Industry Department, the repayment period starts after three years and should not extend more than seven years.
The successful applicants will receive the money in two instalments, half in the initial phase and half later.
The sectors eligible for the subsidised loan as determined by the work procedure are— businesses related to agriculture and livestock, forest (herbs), tourism promotion, entertainment and hospitality, information technology and communication, health services, and education.
Other sectors are transportation and goods carrier services, infrastructure construction, automobile, traditional technology, production and services, mine and food production and processing, and management of waste and environment.
The start-ups registered before the publication of the notice, and those that had not crossed seven years of operations were eligible to apply for the subsidised loan.
According to the work procedure, a paid-up capital start-up applying for a subsidised loan should not exceed Rs5 million, and their annual gross income too should not exceed Rs 5 million. Their fixed capital (except home and land price) should not exceed Rs20 million, and the number of full-time workers should not exceed 10.
To apply for the subsidised loan, the start-ups were provisioned to submit documents such as a copy of the company registration certificate, permanent account number, certificate of tax clearance and the citizenship certificate of the authorised person of the company.
In May 2020, the National Planning Commission announced a similar scheme where they provisioned to provide Rs5 million at 2 percent interest. The agency that frames the country’s plans and policies had received more than 600 proposals, but it never moved ahead.
Start-ups say the government duped them.
Some startup entrepreneurs who applied for the subsidised loan said they never received the money, alleging that while such a scheme is announced every year, it never really materialises.