The Ministry of Industry, Commerce and Supplies has approved the rulebook to issue startup funds, five months before the current fiscal year ends.

Bimal Prasad Baral, undersecretary at the ministry, said the Startup Enterprises Credit Fund Working Procedures was approved on Thursday, clearing the way for startups to get subsidised loans.

The government introduced the new rulebook cancelling last fiscal year’s working procedure. The 212 proposals from startups selected last fiscal year, however, are ineligible to get subsidised loans, said Baral. “They have to apply again.”

Baral said the working procedure’s approval was delayed last year, but it was okayed on time this year. “We are hopeful of its implementation this year.”

On February 22 last year, the ministry approved the working procedure. Subsequently, on March 30, the Department of Industry invited startups with innovative knowledge, ideas, skills and capacity to submit proposals by April 19.

There were 425 proposals and it took more than a month to evaluate them.

However, the department did not receive the pledged budget of Rs250 million from the industry ministry. This fiscal year, the subsidised loan scheme will be executed by the Industrial Enterprise Development Institute.

This fiscal year too, which started in mid-July 2023, the government continued the scheme by allocating a budget of Rs250 million.

To be eligible for the fund, hopeful startups should have been registered before the publication of the notice, and they should not have crossed seven years of operations.

According to the working procedure, a loan of up to Rs2.5 million will be provided at a 3 percent interest per annum. Loans up to Rs500,000 will be provided by the banks and startups should pay back it in a single instalment. Similarly, loans up to Rs1.5 million can be paid back in two instalments and a loan up to Rs2.5 in three instalments.

The entrepreneurs taking loans under the subsidised scheme should use the amount as per their objectives, pay back the loan and interest and provide necessary information and statistics during the inspection conducted by the governing bodies or banks. The startup enterprise should submit the progress report to the banks every quarter.

If the startup fails to pay back the loan on time, the bank will recommend action from the authority concerned, according to the working procedure.

Also, the accounts of startup entrepreneurs in banks and financial institutions will be stopped if they fail to repay the loan on the agreed time.

The banks can take a service charge of 0.1 percent from the entrepreneur’s maximum loan amount.

The startup policy too is in the process of approval under the Industrial Enterprise Act 2020, which was expected to be implemented last fiscal year.

According to Startup Enterprises Credit Fund Working Procedures 2024, the sectors eligible for subsidised loans 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, management of waste and environment, alternative or renewable energy, minimising climate change and disaster management.

According to the work procedure, a paid-up capital start-up applying for a subsidised loan should seek an amount between Rs200,000 and Rs1 million and their annual gross income should not exceed Rs20 million.

Their fixed capital (except home and land price) should not exceed Rs20 million.

The Industrial Enterprise Development Institute will invite prospective startups to apply. It can also do so through online mediums.

The proposals will be evaluated and recommended for loans if the startup enterprise has fulfilled the set criteria based on the marketability of produced goods, the source of raw materials used in the project and the availability of infrastructure.

Entrepreneurs themselves should insure their business or the projects.

Officials involved in shortlisting the startups at the industry department said last year’s procedures had not clearly defined innovative business ideas, which was why the plan had stalled. This year, they are working to prepare standard operating procedures to evaluate shortlisted applications.

Startups, meanwhile, have criticised the government for making an empty promise.

The plan, as originally announced by the National Planning Commission in May 2020, was to provide Rs5 million to each startup at 2 percent interest.

The planning commission, which makes the country’s development plans and policies, had received more than 600 proposals, but the scheme unravelled.

Startups say the government has been duping them since the beginning.

Some startup entrepreneurs who applied for subsidised loans said they never received the money. Despite annual announcements of such schemes, they never materialised.

Startups attribute the the failure to implement programmes and projects to promote innovation to the tendency to announce such schemes without preparations.

This shows that government plans are half-baked and that decision-makers have no idea about start-ups, they say.