Nearly 1,500 startup entrepreneurs have received around Rs1.88 billion in subsidised loans from the government over the past three fiscal years, including the current one. However, entrepreneurs say the programme has yielded little visible impact, with a large majority of startups failing within a year of operation.

The subsidised loan scheme for young entrepreneurs was introduced in 2018 by the KP Sharma Oli administration to promote self-employment and entrepreneurship. However, the programme came into operation only five years later due to procedural delays. In recent years, startup founders have often had to wait for months, and sometimes more than a year, to receive the loans.

This year, too, political changes and administrative delays have pushed the loan disbursement process close to the end of the fiscal year.

Earlier, the authorities had planned to complete loan processing by January and begin disbursement in April. However, changes in the political landscape and the formation of a new government delayed the process. The concessional loans will be issued through Rastriya Banijya Bank at an annual interest rate of 3 percent.

“We had planned to disburse the loans by the end of May, but the election process and the formation of a new government delayed the programme. The executive director’s position at the Industrial Enterprise Development Institute (IEDI) is also vacant, which has contributed to the delay,” said Maniram Gautam, acting executive director of the institute.

“The final selection will be completed by mid-June, after which the loans will be disbursed. Out of around 1,200 shortlisted enterprises, IEDI plans to select approximately 750 businesses for subsidised loans of up to Rs2 million,” he said.

The institute has asked shortlisted applicants to submit financial records, details of their planned investment of the subsidised funds, and information about current business operations before the final selection.

This year, IEDI made a preliminary selection of 1,301 enterprises from among 10,244 applications received for startup loans.

Last fiscal year, the institute received 5,120 proposals. Of the 661 enterprises recommended for loans, 600 eventually received financing. In the fiscal year 2023-24, 165 enterprises received loans out of the 183 recommended. Over the past two fiscal years, a total of 765 enterprises have received Rs770 million in subsidised loans, of which Rs28.2 million has been repaid so far.

In the budget for the upcoming fiscal year, Finance Minister Swarnim Wagle announced the establishment of the Nepal Enterprise Facility, a platform aimed at integrating startups, small enterprises and medium-sized businesses into the national enterprise ecosystem. The government has allocated Rs500 million for the initiative.

The facility will support enterprise-related policy reforms, improve access to innovative financing instruments, strengthen incubation and support networks, and promote entrepreneurship across the country.

“We will provide startup support facilities to 1,000 young entrepreneurs who wish to engage in agriculture and livestock-based enterprises,” Wagle said while presenting the budget in Parliament last week.

Startup entrepreneurs say the subsidised loan schemes launched by previous governments failed to create meaningful impact and hope the new youth-led administration will introduce policies and mechanisms that better support startup growth.

Rajeev Shrestha, co-founder of Upaya City Cargo, said the subsidised loan scheme could be discontinued in the coming fiscal year because it has failed to produce significant results.

“The current government, in line with its election manifesto and the new budget, appears committed to facilitating startups, and we are hopeful that it will create a meaningful impact,” said Shrestha. “For now, we can only wait and see how the government implements its plans.”

According to him, creating venture capital and private equity funds would help channel larger amounts of capital into startups. He said a proper mechanism is needed to identify and support high-potential startups with such investments.

Entrepreneurs also argue that the existing loan programme has been poorly targeted.

“If we look at the businesses that received the loans, many were ordinary momo restaurants or clothing stores,” said an entrepreneur. “The loans of Rs2 million to Rs2.5 million are also insufficient. The cost of running a business is much higher, and the amount provided is little more than a drop in the ocean.”

Shrestha said the absence of a clear legal definition of startups, dedicated funding mechanisms, supportive policies and institutional backing has made survival difficult for new ventures.

“In the absence of a proper startup ecosystem, nearly 99 percent of startups shut down within a year,” he said.