January 30: The government has been promising to develop the startup ecosystem in the country but its actions indicate otherwise. Questions are being raised about the government’s commitment to developing the startup ecosystem after the introduction of a new procedure that is likely to disrupt the concessional loans under the startup programme in Nepal.

About a year ago, the government had initiated the process of distributing subsidized loan for startups by calling for applications to provide concessional loans to 100 start-up enterprises.

The startup entrepreneurs, who were in the final stage of obtaining concessional loans, have been disappointed after the government introduced the Startup Enterprise Loan Operation Procedure 2080 as the new procedure contradicts the process they have fulfilled so far.

When the Department of Industries asked for applications for start-up loans, it received a total of 382 applications. The government had allocated Rs 250 million to provide concessional loans to 100 startup enterprises selected from among those applicants. However, the budget has been frozen as the new procedure has changed the agency that executes startup loans.

A total of 169 startup enterprises that have reached the stage of further evaluation will not get loans through the Department of Industries anymore.

Prior to this, the government had issued the 'Startup Business Loan Disbursement Procedure 2079' on February 22 last year. The procedure assigned the responsibility of implementing the concessional loan program to the Department of Industries. Following the same procedure, the department had asked for applications with a policy of providing concessional loans up to Rs 2.5 million per startup. Less than a year later, the government approved the Start-up Enterprise Loan Operation Procedure 2080 on Monday.

Now, the Industrial Business Development Foundation will do the work of facilitating loans to start-up enterprises, seeking for applications.

Although the government has introduced a policy of providing subsidizing loan to help startup enterprises, not a single entity has been able to benefit from the government's announcement to develop the startup ecosystem due to its instable policy.

Jeevlal Bhusal, Joint Secretary of the Ministry of Industry, Commerce and Supplies, informed that the Startup Enterprise Loan Operation Procedure 2080 will now be implemented by the Industrial Business Development Foundation. "The Department of Industries is not a body with expertise in this regard," he said.

He also said that no further process will be carried out regarding the application submitted to the Industry Department last year. "Old applicants (who have submitted their applications to the department) can apply again," said Bhusal, "Since last year's budget has been frozen, it cannot be provided to the startups."

The new procedure approved by the government has designated 16 sectors and enterprises as startups. It is said that the loan will be provided in the areas specified by the procedure and the loan period will be 5 years. In the procedure, there is a provision that borrowers should start paying the principal and interest from the second year. The interest rate of such a loan will be 3 percent per annum.

According to the new procedure, the bank will provide funds in one installment for loans up to Rs 0.5 million, 2 installments for loans up to Rs 1.5 million, and up to 3 installments for loans up to Rs 2.5 million. According to this procedure, a startup will get a concessional loan up to a maximum of Rs 2.5 million.

The government has allocated Rs 250 million for this program in the current fiscal year as well. Bhusal claimed that the program will be implemented this year.