The Startup Enterprise Fund Procedure, 2079 (2023) — approved on 10 Falgun 2079 (22 February 2023) — aims to make the granting of concessional loans simple, transparent and effective, encouraging aspiring entrepreneurs with the knowledge, innovative thinking, skills and ability to build dynamic start-up enterprises. This insight summarises the scheme’s key provisions.
01Definition of a start-up enterprise
The Government of Nepal (GoN) defines a start-up enterprise as any business or venture that operates with novel innovation and creative ideas by an entrepreneurial group. Such enterprises are engaged in developing, producing, operating and distributing goods, services or processes that have the potential for significant progress.
02Eligible sectors for start-up industries
The Procedure prioritises ventures across the following sectors:
- Agriculture and poultry-based ventures
- Forest-based enterprises dealing with herbs and forestry products
- Tourism promotion, entertainment and hospitality
- Science, technology, information and communication technology
- Human health services
- Education and educational institutions
- Accessible and safe travel and transportation
- Infrastructure construction
- Automobile-related businesses
- Improving traditional technology, production methods and services
- Mines and mining research and development
- Facilitating domestic and daily affairs — ease, convenience and safety
- Food production and processing
- Waste management and environmental conservation
03Criteria for applying to the Fund Scheme, 2079
An applicant must be registered and in operation for no more than seven years before the publication of the Procedure, and must satisfy at least three of the first four criteria and two of the final three:
- Paid-up capital — not exceeding NPR 5 million (NPR 50 lakhs)
- Gross income — not exceeding NPR 5 million (NPR 50 lakhs)
- Fixed capital — (excluding land and building) not exceeding NPR 20 million (NPR 2 crore)
- Employment — no more than 10 full-time employees
- Use of information technology — utilising IT and innovation to address consumer needs
- Allocation of expenditure — at least 5% of total expenditure on product development and market research
- Intellectual property — holding (or being eligible for) registered patents, designs or software
04Obligations of the entrepreneur
- Use the loan amount solely for the purpose stated in the project.
- Repay each instalment — principal and interest — as per the agreement.
- Provide information and data during monitoring by the committee and the bank.
- Submit an annual progress report to the committee secretariat and the lending bank.
- Display a board at the project site reading “Government of Nepal’s Subsidized Loan Facilities”.
- Comply with instructions given by the committee and the bank.
05When a start-up will not qualify
A start-up may be disqualified from obtaining the loan where:
- the enterprise is not legally registered in Nepal;
- it solely imports goods and services from abroad without using local technology and innovation;
- it is a subsidiary company or firm of an existing business;
- the enterprise or entrepreneur is blacklisted in the Credit Information Bureau;
- it has not obtained a Permanent Account Number (PAN) for taxation;
- it is classified as a medium-large holding company under the Industrial Enterprises Act, 2076 (2020);
- it has been banned for other reasons under existing laws.
06Charges payable to the bank
The bank providing the concessional loan may, based on its agreement with the entrepreneur, charge an administrative/service fee at a maximum rate of 0.1%. In addition, the entrepreneur is entitled to a reward of 0.5% of the instalment amount from the principal.
07Loan repayment duration
The entrepreneur must repay the principal and interest in line with the payment agreement. Early repayment is permitted without excessive charges. Failure to clear the principal and interest results in default under prevailing law, and the outstanding amount is collected as a government loan.
08Security for the loan
The bank secures the loan in one of the following ways:
- keeping the approved project as collateral;
- securing the loan with the Deposit and Credit Guarantee Fund and depositing the required fee; or
- requesting the Deposit and Credit Guarantee Fund to secure the loan on its behalf from Nepal Rastra Bank (NRB).
09Evaluation and recommendation of projects
The Executive Committee (or a sub-committee) evaluates project proposals submitted electronically. Requests may be referred to multiple sub-committees depending on the project’s area, and sector and entrepreneurship experts, the disbursing bank and private-industry representatives may be invited. Evaluation considers innovation, employment creation, market demand, sources of labour and raw materials, the proposer’s qualifications, expansion potential and risk.
10Assessment and disbursement process
The sub-committee submits its evaluated report to the Executive Committee, which prepares an integrated assessment and selects the best proposals. Where the amount required is less than the requested concession, a lower loan may be granted on justification. Selected proposals are recommended within 30 days; the Department of Industries (DOI) publishes the details and informs NRB, which notifies the granting bank. The selected proposer must then contact the bank, failing which the proposal is automatically cancelled and replaced by the next highest-scoring project.