Guideline on seed capital for startups awaits cabinet’s nod for implementation

Published On: February 24, 2023 09:30 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Feb 24: The government is preparing a working guideline to provide startups with collateral free subsidized loans of up to Rs 2.5 million.

According to the Ministry of Industry, Commerce and Supplies (MoICS), the Ministry of Finance (MoF) approved the final draft of the guideline last week. “After the Cabinet gives its go ahead, it will come into effect,” said Toya Narayan Gyawali, secretary at the MoICS.

Any startup that was established within the past seven years, has a paid-up capital of less than Rs 5 million and has annual revenue not exceeding Rs 5 million will be eligible to get a subsidized loan from the government. Similarly, the startup should have fixed capital investment not exceeding Rs 20 million, not having more than 10 full time employees and should be innovative to address the production and distribution system to relieve the consumers.

The interested startup will have to forward their complete project plan to receive the seed capital from the government. The evaluation and selection of feasible startup projects will be done within 30 days from the date of application, says the proposed guideline.  

The government’s plan to implement subsidized loans for startups has been put on hold for a long time, mainly due to the lack of a related law. Through the budget for the fiscal year 2021/22, the government announced to provide project loans to startups at just one percent interest rate.

In May 2019/20, the government through a public notice invited proposals from the startups with the aim of providing them a seed capital of up to Rs 5 million. However, citing the lack of a relevant law, the government did not implement the program to which a total of 699 young entrepreneurs had forwarded their applications.

The government has set aside a fund of Rs 1 billion to provide subsidized loans to startups. The amount of loan and timeframe to settle the loan by an individual firm will be decided through the working guideline, according to the MoF.

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