KATHMANDU, March 25: In an effort to strengthen small and medium enterprise (SME) financing and promote economic growth, the Koshi Province Government on Monday launched the Udaya Guarantee Fund and Udaya Challenge Fund. These funds aim to provide loan guarantees for SMEs, reducing lending risks for banks and financial institutions while improving access to capital for businesses in the province.
The funds were officially inaugurated at a special event in Kathmandu by Minister for Industry, Commerce and Supplies Damodar Bhandari, Minister for Economic Affairs and Planning of Koshi Province Ram Bahadur Magar, and Ambassador of Switzerland to Nepal Danielle Meuwly.
Addressing the event as the chief guest, Minister Bhandari underscored the pivotal role SMEs play in driving Nepal’s economic growth. "One of the biggest obstacles facing SMEs is the lack of collateral, which hampers their access to financing," he said. "This initiative by Koshi Province serves as a model not only for the federal but also other provincial governments to follow in supporting small businesses and fostering entrepreneurship."
Echoing similar sentiments, Minister Magar highlighted that the establishment of the Udaya Guarantee and Challenge Funds is the culmination of years of strategic planning. "This marks the beginning of a more robust and accelerated financial support system for SMEs in Koshi Province," he stated. "We are confident that this will create income-generating and employment opportunities, improving the overall investment climate in our province."
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Ambassador Meuwly commended the Koshi Province Government’s leadership and reaffirmed Switzerland’s commitment to SME financing in Nepal. "These funds will serve as models for sustainable economic transformation, supporting the shift from an aid-based to a trade-based economy," she remarked, emphasizing Switzerland’s longstanding development partnership with Nepal.
Speaking on the implementation, Secretary at the Ministry of Economic Affairs and Planning, Koshi Province, Shankar Nepal noted that the credit guarantee fund will provide SMEs the confidence to invest and expand. Similarly, Kovid Dhakal from the project implementation unit shared that over 3,000 SMEs are expected to directly benefit from the program.
CEO of the Deposit and Credit Guarantee Fund (DGGF) Ramesh Ghimire elaborated on the financial mechanism, explaining that the funds will offer partial loan guarantees to partnering banks. This is designed to encourage increased SME lending while mitigating risks for financial institutions. The Provincial Credit Guarantee Fund, with an initial budget of NPR 600 million, will be jointly financed by the Koshi Province Government and the Swiss Development Cooperation, each contributing 50%.
"This blended financing model is a landmark step in Nepal’s financial sector," Ghimire said. "It introduces a structured and sustainable approach to SME financing that can be replicated in other provinces and at the national level."
The Udaya Guarantee and Challenge Funds are integral components of the broader Udaya Project, which was launched under a bilateral agreement between Nepal and Switzerland in November 2023. The project is implemented by the Ministry of Economic Affairs and Planning, Koshi Province, with technical support from DAI Global UK and financial backing from Swiss Development Cooperation.
The first phase of the Udaya Project (December 2023 – November 2027) focuses on fostering SME growth, innovation, and capital expansion. Its four key components include Business Development Services, Technical Assistance Facility, Provincial SME Risk Reduction Mechanism, and Digital Information Portal.
The total budget for the first phase is NPR 1.149 billion, with 61.7% funded by the Swiss Development Cooperation and 38.3% by the Koshi Provincial Government. The initiative is widely expected to bolster entrepreneurship, improve economic resilience, and advance financial inclusion across Koshi Province and beyond.
