Starting Up the Start-ups

The government has selected 661 innovative projects for start-up enterprise loans in the fiscal year 2024/25 under the Start-up Enterprise Loan Operation Procedure, introduced two years ago. The Industrial Enterprise Development Institute (IEDI) had received 1,314 proposals, out of which 1,073 were shortlisted. The start-ups were finalized through a rigorous process, also involving in-person presentation of business plans by the applicants. These selected entrepreneurs will now be eligible to secure bank loans of up to Rs. 2.5 million at a subsidized interest rate of 3% in the next 45 days. The selected projects primarily focus on agriculture and livestock, boutique and clothing, processing industries, handicrafts, sculpture, footwear, furniture and homestay ventures. These are among the 16 sectors identified by the government as eligible for support. The government has earmarked Rs. 1 billion for start-up loans this fiscal year – up from Rs. 250 million in FY 2023/24, which supported 165 projects and recovered Rs. 18 million in principal and interest. The government plans to expand funding in the upcoming fiscal year. The fund is administered by the Ministry of Industry, Commerce and Supplies. The loan program supports start-ups registered within the last seven years, with a paid-up capital between Rs. 200,000 to Rs. 1 million, and annual turnover and fixed capital not exceeding Rs. 20 million.

Nepal's start-up ecosystem has witnessed promising growth over the last decade, led by entrepreneurial spirit among the youth. But then systematic obstacles continue to inhibit innovation and enterprise in Nepal, as in many other countries around the world. A study published in the Westcliff International Journal of Applied Research shines a critical light on the five most pressing challenges confronting Nepali start-ups: human capital, finance, marketing, policy, and support systems. The study places human capital as one of the most significant hurdles – reasonably so. The start-up entrepreneurs struggle to attract and retain skilled professionals, with many workers favoring established companies and others seeking opportunities abroad. Access to finance is another major challenge faced by start-ups globally. The start-up enterprise loan scheme, however, addresses this particular issue in Nepal's case by provisioning for low interest loans. Likewise, marketing is critical to sales and brand growth and poses another uphill battle even as the enterprise founders may possess strong technical know-how. The study underscores the absence of marketing expertise within founding teams and the broader ecosystem. Government policy and bureaucracy also tend to stifle growth as policies meant to support businesses are also likely to end up discouraging them. No less critical is the provision of a robust support system padded with mentorship, monitoring and incubation.

While Nepal’s start-up enterprise loan scheme is a commendable step toward fostering entrepreneurship, its effectiveness and long-term success remain a bit uncertain when critically examined against the backdrop of global and local start-up challenges. Many entrepreneurs in Nepal, especially in rural and semi-urban areas, lack exposure to market dynamics, business planning, and digital tools. Without complementary support systems such as incubators, accelerators, and mentorship, there is a risk that funds alone may not translate into sustainable businesses. Furthermore, the macroeconomic environment – frequent policy shifts, weak infrastructure, and a rapid change of government at the federal and provincial levels – has the potential to bring complex challenges for entrepreneurship in Nepal. As the study in question suggests without addressing these systemic issues, the loan scheme may result in short-term job creation but fall short of fostering resilient, scalable businesses. The startup loan policy appears to be a positive initiative, but its success will depend on the integration of financial, technical, and institutional support.