Kathmandu-Serious questions have emerged about the effectiveness of Nepal's concessional startup loan programme, which was launched to promote youth self employment and entrepreneurship.

Although around Rs 1.88 billion in concessional loans has been provided to nearly 1,500 entrepreneurs over the past three fiscal years, many businesses appear to shut down within a year.

The government launched the Startup Enterprise Loan Programme in 2018 under the leadership of then Prime Minister K.P. Sharma Oli. However, procedural delays prevented implementation for five years.

Stakeholders say continued delays in loan distribution and business selection have weakened the programme's effectiveness.

This year as well, political changes and administrative obstacles have pushed the loan distribution process towards the end of the fiscal year. The original plan aimed to complete approvals by mid January and begin loan disbursement in April. However, a change in government and a lack of institutional leadership delayed the process.

According to the Industrial Enterprise Development Institute (IEDI), authorities plan to complete the final selection by mid June and start loan distribution soon after. Out of around 1,200 businesses that passed the initial screening, about 750 enterprises will receive concessional loans of up to Rs 2 million each.

The institute has asked applicants to submit financial statements, investment plans, and business operation documents. The loans will be distributed through the National Commercial Bank at an annual interest rate of 3 percent.

In the current fiscal year, authorities received 10,244 applications. They shortlisted 1,301 enterprises in the initial phase. In the previous fiscal year, they received 5,120 proposals and recommended 661 businesses for loans. Among them, 600 enterprises received funding. In fiscal year 2023/24, 165 of the 183 recommended businesses obtained loans.

Data show that the programme disbursed Rs 770 million to 765 enterprises during the past two fiscal years. However, borrowers have repaid only Rs 28.2 million so far. This has raised concerns about the programme's financial sustainability.

In the budget for the next fiscal year, the government announced the establishment of the Nepal Enterprise Facility. Finance Minister Dr. Swarnim Wagle said the facility will bring startups, small enterprises, and medium enterprises under a single framework. The government has allocated Rs 500 million for the initiative.

The new structure aims to improve entrepreneurship policies, expand access to innovative financing, strengthen incubation and advisory services, and promote entrepreneurship. The budget also promises special support for 1,000 young entrepreneurs interested in agriculture and livestock based businesses.

Entrepreneurs, however, say previous programmes have failed to deliver the expected results. They argue that loan distribution alone is not enough. Nepal also needs startup friendly laws, long term investment funds, effective advisory systems, and better market access.

Many entrepreneurs believe Nepal must develop venture capital and private equity funds to attract larger investments into the startup sector. They say investors should identify high potential businesses and channel funding through such mechanisms to achieve long term success.

Entrepreneurs also criticise the programme's target selection process. According to them, many loan recipients operate traditional businesses such as restaurants and clothing stores rather than innovative startups. They also say loans of Rs 2 million to Rs 2.5 million are often insufficient to run and scale a business.

Entrepreneurs conclude that startups face significant challenges in Nepal because the country lacks a clear legal definition of startups, dedicated investment mechanisms, supportive policies, and institutional support.

They argue that the absence of an effective startup ecosystem makes it difficult for new businesses to survive, with nearly 99 percent failing to achieve long term sustainability.