Nepal Startup Scheme, Kathmandu: Nepal’s attempt to build a stronger startup economy through cheap government-backed loans is running into a hard question: can subsidised credit alone keep young businesses alive?

Over the past three fiscal years, nearly 1,500 startup entrepreneurs have received around Rs1.88 billion in subsidised loans. The programme was designed to encourage self-employment and entrepreneurship, especially among young people. But the results have left many founders unconvinced.

Entrepreneurs say the scheme has suffered from familiar problems: delays, poor targeting, a weak support structure and the absence of a clear system to identify businesses with real growth potential. For many new ventures, the loan has not become the lifeline it was meant to be.

A scheme announced in 2018, but delayed for years

The concessional loan programme was introduced in 2018 during the KP Sharma Oli administration. Its stated aim was to support young entrepreneurs and promote self-employment. Yet the scheme did not begin functioning immediately. Procedural delays meant it came into operation only five years later.

Even after it started, waiting remained part of the process. Startup founders have often had to wait months, and in some cases more than a year, before receiving funds.

This year, the timeline has again slipped. Authorities had planned to complete loan processing by January and begin disbursement in April. Political changes, the formation of a new government and administrative gaps have pushed the process close to the end of the fiscal year.

The loans are to be issued through Rastriya Banijya Bank at an annual interest rate of 3 percent.

10,244 applications, 1,301 shortlisted, around 750 expected to get loans

Demand for the scheme remains high. This year, the Industrial Enterprise Development Institute made a preliminary selection of 1,301 enterprises from 10,244 applications.

The institute has asked shortlisted applicants to submit financial records, details of how they plan to invest the subsidised funds and information about their current business operations before the final selection.

Maniram Gautam, acting executive director of the Industrial Enterprise Development Institute, said the final selection is expected to be completed by mid-June. Around 750 businesses are expected to be selected for loans of up to Rs2 million.

He said the disbursement plan was delayed by the election process, the formation of a new government and the vacant executive director’s position at the institute.

The money has gone out, but impact remains unclear

The scale of the programme has grown, but the visible impact is still under question.

In the last fiscal year, the institute received 5,120 proposals. Of the 661 enterprises recommended for loans, 600 eventually received financing.

In fiscal year 2023-24, 165 enterprises received loans out of 183 recommended. Across the past two fiscal years, 765 enterprises received Rs770 million in subsidised loans. Of that amount, Rs28.2 million has been repaid so far.

For founders, the issue is not just whether the money is being disbursed. It is whether the right businesses are being funded, whether the amount is enough and whether startups are getting any support beyond credit.

Founders say the problem is deeper than interest rates

Startup entrepreneurs argue that Nepal’s startup challenge cannot be solved only by cheaper loans.

Ranjeev Shrestha, co-founder of Upaya City Cargo, said the subsidised loan scheme may even be discontinued in the coming fiscal year because it has not produced significant results.

He said the current government appears committed to startup facilitation through its election manifesto and new budget, but implementation will decide whether the policy makes any real difference.

For Shrestha, the missing piece is larger and more patient capital. He said venture capital and private equity funds could help channel bigger investments into promising startups. He also called for a proper mechanism to identify and support high-potential ventures.

That point goes to the heart of the criticism. Founders are not saying capital does not matter. They are saying the current system is not sharp enough to separate a scalable startup from a small conventional business.

“A drop in the ocean” for many Nepal Startups

Several entrepreneurs have also questioned the size and targeting of the loans.

Some said many recipients have been ordinary momo restaurants or clothing stores, rather than high-potential startups. Others argued that loans of Rs2 million to Rs2.5 million are far too small for the cost of running and scaling a business.

One entrepreneur described the amount as “little more than a drop in the ocean.”

That concern matters because startup financing is not the same as small business lending. A small shop may need working capital. A startup may need product development, technology, marketing, hiring, compliance support and time to test its business model. Without that wider support system, a cheap loan can become just another liability.

No clear definition, no strong ecosystem

Entrepreneurs also point to a more basic policy gap: Nepal still lacks a clear legal definition of a startup.

Shrestha said the absence of dedicated funding mechanisms, supportive policies and institutional backing has made survival difficult for new ventures. In his view, nearly 99 percent of startups shut down within a year because the broader ecosystem is still weak.

That statement captures the frustration in Nepal’s startup community. The country has young founders, strong demand for capital and an official policy push. What it lacks, according to entrepreneurs, is a structured pipeline that can support businesses from idea to survival and then from survival to scale.

New budget brings a fresh platform

Finance Minister Swarnim Wagle has announced the Nepal Enterprise Facility in the budget for the upcoming fiscal year. The platform is meant to bring startups, small enterprises and medium-sized businesses into a broader national enterprise ecosystem.

The government has allocated Rs500 million for the initiative.

The facility is expected to support enterprise-related policy reforms, improve access to innovative financing instruments, strengthen incubation and support networks and promote entrepreneurship across the country.

Wagle also said the government will provide startup support facilities to 1,000 young entrepreneurs who want to work in agriculture and livestock-based enterprises.

For entrepreneurs, the announcement offers some hope. But it also brings a familiar concern: Nepal has already seen ambitious startup promises slowed by procedure, politics and weak execution.

From loan distribution to startup building

Nepal’s startup loan scheme was built on a simple idea: make capital cheaper for young entrepreneurs and they will build businesses. The past few years have shown that the problem is more complicated.

Cheap loans can help, but they cannot replace policy clarity, institutional support, mentoring, market access, patient capital and a proper screening system. Without those elements, the government may continue to distribute funds without creating the kind of businesses that can survive, grow and create jobs.

The next test is not whether another batch of loans is issued. It is whether the new enterprise facility can move the conversation from lending to ecosystem-building.

For Nepal’s young founders, that shift may decide whether government support becomes a serious launchpad or remains another well-intentioned scheme trapped in paperwork.

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