For each Fiscal Year (FY), the Government of Nepal (GoN) sets sectoral priorities in its federal budget. The current government policies are focused towards the promotion of entrepreneurship as it is an important aspect for the sustainable development of a country. Taking this into account, budget has been segregated for subsidizing business loans in order to encourage entrepreneurship, create employment and increase domestic production in Nepal.
For the FY 2075/76 (2018/19), the government, in line with the Integrated Working Procedure for Subsidised Credit 2018, has announced plans to provide interest subsidy on loans for various programmes, including youth self-employment, women entrepreneurship, self-employment for returnee migrants, upliftment of underprivileged community and agriculture and livestock promotion.
Any Nepali citizen above 18 years of age having Personal Account Number (PAN) and not listed as a ‘defaulter’ in any Bank and Financial Institutions (BFIs) can apply for the loan facility, according to the procedures published by the Ministry of Finance (MoF). The term of the loan facility is up to five years and is available at all types of BFIs – commercial banks, development banks, finance companies and micro-finance institutions. The actual size of the loan and instalment is decided by the respective BFIs.
Educated Youth Self-Employment Loan
In order to encourage youths with higher education to start their own businesses, Educated Youth Self-Employment Loan allows youths below 40 years to obtain loan against collateral of their academic certificates.
BFIs extending the concessional loan facility to the youth cannot charge more than an additional 2% interest to the grant provided by the government, and they are not allowed to charge other fees except the interest on the loan.
Women Entrepreneurship Loan
This loan scheme was initiated with the motive to fulfill the financial requirements of women in order to encourage them to start a business venture. It allows women to take loan against group guarantee.
Youth Returned from Foreign Employment Project Loan
This loan was introduced by the government to retain migrant returnees so that they can utilize the skills and experience they have gained abroad. This initiative has received an encouraging response with more and more workers applying for the financial assistance introduced to engage them in occupations within the country. Within a month, nearly 3,000 youths who are experienced in foreign jobs applied for this loan since the launch of the scheme.
Commercial Agriculture and Livestock Loan
This scheme was introduced by the government
to address the problem of rising unemployment and manpower exodus from the
country by encouraging youths to take up farming, as well as make the country
self-sufficient in food production.
This loan can be provided against collateral of the same land used for agro or livestock undertaking or crops. For credit up to NPR 1 million, loans can be issued based on group guarantee.
BFIs are not allowed to add more than 5% interest on top of the interest subsidy while fixing the interest rate i.e. maximum 10% total interest rate. Loans exceeding NPR 50 million should be approved by a seven-member Central Coordination and Monitoring Committee formed under Nepal Rastra Bank’s (NRB’s) deputy governor who overlooks the banking sector.
Dalit Community Enterprise Development Loan
This loan scheme was initiated to meet the financial requirements of the youth under Dalit Community to start business for modernizing and promoting the traditional skill and occupation of the Dalit Community. The loan can be obtained under collective guarantee.
The information in this blog is obtained from various sources including government budget speech (FY 2075/76) and newspaper articles by the author. The loan procedure may vary according to each bank. Respective bank liaison officer should be consulted for more details.