Nepal Government helping Women Entrepreneurs with Loans

Women entrepreneurship, a relatively new but evolving concept, is seen in both urban and rural parts of Nepal. Women entrepreneurs are taking risk and starting their own enterprise. The Government of Nepal at the meantime has its focus on initiating program like Women Entrepreneurship Development Fund (WEDF) to help women entrepreneurs meet their financial need for their enterprise growth.

WEDF is an initiation by Ministry of Industry (MOI) with a nature of collateral free loan at six percent interest rate. The program began in the year 2015 with the limitation up to five lakh rupees. Women entrepreneurs submit an application along with their business plan at the district office of Department of Cottage and Small Industries (DCSI) which later gets sent to the center office of DCSI at Kathmandu. The center office receives the documents for analysis. The enterprise which meets the conditions laid under Women Entrepreneurship Development Fund Procedural, 2065 receives the loan amount.

Women Entrepreneurship Development Fund Procedural, 2065 ensures the right of women entrepreneurs with their own enterprise to apply for this loan. The women led enterprises must be in operation for at least two years and should also be recommended by any one of the umbrella organization in their district. A visit to the district office of DCSI can help a women entrepreneur know all about WEDF and its applying procedure.

Miss Needika Adhikari conducting research on women entrepreneurs in Pyuthan.

There are four stakeholders to this process of loan allocation:

1. Women entrepreneurs: They submit loan application along with their business plan to their district office of Cottage and Small Industry. The documents are then sent to the centre office of DCSI at Kathmandu for analysis.
2. Department of Small and Cottage Industry: The department analyses the submitted application and business plan to see if the enterprise meets certain criteria’s like:

• Use of local resources
• Trainings received by women entrepreneurs
• Agriculture based enterprise of national priority
• Conflict victim, disabled, single women, minority
• Sustainability
• Generating Employment
• Pollution Control

3. Umbrella organizations: Women entrepreneurs are recommended for loan by umbrella organizations like The National Micro Entrepreneurs Federation Nepal (NMEFN), Federation of Women Entrepreneurs Associations of Nepal (FWEAN), Federation of Nepalese Chamber of Commerce and Industry (FNCCI) and Federation of Nepal Cottage and small Industries (FNCSI).
4. Rastriya Banijya Bank: Women Entrepreneurship Development Fund Procedural 2065, for loan allocation, recognizes Rastriya Banijya Bank, as the channelizing body. Bank receives three percent of the allocated loan amount as its facilitation fee. Bank plays the role of the loan distributor with no designated power to deal with the problem of default rate.

In conversation with authorities at DCSI, the number of women entrepreneurs receiving the loan amount is more in Pyuthan district since its initiated year. Every year around 40 women entrepreneurs receive the loan. As a reflection on the advantages and disadvantages on receipt of the loan amount, the important observations made in Pyuthan were:

• Collateral free loan at six percent interest rate is a good offer when compared to the interest rate charged by other micro-financial institutions. As WEDF has limitation up to five lakh rupees, and the women entrepreneurs are not receiving more than two lakh in Pyuthan, they were bound to approach other financial institutions for loans at high interest rate.
• Women may be disadvantaged not only in raising the initial capital to start a new firm but also while operating an enterprise. Thus, finance must be injected at all stages of business continuum accompanied by accurate evaluation of the enterprise growth and it’s potential.
• Financial injection must be accompanied by upgraded and new set of skills for the particular enterprise to survive in the competitive macro market.
• Lack of assistance on market linkage that helps substantial growth of the enterprise. Continuous financial injection accompanied with upgraded skills for women led enterprises would make not much of a difference if the products of such enterprise receive no correct market.
• Women entrepreneurs lack information on the nature of the loan and its payment structure. In assumption that women shall receive the entire five lakh rupees as per their demand have disappointed them. All forty women have received not more than two lakh rupees. This disappointment has led to an increase in default rate of WEDF.

WEDF has been a great initiative to address the financial needs of women entrepreneurs. However, lack of financial injection for business operation, upgraded set of skills and  market linkages can eventually lead to business failures and market exit. Business development and support services; access to corporate, government and international markets; access to technological services; R&D and innovation are equally important for women entrepreneurs to sustain and grow their businesses. Creating a support system to acknowledge and address these inadequacies can encourage women entrepreneurs to take more risk and progress in their entrepreneurial journey.

Advocate Needika Adhikari is currently working as a legal associate for Abhinawa Law Chambers. She received her BA, LLB degree from Nepal Law Campus. In the past, she has worked as a Dayitwa fellow and a legal associate for Biruwa Advisors.