Start-ups will be entitled to receive subsidized loans of up to Rs 2.5 million at just three percent interest per annum from Wednesday, following the government’s decision to implement the ‘Start-up Enterprises Credit Operation Working Procedure 2023’ with immediate effect.
The Industrial Enterprise Development Institute (IEDI) signed a memorandum of understanding (MoU) in this regard with the Rastriya Banijya Bank Limited and the Deposit and Credit Guarantee Fund for the effective implementation of the scheme targeted to boost start-ups in the country. The tripartite agreement was inked in the presence of Minister for Industry, Commerce and Supply Minister Ramesh Rijal.
The government in 2020 had announced plans to provide such loans to the start-ups. Although the government had earlier asked the start-ups to submit their proposals to get subsidized loans, it could not provide the subsidized loans in the absence of the work procedure.
The enforcement of the work procedure has pinned some hope towards implementation of the government-announced scheme for start-ups. According to the work procedure, Rastriya Banijya Bank (RBB) will be providing the start-ups with the subsidized loans on the recommendation of the IEDI.
Speaking at the MoU signing program, Minister Rijal urged the investors to invest in projects that give tangible returns. He said that various aspects should be analyzed during the selection of the startup project and loans should be made available for projects that promise returns.
The procedure is expected to facilitate providing concessional loans to entrepreneurs with the latest knowledge, thinking, skills and abilities. The Ministry of Industry, Commerce and Supplies had approved the procedure on January 25 to make the credit process for startup enterprises simple, clear, orderly and transparent. With the implementation of the procedure, the IEDI has been mandated with facilitating startup loans.
These are the procedural criteria
The procedure mentions that startup enterprises that have not been registered for more than seven years are eligible to get loans. Similarly, the total paid-up capital should be between Rs 200,000 to Rs 10, 00,000, the total annual turnover of the enterprise should not exceed Rs 20 million and the fixed capital (except for real estate) should not exceed Rs 20 million.
According to the procedure, start-up entrepreneur loans cannot be provided to companies that are not registered according to law, import goods and services from abroad, sell and distribute them, are blacklisted and are registered as holding and investment companies under the Industrial Enterprises Act, 2020.
The Startup Enterprise Program will be implemented by the Industrial Enterprise Development Institute. The institute will call for proposals, evaluate submitted proposals and make recommendations for taking startup loans.
According to the procedure, only government-owned commercial banks should be designated as lending institutions. It is mentioned in the procedure that the bank should enter into an agreement with the institution by specifying the method of providing loans, the limits of the loan, the period for paying installments, the period and procedure for repayment of principal and interest.
The procedure mentions that the bank has to keep the approved business or project as collateral while disbursing the loan. The insurance of such a business or project should be done by the entrepreneurs themselves.”
Similarly, according to the procedure, 16 different areas have been designated eligible for start-up loans. These include agriculture and livestock, forestry, tourism promotion, entertainment and hospitality, science, information technology and communication, human health services, education and teaching and learning.
Startup loans will also be made available in areas related to easy and safe transportation, automobiles, traditional technology, production and mining and mineral research, household or daily living.
Entrepreneurship loans will also be available in areas related to food production and processing, waste management and environmental protection, disaster management, alternative and renewable energy and climate change mitigation.
