Only 33 enterprises have received Rs 420 million credit under the Nepal government’s scheme to provide subsidized credits to micro, small and medium enterprises and tourism enterprises affected by the pandemic.

Many targeted enterprises have not benefitted from the scheme, which was part of the budget for the current fiscal 2020-21.

As per the working procedure on Business Continuity Credit Scheme — a two-year credit program — an enterprise from the most affected sectors can get up to Rs 100 million credit while enterprises from the sector that is facing medium-level impact can get up to Rs 70 million. Enterprises from a partially affected sector can get up to Rs 50 million.

Half of the loan can be used to pay staff salaries and the other half can be utilized as working capital to continue the business. An enterprise cannot fire any employee as long as the credit facility is in effect.

But, as of mid-April, only 33 enterprises have received Rs420 million credit under this scheme, according to the Nepal Rastra Bank.

“Tourism-related enterprises such as hotels and cable cars have mostly taken loans under this scheme,” said Dev Kumar Dhakal, spokesperson at the central bank, The Kathmandu Post reported.

Officials at the central bank and bankers say the delayed introduction of working procedures regarding the credit plan was a prime reason for the low demand for credit. Even though the government announced a Rs 50 billion package under this scheme in May last year, the working procedure was introduced only in November.

“When the working procedure was introduced, the borrowers had already taken credit from banks to run their businesses,” Bhuvan Dahal, president of Nepal Bankers’ Association., was quoted as saying.

“They could receive the loans at lower interest rates because of adequate liquidity with the banks. After the working procedure on the Business Continuity Credit Scheme was introduced, people willing to take extra credit from banks were required to justify their proposals which many could not do,” said Dahal.

Dahal said the important reason behind the lack of interest among targeted enterprises is that they were required to submit their tax clearance certificates as well as of the employees.

“I think, this provision of the working procedure deterred many enterprises from availing the subsidized loans under this scheme,” said Dahal, who is also the chief executive officer of Sanima Bank.

According to bankers and central bank officials, the provision of the working procedure which stipulates that anybody who has already received loans under other subsidized loan schemes cannot receive loans under this scheme also prevented many potential borrowers from receiving the credit under the Business Continuity Plan.

But, some borrowers didn’t approach the banks because of ignorance about the government’s provision.

For example, Hot Bread, a restaurant chain, didn’t approach any bank to secure extra credit under any government schemes. Due to the impact of the pandemic, they had to close three of their seven outlets, while 50 employees lost their jobs over the last year.

 “We were not aware of the government’s scheme and we didn’t approach any bank for subsidized loans,” Kedarnadhi Pandey, general manager of Hot Bread which sells bakery items.

The government is continuing the scheme for the next fiscal year too.

“Maybe more enterprises will be interested in this scheme after the borrowers hit the refinance facility limit,” said Dhakal, central bank spokesperson.

(SAM)