Koshi Province launches funds to support SMEs, boost economic growth

KATHMANDU: Koshi Province Government has launched the Udaya Guarantee Fund and Udaya Challenge Fund to provide loan guarantees for small and medium enterprises (SMEs).

These funds aim to reduce lending risks for banks and financial institutions (BFIs), improving access to capital for SMEs in Koshi Province while promoting business growth, innovation, and operational efficiency.

The initiative was inaugurated during an event in Kathmandu by Minister for Industry, Commerce and Supplies, Damodar Bhandari; Koshi Province Minister for Economic Affairs and Planning, Ram Bahadur Magar; and Swiss Ambassador to Nepal, Danielle Meuwly.

Chief guest Minister Bhandari highlighted the vital role of SMEs in Nepal’s economic development, noting that the lack of collateral has hindered their growth. He expressed confidence that Koshi Province’s initiative would serve as a model for federal and other provincial governments to support small businesses.

Minister Magar explained that the launch of the funds marked the culmination of sustained efforts and the beginning of a stronger financial support system for SMEs. He stressed the need for an improved investment climate in Koshi Province and expressed optimism that this initiative would help SMEs generate income and employment within Nepal.

Swiss Ambassador Meuwly commended the provincial government’s commitment to SME financing. She stated that the Provincial Credit Guarantee Fund and Udaya Challenge Fund would serve as models for sustainable economic transformation. Ambassador Meuwly also highlighted Switzerland’s long-standing partnership with Nepal and described the initiative as aligned with transitioning from aid-based to trade-based economic growth.

Shankar Nepal, Secretary at the provincial Ministry of Economic Affairs and Planning, said the credit guarantee fund would enable entrepreneurs to invest more confidently. Similarly, Kovid Dhakal, from the project implementation unit, revealed that the programme is expected to directly benefit over 3,000 SMEs.

Ramesh Ghimire, CEO of the Deposit and Credit Guarantee Fund (DGGF), stated that the funds would provide partial loan guarantees to partner banks, encouraging increased SME lending while minimising risks. The Provincial Credit Guarantee Fund, with a budget of Rs 600 million, is jointly financed by Koshi Province Government and Swiss Development Cooperation, each contributing 50%. The initiative aims to improve access to capital for growth-oriented SMEs and incentivise banks to invest in the sector.

This blended financing model represents a landmark step for Nepal’s financial sector, offering a structured and sustainable approach to SME financing. Based on its success, the initiative is expected to expand to other provinces and eventually to the national level.

The Udaya Project, under which the funds were established, was initiated through a bilateral agreement between the Nepali and Swiss governments in November 2023.

The project is being implemented by the Ministry of Economic Affairs and Planning, Koshi Province, with financial support from Swiss Development Cooperation and technical collaboration with DAI Global UK.

The first phase of the project, spanning December 2023 to November 2027, focuses on SME growth, innovation, and capital expansion through business development consulting, financial support, and improved access to public initiatives and information.

The project includes four key components: Business Development Services, a Technical Assistance Facility, a Provincial SME Risk Reduction Mechanism, and a Digital Information Portal.

With a total budget of Rs 1,149 million for the first phase, 61.7% is funded by Swiss Development Cooperation, while the Koshi Province Government contributes 38.3%.

This initiative is expected to play a pivotal role in fostering entrepreneurship, economic resilience, and financial inclusion in Koshi Province and beyond.