The government’s budgetary allocation to disburse loans for start-ups taking academic certificates of Nepali youth as collateral has drawn cynicism from a section of experts in Kathmandu.

On May 29, Finance Minister Yubaraj Khatiwada announced the government would provide loans up to Rs700,000 with five percent subsidy on interest rate to qualified youth with their academic certificate as collateral. Experts laud government’s intent as noble, but express cynicism on its success. Former Finance Secretary Rameshore Khanal said, “Qualified youth deserve such schemes because many migrate to other countries for better prospects.

“The government should grant loans to deserving candidates. There is probability of the government disbursing loans to wards of party members. This would be misuse and colossal failure of the scheme.”

The government is yet to prepare the framework for this plan. A Finance Ministry official said it they would implement it once the scheme’s working procedure is ready.

Finance Ministry Budget and Programme Division Chief Nirmal Hari Adhikari said, “I cannot say how the scheme would be implemented as the working procedure is yet to be prepared.”

This is the second occasion the government announced providing loans against the collateral of academic certificates. This time the loan offered to youth is for starting business. The objective is to prevent talent migration out of Nepal.

On the first occasion in fiscal 2016-17, the then Finance Minister Bishnu Prasad Poudel offered interest free loans to students pursuing higher education equivalent to Bachelor’s Degree or above against the collateral of academic certificates.

The government failed to implement its decision.

Education experts said there is lack of clarity on the scheme and cynically dismissed it as a publicity stunt.

Tribhuvan University Central Department of Education Professor Bidhya Nath Koirala said, “I feel this announcement is merely a publicity stunt. It may ultimately turn out to be a failure like the first announcement made by the then government.”

He suggested that the government should consider disbursing such loans through municipality and rural municipalities after establishing a trust.

“There should be an effective working plan on how the student should spend the loan and how he or she gets returns. The government should also establish a strong monitoring body,” said Koirala.

Bank officials fear their disbursals could end up as bad loans. The country does not have a good history of the banks providing collateral free loans easily and the borrowers repaying the loans within the stipulated period.

Rastriya Banijya Bank Chief Executive Officer Kiran Kumar Shrestha said, “The government’s decision on compulsory provisioning of credit guarantee and insuring the business might work in favour of banks that are ready to give loans against the collateral of academic certificates,”

The working procedure should be easy and practical for both—the bank and borrower, he said.