The Koshi Province Government has launched the Udaya Guarantee Fund and Udaya Challenge Fund to facilitate loan guarantees for small and medium enterprises (SMEs). These funds aim to mitigate lending risks for banks and financial institutions, enhancing access to capital for SMEs in Koshi Province to foster business growth, innovation, and operational efficiency.

The funds were officially inaugurated at an event in Kathmandu by Damodar Bhandari, Minister of Industry, Commerce, and Supplies, Hon’ble Ram Bahadur Magar, Minister of Economic Affairs and Planning, Koshi Province, and Her Excellency Danielle Meuwly, PhD, Ambassador of Switzerland to Nepal.

Strengthening SME Financing and Economic Growth

Addressing the event as the chief guest, Hon’ble Minister Damodar Bhandari emphasized the crucial role of SMEs in Nepal’s economic development. He noted that the lack of collateral has hindered SME growth, and Koshi Province’s initiative will serve as a model for federal and other provincial governments in supporting small businesses.

Minister Ram Bahadur Magar stated that the launch of both funds was the result of long-standing efforts and marked the beginning of an accelerated financial support system for SMEs. He highlighted the importance of improving the investment climate in Koshi Province and expressed confidence that this initiative would enable SMEs to generate income and employment within Nepal.

Speaking on behalf of the Swiss Government, Ambassador Danielle Meuwly commended the Koshi Province Government’s commitment to SME financing. She emphasized that the Provincial Credit Guarantee Fund and Udaya Challenge Fund would serve as models for sustainable economic transformation. She also underscored Switzerland’s longstanding development partnership with Nepal, stating that this initiative aligns with the broader goal of shifting from aid-based to trade-based economic growth.

Implementation and Impact

Shankar Nepal, Secretary, Ministry of Economic Affairs and Planning, Koshi Province, noted that the credit guarantee fund would play a key role in encouraging entrepreneurs to invest confidently. Similarly, Mr. Kovid Dhakal, from the project implementation unit, shared that the program aims to directly benefit over 3,000 SMEs.

Ramesh Ghimire, CEO of the Deposit and Credit Guarantee Fund (DGGF), explained that the funds would provide partial loan guarantees to partner banks, encouraging them to increase SME lending while minimizing risks. The Provincial Credit Guarantee Fund, with a budget of NPR 600 million, will be jointly financed by Koshi Province Government and Swiss Development Cooperation, with equal contributions of 50% each. This initiative is expected to facilitate access to capital for growth-oriented SMEs and incentivize banks to invest in the sector.

The blended financing model introduced through this initiative is seen as a landmark step in Nepal’s financial sector, offering a structured and sustainable approach to SME financing. Based on its effectiveness and success, the initiative aims to be expanded to other provinces and at the national level.

The Udaya Project was launched under a bilateral agreement between the Government of Nepal and the Government of Switzerland in November 2023. It is 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 (December 2023 – November 2027) focuses on SME growth, innovation, and capital expansion through business development consulting, financial support, and access to public initiatives and information.