Twenty-five-year-old Krishna KC from Kavre is a prospective candidate for the government’s self-employment programme launched in 2009. KC has already lost Rs 300,000 to foreign employment agents who promised him jobs as a security guard in Dubai and Malaysia. Had he been aware of the Youth Self-employment Fund, he would have instead applied for the loan. “Nobody ever told me there was such a provider,” says a frustrated KC.

Dev Bahadur Tamang from Sindhupalchok, who has been driving a fruit cart in Kathmandu for the last two years, is another prospect for the Fund. But, like KC, he has neither heard of it nor does he believe that he can access it. “I’m worried more about the cart that the police confiscated while I was selling fruits on the street,” he says.

Despite the Fund’s noble intention of lending Rs 200,000 per person without collateral at an interest rate of 12 per cent, it has so far failed to attract its target group: young and unemployed, willing to start a business but unable to do so for the lack of capital.

The ambitious programme has failed to benefit the poor as it is unable to ensure target groups’ access to information and resolve the procedural hassles the applicants have to face while obtaining funds through the designated financial institutions.

Twenty-four-year-old Bibek Pariyar from Ramechhap was one of the 600,000 applicants who applied for the fund in 2009. He was an ardent supporter of the programme and even worked as a publicity volunteer for six months before he lost interest. Feeling that the programme might never be implemented, he discontinued the application process and went to work in Malaysia instead. Four years later, he still does not believe in the programme.

After the initial euphoria, people have become disillusioned. So far only 20,467 have availed of the fund. Records show that last year alone 156,770 went to Malaysia in search of jobs. Thousands like Pariyar would rather prefer working abroad than applying for the self-employment fund.

“What’s gonna change with the loan?” asks Mahottari-based Bikash Karki, also in his early twenties, waiting to fly to the United Arab Emirates any day soon. “Maybe they should target those who’ve already gone abroad and now want to stay in Nepal.”

The government is yet to collect data on the number of poor and unemployed youths like KC, Pariyar, Karki and Tamang the Fund has helped so far, but Punya Prasad Regmi, the vice-chairman at the Fund, believes the number to be a small percentage of the 20,467. A majority of the people who have benefited from the Fund so far are those with prior business experience and with some form of contact with financial institutions through which the Fund disburses the money.

This has been the case not only because the government has failed to publicise its programme to the poor, but also because the banks and other financial institutions, including the cooperatives, want to see some form of security in their investments, even though the Fund requires no collateral. As a result, these financial institutions want to invest in people they know who have a good business record.

For example, 33-year-old Buddha Bahadur Khatri and his contemporary Padam Kumar Giri were already owners of a pig farm at Tinthana, Kathmandu, when they decided to apply for the self-employment loan to scale the farm up and add a fish pond. Khatri also helps run an educational consultancy at Bagbazaar and Giri owns a restaurant in Lazimpat. Most importantly, both had close links with the Royal Merchant Banking and Finance Limited at Durbarmarg, through which they learned about, and eventually obtained, the self-employment loan. “If we weren’t close to the Royal Merchant Finance Company, we wouldn’t have received the loan,” admits Giri, who with Khatri and six other partners received Rs 1.6 million from the Fund last year.

Across the Valley to the north, below the Shivapuri hills, the story of another Fund entrepreneur is similar. Subash Chandra Budhathoki Chhetri (BC), chairman of the Nanglo Deep Saving and Credit Cooperative at Gongabu, received Rs 1 million from the National Cooperative Bank in Kupandole nine months ago.

Although the amount is a “drop in the sea” for Chhetri, as he has invested Rs 13.5 million in total in the farms, a meat market and a restaurant, the loan is collateral-free and charges low interest, which Chhetri is thankful for. He, however, would not have known of the loan had a member of his cooperative not happened to be Regmi’s nephew.

The poor, on the other hand, lack this kind of access to information and financial institutions, hurting their chances of receiving the loan. One seemingly simple step in the loan application process shows how they could be left out of it. Orientation training sessions from the Fund are mandatory prior to application. But the Fund will not train youths who are not recommended by financial institutions. This weeds those who lack connection to the intermediary lenders out of the process.

Regmi admits that the financial institutions have focused heavily on youths in bazaars, but hopes to change this by stepping up its cooperation with cooperatives, which began only around three months ago. According to Shiva Tiwari, accounts chief for the Fund, of the Rs 1.6 billion disbursed to various financial institutions since the Fund’s inception, Rs 1.1 billion went to cooperatives in the last three months alone.

“Banks and finance companies refused to go to villages and were reluctant to invest without collateral. Cooperatives will change that,” says Regmi, who is hopeful that this new venture will change the demography of the loan recipients.

According to Keshav Baral, chairperson of the National Cooperatives Organisation, there are around 28,000 cooperatives, with about half a million shareholders spread across 75 districts. In the next five years, the organisation plans to increase the number of shareholders to 10 million, penetrate every Village Development Committee and triple its contribution to Gross Domestic Product to 9 per cent. With such an ambitious partner on its side, the Fund is set to change its game.

Despite denials from Baral and Regmi, however, cooperatives nationwide face criticism that they favour  Unified Communist Party of Nepal (Maoist)-affiliated youths for the loan.

Economists say that unless the programme purges itself of this allegation and reaches the poor and stops the flow of migrants in search of labour abroad, the Fund cannot be called a success. As the Fund prepares to add 50,000 new self-employed on its roster this fiscal year, they warn that a serious study on human resources is crucial. Else, the state might lose its money and hurt the dignity of the unemployed youths. It’s not biscuits the state is distributing, they remind.

Published on: 7 August 2013 | The Kathmandu Post