SEBON ponders inclusion of startups and SMEs in stock exchange market

KATHMANDU: The Securities Board of Nepal (Sebon) is actively considering measures to integrate startups into the stock exchange market system.

In pursuit of this objective, the regulatory body has developed a distinct set of rules governing the trading of stocks associated with small and medium-sized enterprises (SMEs), with the primary aim of facilitating startups in the secondary market.

Ramesh Kumar Hamal, the Chairman of Sebon, confirmed that the board has already given its approval to the new regulation, which is currently awaiting final authorization from the cabinet.

The official board meeting of Sebon, held on May 18, successfully endorsed the regulation, following which it was forwarded to the Ministry of Finance for further review. Hamal asserted that the regulation is likely to be presented in the upcoming cabinet meeting.

The introduction of this new regulation is anticipated to bolster startup businesses by enabling them to raise capital funds through the secondary market, thereby exempting them from the need to maintain securities.

Subject to the cabinet’s approval, individual investors will be able to purchase 250 units of startup shares at a rate of Rs 100 per unit. However, investors may have to wait for a minimum of five years to yield returns on their investments.

The startup sector is experiencing substantial growth throughout the country, and the government has also expressed its commitment to supporting and fostering startups. For the current fiscal year, the government has allocated Rs 1.25 billion for promoting startup initiatives.

Back in the fiscal year 2015-16, the government had pledged to establish a fund of Rs 500 million to nurture startups and innovators. Subsequently, in 2019-20, the government announced a cash subsidy of up to Rs 5 million for promising new businesses.

Additionally, in response to the pandemic, the government created a startup fund of Rs 500 million in 2020-21, offering loans at a 2 percent interest rate to encourage innovative entrepreneurs.

Despite these funding allocations, startups have faced challenges in utilizing the funds due to the lack of appropriate regulations, which have also hindered them from generating debt equity.

Furthermore, these companies have not made any investments in the country’s sole stock exchange market to date. However, by providing startups with access to the stock exchange market, they can raise more funds to expand their investment portfolios, according to Chairman Hamal.