Nepal 's Tech Startup Revolution: Policies, Challenges & Road Ahead

Nepal’s ICT service exports currently represent only about 0.3% of GDP, a small fraction compared to its potential. With its young workforce, rising digital literacy and growing global demand for remote tech services, Nepal has the opportunity to become a regional powerhouse for technology and innovation.
Nepal is gradually emerging as a hub for innovation and technology in South Asia. Over the past decade, a growing number of young entrepreneurs and tech enthusiasts have ventured into launching startups, driven by the rapid increase in internet penetration, digital adoption and a tech-savvy youth population. 

As of 2025, approximately 50% of the Nepali population are active internet users and mobile broadband subscriptions have crossed the 100% threshold due to multiple SIM usage. This digital boom has created fertile ground for tech startups in areas such as fintech, e-commerce, edtech, healthtech and artificial intelligence. Cross-border payment initiatives like QR code interoperability with India have further boosted opportunities for startups by enabling seamless transactions for businesses, tourists and freelancers.

The government introduced the Digital Nepal Framework (DNF) in 2019. This comprehensive plan focuses on eight priority sectors: digital foundation, agriculture, health, education, energy, tourism, finance and urban infrastructure with 80 specific initiatives to enhance productivity and inclusion. For startups, the DNF provides a strategic direction, indicating government intent to foster innovation and use technology as a driver of economic growth. Startups operating in these sectors have a clear mandate to design solutions that align with the framework while simultaneously benefitting from government programmes and international donor support tied to DNF priorities.

Until recently, Nepal lacked a dedicated policy to guide the startup ecosystem. This changed with the introduction of the Startup Policy and Rules (2080/81) adopted in 2023/24. The policy formally defines what constitutes a startup, based on factors like revenue size, company age and innovation criteria. It also established a Startup Enterprise Steering Committee, chaired by the Ministry of Industry, Commerce and Supplies (MoICS), tasked with coordinating incubation, grants, co-investment and procurement opportunities for startups. While implementation is still in its early stages, the policy is a landmark move, finally providing startups with a central government body and clear policy direction to advocate for their needs.

Access to finance remains one of the most pressing challenges for Nepali tech startups. Nepal’s Foreign Investment and Technology Transfer Act (FITTA) 2019 legalised venture capital funds and foreign investment in startups, while the Specialised Investment Fund (SIF) Rules 2019 empowered private equity and venture capital managers to raise domestic and international capital. Additionally, the Crowdfunding Directives (2078) created alternative financing options for early-stage companies. These frameworks collectively form a modern financial architecture for startups to access diverse capital sources. However, operational inefficiencies, slow approval processes and lack of awareness among entrepreneurs and investors have hindered their full utilisation.

Despite the hurdles, a few venture capital firms and impact investors have paved the way. Dolma Impact Fund and Business Oxygen (BO2) has invested in high-growth startups across sectors such as fintech, logistics and education. Leading digital wallet companies like eSewa and Khalti, logistics platforms such as Upaya, and edtech companies like Programiz have demonstrated scalable business models. Nevertheless, the overall size of funding rounds remains small compared to regional benchmarks in India or Singapore, forcing many Nepali founders to rely on bootstrapping or diaspora funding.

The fintech sector has been a standout performer in recent years. With digital wallet and QR transactions rising exponentially, the financial technology space has seen rapid adoption. The introduction of UPI and QR interoperability with India and Bhutan has created a massive opportunity for cross-border retail payments, benefitting startups targeting freelancers, exporters and tourism-related businesses. Nepal Rastra Bank (NRB) has actively introduced policies to regulate and promote fintech innovation but further modernisation is needed to ensure security and global competitiveness.

However, significant challenges remain. Many startups struggle with payment gateway limitations, as global platforms such as Stripe or PayPal lack full support in Nepal, creating hurdles for SaaS exports and international transactions. Additionally, while Nepal’s Individual Privacy Act (2018) and regulations (2020) provide a foundation for data governance, the absence of a comprehensive data protection law aligned with global standards hampers startups aiming to serve international enterprise clients. Physical infrastructure is another bottleneck; projects like the Banepa IT Park have failed to meet expectations, underscoring the need for modern, plug-and-play campuses with reliable utilities and collaborative spaces.

To address these challenges, the government must move beyond policy declarations and focus on execution. Immediate steps include fully operationalising the Startup Policy through seed grants, co-investment funds and startup-friendly public procurement rules. Simplifying foreign exchange regulations to support outward payments for essential tools and services like cloud hosting and inbound SaaS receipts will greatly ease business operations. Passing a modern data protection and privacy law should be a top priority to build trust among international partners. Additionally, IT parks should be redesigned into export-oriented tech campuses, offering incentives such as tax breaks, zero-rated exports, and one-stop regulatory services.
The private sector also has a critical role to play. Established corporations should integrate startups into their supply chains by offering pilot opportunities and timely payments. Banks and insurers can foster innovation by opening APIs and collaborating with NRB to create regulated sandboxes for fintech solutions. Fund managers must leverage the SIF framework to raise multi-stage venture funds, while diaspora investors can provide early-stage capital and mentorship. Universities and accelerators should expand programmes to produce investment-ready startups, building on initiatives like Idea Studio and NLab Uddhyam. Experienced tech companies can mentor startups on compliance, cybersecurity and scaling to ensure sustainable growth.

Nepal’s ICT service exports currently represent only about 0.3% of GDP, a small fraction compared to its potential. With its young workforce, rising digital literacy and growing global demand for remote tech services, Nepal has the opportunity to become a regional powerhouse for technology and innovation. However, achieving this vision requires a united effort from the government, private sector and international partners. Nepal, by operationalising existing policies, improving access to capital, modernising infrastructure and fostering collaboration, can transform its promising startup ecosystem into a sustainable engine of economic growth and global competitiveness.