The government has officially acknowledged peer-to-peer (P2P) lending for the first time in Nepal's financial history in the national budget. Dr. Swarnim Wagle, the Minister for Finance, presented Nepal's Rs. In the budget for FY 2083/84, Rs. 2,124.34 billion, the establishment of a Fintech Marketplace under the Nepal Rastra Bank is announced, which will be accompanied by new laws to regulate P2P lending and individual digital credit scoring.
This budget announcement is for anyone who has ever been turned down for a bank loan, waited weeks for approval or just didn't have any collateral to show.
But what exactly is P2P lending? How does it work? And why should every Nepali care about it? Let's break it all down — simply and clearly.
What is P2P Lending?
Peer-to-peer lending (P2P) is a system that allows individuals who wish to borrow money to borrow it directly from individuals who wish to lend money, without the traditional bank being involved.
Think of it like this:
- Old way: You only need to pay Rs. 3 lakhs for your small business. You visit a bank, complete multiple forms, and have to wait weeks, and finally you get turned down because you don't have sufficient collateral.
- P2P way: You advertise your loan requirement on a licensed P2P site. It is reviewed by real persons (your peers) and your loan is funded directly by them. The money is given to you. They earn interest
In between, the platform sorts the verification, agreements, monitoring of repayment, and risk assessment. No bank. No need for a long trip to visit branches. No impossible paperwork.
How Does P2P Lending Actually Work? — Step by Step
Step 1 — Borrower applies online
The borrower registers on a licensed P2P lending website, provides the borrower details, such as citizenship, income details and enters the amount borrowed and the purpose of the loan, such as business capital, education, emergency, home improvement, etc.
Step 2 — Platform assesses and scores the borrower
Digital credit scoring is performed on the platform for the borrower by — analysing his or her transaction history, payment behaviour, digital footprint, and identity data, and assigning a risk rating to the borrower. The only thing that separates this from a bank, is the fact that it isn't just based on collateral, but rather on your financial behaviour and credibility, which is what P2P platforms assess.
Step 3 — Loan is listed for lenders
When approved, the borrower's loan request will be displayed on the platform (with personal information concealed). Individual lenders can look at the loans that are available, and decide which ones they want to loan and what their interest rates will be, based on the credit score, purpose of the loan, and interest rate of the borrower.
Step 4 — Lenders fund the loan
Several lenders are able to put in little money to back up a single loan. For instance, 10 various lenders can each be contributing Rs. 30,000 to fund one Rs. 3 lakh loan. This way, if a single borrower defaults on the loan, no single lender loses out on the whole deal.
Step 5 — Borrower receives funds and repays
The borrower receives the loan amount digitally — directly to their bank account or digital wallet. They repay in monthly instalments over the agreed period. The platform automatically distributes repayments (principal + interest) back to each lender's account.
P2P lending bypasses the traditional bank entirely — connecting those who have excess money to save with those who urgently need it to grow. Technology makes the trust possible.
Who Benefits from P2P Lending in Nepal?
For Borrowers
- Freelancers and gig workers who have income but no formal salary slip for banks
- Small business owners who need quick working capital without mortgage requirements
- Students who need education loans but lack a guarantor
- Young entrepreneurs with a business idea but no credit history
- Farmers and rural households far from bank branches who need microloans
For Lenders / Investors
- Earn higher returns than fixed deposits by lending your savings directly
- Diversify your investment across multiple borrowers to manage risk
- Start investing with smaller amounts — no need to lock in large sums
- Help fellow Nepalis grow their businesses while growing your own savings
What Nepal's Budget 2083/84 Says
Here is exactly what the government announced — verified from the official budget statement presented by Finance Minister Dr. Swarnim Wagle:
- Total budget for FY 2083/84: Rs. 2,124.34 billion
- Fintech Marketplace: A Fintech Marketplace will be established under the supervision of Nepal Rastra Bank — with updated statutory codes to govern P2P lending and individual digital credit scoring
- IT sector allocation: Rs. 5.93 billion allocated to the Ministry of Information and Communications
- Science, Technology and Innovation: Rs. 4 billion allocated to the newly constituted Ministry of Science, Technology and Innovation
- 50% IT export tax exemption: 50% income tax exemption on income earned from export of IT services and software
- Sweat equity exemption: 100% exemption in taxable income calculation for sweat equity received by IT sector human resources
- Minimum R&D allocation: At least 1% of national capital expenditure reserved for science, technology research, and innovation
- Sovereign AI Compute Centre: Nepal's first AI computing centre to be established at Syuchatar, Kathmandu — with AI processing units offered to startups at concessional rates
- Digital VAT discount: Consumers making purchases through digital payments will receive a 10% discount on VAT at point of invoice
Why P2P Lending + Digital Credit Scoring Changes Everything
However, the most important figure in the budget isn't only P2P lending, it's the combination of P2P lending and individual digital credit scoring. It’s transformative in Nepal for these reasons.
In present days, Nepal financial system is predominantly a credit based financial system. Borrowing is possible, if you have property and/or land. If you don't, it is near impossible to do — even if you are the most responsible, diligent, and trustworthy individual.
Digital credit scoring changes this entirely. It builds your financial reputation based on:
- How regularly you pay your utility bills
- How you manage your digital wallet transactions
- Your mobile recharge and payment patterns
- Your repayment history on any previous digital loans
- Your transaction consistency and financial behavior over time
So when you do things like pay your NEA bill on time or put money on your phone you are making a kind of record for yourself. This record is like a story about how you handle money. Every time you use a wallet to get money from someone else you are adding to this story. Over time this story can help you get a P2P loan. Your NEA bill payments and phone payments are all part of this story. They show that you can pay bills on time. This is important for getting a P2P loan in the future. Your digital transactions, like paying your NEA bill and using a wallet become a big part of your financial story.
What Are the Risks of P2P Lending?
P2P lending is not without risks. As a responsible financial platform, CityPay believes our users deserve a complete picture — not just the benefits.
- Default risk: Borrowers may fail to repay. Unlike a bank deposit, P2P investments are not guaranteed by any government insurance scheme.
- Platform risk: If the P2P platform itself faces difficulties, lenders' funds could be at risk — which is exactly why NRB oversight and regulation is critical.
- Liquidity risk: Unlike a bank savings account, money lent through P2P platforms cannot always be withdrawn immediately — it is locked in for the loan duration.
- Regulatory immaturity: P2P lending in Nepal is still in its early regulatory stages. The framework announced in Budget 2083/84 is a starting point — full implementation will take time.
This is why the National Bank of Rwanda or NRB is so important. The NRB has to watch over the Fintech Marketplace to make sure everything is okay. This helps keep both the people who borrow money and the people who lend money safe as the Fintech Marketplace grows and changes. The NRBs job is to make sure the Fintech Marketplace is working the way it should.
What Does This Mean for CityPay Users?
As an NRB-licensed digital wallet, CityPay is at the centre of Nepal's digital financial transformation. The Fintech Marketplace announced in Budget 2083/84 — and the digital credit scoring framework that comes with it — will work most effectively for people who are already active in the formal digital payments ecosystem.
Every transaction you make through CityPay contributes to your digital financial identity:
- Paying your NEA electricity bill through CityPay
- Receiving City Express remittance into your CityPay wallet
- Paying merchants via Fonepay QR
- Transferring money digitally instead of using cash
In the emerging P2P lending world, digital wallet users with consistent transaction histories will have a significant advantage in accessing credit — because their financial behaviour is already recorded, verified, and assessable by digital credit scoring systems.
The more you use digital payments today, the stronger your credit identity becomes for tomorrow.
The Bottom Line
Nepal's Budget 2083/84 is not just a financial statement — it is a signal. A signal that Nepal's government recognises the formal banking system cannot serve everyone, and that technology-driven alternatives like P2P lending and digital credit scoring are not just acceptable — they are officially encouraged, regulated, and supported.
For the millions of Nepalis who have never qualified for a traditional bank loan, this budget opens a door that was previously closed. For the millions who have savings sitting in fixed deposits earning modest returns, it opens an opportunity to put that money to work — in their own communities, for their fellow citizens.
P2P lending will not replace banks overnight. But paired with digital credit scoring, a Fintech Marketplace under NRB, and a growing ecosystem of NRB-licensed platforms like CityPay — it will make Nepal's financial system more inclusive, accessible, and fair than it has ever been.
And that is a future worth building together.
Stay updated on Nepal's fintech developments, budget announcements, and digital payment news — visit our blog at citywallet.com.np/blogs. For any queries, reach us at citywallet.com.np.
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