Is SIP a scam in Nepal? Auditing seven years of the country's oldest SIP fund

A colleague forwarded me a screenshot last Saturday: a SIP calculator with Rs 5,000 a month typed in, 12.74% in the return box, and a figure at the bottom promising about Rs 55 lakh in twenty years. His message was one line. "Is this real or is SIP a scam?"

He had been dripping Rs 3,000 a month into an open-end fund for about two years. His statement showed a NAV barely above the Rs 10 he started at, and he could not square that with the number on the calculator.

Where the 12.74% comes from

The number is not invented. It appears in trade coverage of Nepal's SIP boom, including Nepalytix's March 2026 analysis and a clickmandu report the same month, both describing NIBL Sahabhagita as having delivered "a cumulative dividend of over 76 percent and an average annual return of around 12.7 percent."

Here is the trail those figures are built from, straight off the fund manager's own scheme page.

Add the percentage column: 76.45. Divide by six fiscal years: 12.74. That is the entire derivation.

One housekeeping note, since the sources disagree. NIMB Ace Capital's scheme synopsis subdomain files the 7% dividend under FY 2080/81, while the main scheme page files it under FY 2081/82. Three independent reports from July 2025 settle it: ShareSansar, Investopaper and ICT Frame all record the 136th board meeting declaring 7% for FY 2081/82. So FY 2080/81 passed with no declaration at all, which the averaged figure quietly absorbs.

Four things wrong with that arithmetic

Dividend percentages in Nepal are declared on par value. Every scheme issues units at Rs 10, and a "7% dividend" means Rs 0.70 per unit. If you bought in at an NAV of Rs 12, that Rs 0.70 is a 5.8% yield on your actual money, not 7%.

Summing annual rates and dividing by the count is an arithmetic mean, not a compound return. Compounding is multiplicative. Averaging percentage points across years overstates what actually accumulated, and the wider the spread between years, the worse the overstatement.

It ignores NAV. The whole point of an open-end fund is that you redeem at NAV, so NAV movement is most of your return. NIBL Sahabhagita's NAV was Rs 10.17 on 13 August 2026 per the manager's NAV page, against the Rs 10 par it launched at on 9 July 2019. Seven years, up 1.7%.

One year supplies most of the total. The 50% declared in FY 2077/78 is Rs 5.00 of the Rs 7.65, or 65% of the cumulative figure. That was the year NEPSE rose 111.65% to close at 2,883.38, per NRB's Financial Stability Report. Strip that single year out and the remaining five average about 5.3% a year, against the 4.167% a fixed deposit pays this month.

What a unit actually did, 2019 to 2026

Buy one unit at par at allotment and hold it to the latest published NAV. Every input below is from the fund manager's filings; the last two rows are my arithmetic, not a published figure.

The 5% withholding on dividends to individuals, 15% for entities, is confirmed by NIC Asia Capital's explainer. The calculation assumes you took every dividend as cash and left it idle. Reinvesting through the fund's Dividend Reinvestment Plan would land somewhat higher, though with NAV up only 1.7% over the period, not dramatically so.

Daily NAV moves, so the figure moves with it. At the Ashad 2083 month-end NAV of Rs 10.03 the same calculation gives 8.14%; at the Rs 10.36 published on 21 July 2026 it gives 8.43%. The honest statement is that this fund has compounded in the low eights, not at 12.74%.

Did it actually beat inflation?

Worth checking rather than assuming, because "beats inflation" is the entire pitch. NRB publishes annual average consumer price inflation for every fiscal year.

Compounded across the seven years, that is 5.16% a year, and prices rose about 42% in total. So the fund's 8.26% nominal becomes a real return of just under 3% a year. Put differently, the Rs 17.43 a unit is worth today buys what about Rs 12.26 bought in 2019.

Three percent real, compounded, is a genuinely useful result. It is also nothing like the outcome someone extrapolates from a 12.74% box on a calculator.

The fee stack, against what SEBON permits

Fees come out of NAV before you ever see it, which is why they are easy to miss. NIBL Sahabhagita's are on its scheme page, and the ceilings sit in Regulation 23 of the Mutual Fund Regulations, 2067.

Nothing here is hidden and nothing breaches the cap. What it means in practice: the portfolio had to earn roughly 9.8% gross for you to end up with 8.26%. A percentage and a half on a Rs 3,000 monthly drip is not what decides your outcome, but it is real, and it compounds against you for as long as you hold.

The loads are the part worth planning around. There is no entry load; SEBON's 2019 statement introducing open-ended schemes said plainly that investors would incur no entry load, and the scheme page confirms it. Exit load is 1.5% if you redeem inside six months, 1.25% from six to twelve months, 1% from twelve to eighteen, 0.75% from eighteen to twenty-four, and nothing after two years. A SIP you might abandon in month seven is a SIP that costs you 1.25% to abandon.

What you are actually choosing between

The fair question is not whether 8.26% is impressive in the abstract. It is what else that money could have done.

Commercial banks cut deposit rates again for the first month of FY 2083/84, taking the average maximum individual rate to 4.167% from 4.258% in Asar, per Bizness News. Meanwhile year-on-year inflation hit 5.22% in mid-June 2026 according to NRB's eleven-month report. NRB projects inflation averaging around 5.5% in 2026/27.

Read the table honestly and a fixed deposit opened this Shrawan is losing purchasing power against the latest inflation print. That is the backdrop against which SIPs are being sold, and it is a genuine argument for them. The savings account below inflation problem and the falling FD rate squeeze are the same story from the other side.

The part the calculator never shows you

NEPSE closed at 2,651.21 on 13 August 2026. Its all-time high was 3,198.60 on 18 August 2021, a level recorded both by ShareSansar on the day and in NRB's Financial Stability Report. Five years on, the index is still roughly 17% below that peak.

Equity-oriented SIP funds hold 80% to 85% of assets in stocks, so their NAVs track that. ShareSansar's Ashad 2083 review shows every open-end scheme it tracks falling that month, with the six SIP funds launched in 2025 sitting where you would expect: NIC Asia's Equity Linked Investment Scheme at 9.58, Citizens Sadabahar at 9.97, NI 31 at 10.13, Sanima Flexi at 10.29, Prabhu Systematic Investment Scheme at 10.57. Machhapuchchhre SIP Yojana at 11.29 is the one clear outlier.

This is where my colleague's confusion actually lives. His NAV is not stuck because someone is cheating him. It is stuck because he started buying in a market that has gone sideways for five years, and a SIP has no mechanism to fix that. Rupee-cost averaging lowers your average entry price. It does not manufacture a return the underlying market did not produce. That is the same argument as SIP versus lump sum, seen from the losing end.

Most of these funds have no track record at all

The audit above works because NIBL Sahabhagita has been running since 2019, as Nepal's first open-ended scheme. Almost nothing else has that history.

Nepal had seven SIP schemes operating by 2023. None launched in 2024. Then six arrived in a single year: Sanima Flexi Fund, Prabhu Systematic Investment Scheme, Citizens Sadabahar Yojana, Nabil's NI 31, NIC Asia Equity Linked Investment Scheme and Machhapuchchhre SIP Yojana. That took the count to thirteen by early 2026, and ShareSansar's Ashad 2083 review puts the open-end total at fourteen against 46 listed closed-end schemes, 61 in all.

Doubling the shelf in two years means most of what is being marketed to you right now has one or two years of history, launched into a flat market. A fund with eighteen months of NAV data cannot tell you how its manager behaves in a drawdown, which is the only thing you actually need to know before committing a decade of monthly debits.

There is an operational wrinkle worth knowing too. Nepalytix reports investors seeing delays in SIP units showing up in their demat accounts, with capital companies saying transactions execute in real time while system-level demat records lag. Units missing from Mero Share for a few weeks is an administrative backlog, not a theft, and it is a common trigger for the "is this a scam" reflex. The related Mero Share and demat mistakes are worth knowing before you panic.

What is genuinely a scam, and it is not this

SEBON's enforcement attention in 2025 and 2026 has been aimed somewhere else entirely. The regulator has issued repeated public notices warning that there is no legal provision for selling "pre-IPO" shares to the public, after complaints about entities soliciting money over WhatsApp, Viber, Facebook and SMS while promising returns up to five times the investment. Under Section 29(1) of the Securities Act, selling to more than 50 people requires a public issue. SEBON repeated the warning in April 2026 because the practice had not stopped.

For FY 2083/84, SEBON has said it will draft an Investment Consultation and Research Analyst Regulation, introducing licensing for anyone offering investment advice and a stated zero-tolerance line on misleading social-media promotion.

Set the two side by side. A SIP is a SEBON-registered open-end scheme with capped fees, published NAV and mandated disclosure of objectives, risks, expenses and holdings. A pre-IPO pitch in a Viber group promising ten-fold returns is an unregistered solicitation the regulator has declared illegal. Only one of those is a scam, and the Telegram tip and pump-and-dump playbook is where it usually starts.

One tax change that landed this Shrawan

The Finance Act 2083 raised capital gains tax from Shrawan 1, 2083. Listed shares held 365 days or less now attract 10%, up from 7.5%. Held beyond 365 days, 7.5%, up from 5%. The tax is now final on share transactions, so gains taxed under it no longer fold into your personal income slab.

One honest gap. Open-end SIP units are not listed on NEPSE, and none of the published sources I could find state whether the listed-share rate reaches open-end redemptions. The 5% dividend withholding is settled. The redemption treatment is not, so ask your fund manager before you redeem a large holding rather than assuming either way. The broader slab picture is in income tax slabs for 2083/84.

Checking any fund's real number yourself

The method that produced the 8.26% takes about ten minutes and works on any open-end scheme.

1. Open the fund manager's own scheme page and note the allotment date. Par is always Rs 10.
2. Copy the full dividend trail from that page, not from a summary article. Summaries drop years, and a dropped zero year is exactly what inflates an average.
3. Convert each declared percentage to rupees on par. A 7% dividend is Rs 0.70 per unit, whatever the NAV was that year.
4. Cut 5% off the total for the withholding a natural person pays.
5. Find today's published NAV on the manager's NAV page and add it to your net dividend total.
6. Divide by 10, then take the nth root for however many years the fund has existed. That is your compound annual return.

Then compare it against the fixed deposit rate published for the current Nepali month and NRB's inflation figure, because those two numbers are what the money would otherwise have done. A fund quoting you a figure well above what step 6 produces is quoting an arithmetic mean, and now you know how to tell.

Skip the exercise entirely for anything launched after 2025. There is not enough data yet for the arithmetic to mean anything, and no amount of method fixes a missing track record.

What you actually need to know

The scheme is legitimate; the marketed return is not. SIP funds are SEBON-registered and fee-capped. The 12.74% figure in circulation is six years of dividend percentages added together and divided by six, computed on Rs 10 par, with NAV left out. The oldest fund's real seven-year record is 8.26% a year after dividend tax, which the advertised figure overstates by about 54%.

It still beat the alternatives, and that is the actual case for it. Against 5.16% average inflation over the same seven years, 8.26% left a real return just under 3% a year. A fixed deposit at this month's 4.167% does not clear inflation at all. Anyone selling you a SIP on a 12.74% projection is overselling a product that did not need overselling.

Your entry point decides your experience for years. NEPSE remains around 17% below its August 2021 high. A SIP started into that stretch shows a NAV near par and will keep doing so until the market moves. That is not misconduct, and no monthly-drip mechanism protects you from it. Give it a horizon you can genuinely sit through, and expect an exit load on anything you pull out inside two years.

If you have a SIP statement you cannot reconcile against what you were promised, send it over to parjanya57@gmail.com and I will work through the arithmetic with you.

This post is part of the Nepal Money Basics guide — the investing section.