In August 2022, the Bhutan Chamber of Commerce and Industry (BCCI) said that the Chamber is working on a micro-finance loan scheme to be launched early in 2023. According to the Chamber’s President, Tandy Wangchuk, the scheme was envisaged to help small and medium enterprises (SMEs) self-sustain, following suspension of collateral free loans by the Bhutan Development Bank Limited (BDBL) and the National Cottage and Small Industries (CSI) Development Bank Limited.
However, the Chamber has now decided to do away with the Micro Finance Loan Scheme for SMEs, claiming that the ministry of finance (MoF) has stopped the Chamber from giving such loan schemes.
Meanwhile, Lyonpo Namgay Tshering, finance minister told the paper that as a Chamber office and a coordinating body, BCCI cannot indulge in giving loans and have such kind of schemes. Lyonpo further explained that if the Chamber wants to open a micro finance institution, it will have to secure a formal approval as a micro finance institution from the Royal Monetary Authority (RMA).
When asked about developments in this area, BCCI President said that if the MoF had not refused, the Chamber could have helped the SMEs who have been affected by the COVID 19 pandemic for the past two years.“However, the scheme got cancelled,” he said.
He added that the Chamber explored the possibility of getting capital with different stake holders and obtained about Nu 200mn.
“The chamber even developed the recovery mechanism of the non-performing loan (NPL) issues keeping in mind that there will be more defaulters with the collateral free loan,” he added.
Underlining that it has got nothing to with the MoF but is a question about following rules and regulations that are already established, Lyonpo Namgay Tshering said that if the Chamber wants to open a micro finance institution, it will have to secure a formal approval as a micro finance institution from RMA.
“Then the Chamber can open a separate micro finance institution under the Chamber’s umbrella,” Lyonpo added.
Lyonpo clarified that micro finance licenses are issued only by RMA as it is the only regulatory body in the country. “It has nothing to do with the Royal Government or the Ministry of Finance,” he added.
The finance minister further informed that currently the country doesn’t have micro finance issues and said that there are private micro finance institutions in the country that are doing quite well.
In addition, the minister shared that private micro finance institutions face challenges from financial institutions like the BDBL and National CSI Development Bank Limited, though the two are currently under memorandum because of NPL.
Minister Namgay Tshering further shared that if a person fulfills credit norms, be it those in the SMEs or others they can access finance from the financial institution of the country.
He added that it is important to build a strong credit culture rather than to distribute free money through microfinance.
Speaking about the Chamber’s loan scheme, President of the BCCI had earlier said that under the planned microfinance scheme, SMEs can avail loans amounting between Nu 0.3,m to Nu 0.5mn with no collateral.
The President further mentioned that learning from the past NPL experiences, BCCI has instituted a mechanism where the Dzongkhag Business Development Committee members will visit the business establishments physically for verification before processing the loans.
Additionally, he said that documentation and loan agreement upon approval from the regional secretary also needs to have a notarization from the court to authenticate that the business licence holder is genuine and operating in a particular dzongkhag.
Apart from the equated monthly instalments (EMI), Tandy Wangchuk said that the borrowers also need to compulsorily deposit Nu 500 monthly, to supplement later defaults if any.
Stating that the Chamber lacked funds, he had mentioned that the loan scheme would require about Nu 200M, to begin with.
Tandy Wangchuk has also said that the loan would have a lower interest rate compared to the existing micro-finance institutions in the country.
Meanwhile, about 95% of the industries in the country fall under the small and cottage scale industry with about 26,116 cottage and small industry, followed by 1,174 large and medium industries as of June 2022, according to the department of small and cottage industry (DCSI).
Sherab Dorji from Thimphu