BDBL soon to resume providing loans in 11 branches

BDBL Board approves Nu 1,000 million for community development loan

The Bhutan Development Bank Limited (BDBL) has announced the launch of the “Medhey Gongphel Kuendrel” community development loan as part of its micro-lending program. To empower and support rural communities, the program offers accessible and tailored financial solutions to individuals engaged in various agricultural, livestock, forestry, and home-based production activities. The BDBL Board has approved a substantial sum of Nu 1,000 million (mn) for the program over the next 5 years, with 25% to be allocated for wholesale lending and 75% for retail lending. Additional funds will be provided if necessary to support the program’s progress and demand.

The General Manager (GM), Credit of BDBL said, “There are people who want to set up and upgrade something but cannot proceed due to collateral, and the main focus of ‘Medhey Gongphel Kuendrel’ is to support unbanked and underserved communities, offering financial aid without the burden of collateral.”

However, he said that there is also need for a loan program that strictly serves its intended purpose.

He added that currently, people are availing loans based on agriculture purposes, but it seems like it is not serving the purpose, and while individuals previously used the loan for agriculture-related activities, it was often diverted for personal consumption or alternative purposes.

“With the new loan program, we will strictly monitor, and funds will be released based on the progress of the project, ensuring that they are used appropriately,” the GM said.

For example, the GM said that funds would be released in stages, with the first release being designated for essential project requirements. BDBL is also planning to provide funds directly to sellers to prevent any misuse.

Additionally, funds allocated for feeding purposes will be released every month to ensure proper monitoring. He added, “We are going to monitor the end user of the funding; if that succeeds, I think economic development can happen.”

The GM also added that there are chances that anyone can avail the loan, thinking that it is collateral-free. “But we are seeking help from local government, where an individual has to provide proof of resistance.”

Moreover, only one loan will be given to a household.

The GM said that the 15% annual interest rate is much lower than that of other microfinance banks. “People might think that the interest rate is high, but the rate is flexible if the government is supporting us with the free cost of funds.”

People perceive the 15% interest rate as high; they understand the other monthly interest rate of 2% per month, but 15% is annually.

“It is basically for the beneficiary, not profit,” he added.

The GM said that they had also taken into consideration NPL while launching the loan and would monitor strictly.

Under the initiative, the BDBL will provide micro-loans directly to rural communities while also offering subsidized funds to microfinance institutions for onward lending to micro borrowers.

The “Medhey Gongphel Kuendrel” loan, which transcends traditional lending norms, aims to be a beacon of emotional and financial support for rural communities with dreams but limited means. The collateral-free loan offers rural farmers engaged in income-generating activities the opportunity to thrive and succeed.

To qualify for the loan, applicants must be above 18 years of age, Bhutanese citizens, and involved in agricultural, livestock, forestry, or home-based activities.

However, students, monks, or salaried individuals, as well as those with a history of default in the last 6 months, are not eligible. The loan has an interest rate of 15% p.a and a maximum loan ceiling of Nu 500, 000.

The launch of this Community Development Loan represents a significant milestone for BDBL, demonstrating its commitment to fostering economic growth in rural communities. By providing accessible financial solutions, the bank aims to unlock the potential of countless rural entrepreneurs and contribute to the overall development of the country.

Furthermore, the program also marks a significant effort towards economic empowerment for women in rural communities.

Meanwhile, prospective customers interested in availing these loan services can visit any nearby BDBL branch, or they are prepared and committed to meeting the needs of rural communities, but acknowledge the challenges and limitations and seek support from various government agencies, including local governments, to ensure the success of this initiative.

Nidup Lhamo from Thimphu