Prime Minister concedes that the ESP is not treading according to the government’s plan
Many applicants have expressed concerns and challenges in obtaining the ESP loan from financial institutions (FIs), which also face their own challenges in adhering to regulations where the progress has not been upto the level of their expectations.
An official from the FIs said, “With no safeguard in place under the ESP for collateral when lending the loan, there is a significant risk to the banks and a potential for misuse of the ESP loan.” The official explained that it is one reason why banks are taking time to review applications from different ESP loan applicants.
However, the official shared that FIs are currently working to navigate these issues and challenges.
Sonam (name changed), a farmer from Zhemgang, said, “We were happy to avail the ESP loan at a lower interest rate, which supports agriculture and livestock activities. However, there needs to be a simpler and clearer procedure.”
Sonam highlighted that the current process for obtaining the ESP loan is lengthy, requiring extensive documentation that is challenging to understand.
Another business entrepreneur from the capital remarked, “We were not eligible for the ESP loan in the first window where the banker said we did not meet the criteria, even though the government prefers to support entrepreneurs like me.”
Another applicant for an agriculture proposal said, “I submitted my business proposal during the first window, however, I did not receive any response from the bank.” This applicant shared that the application process is complicated and time-consuming.
With the official launch of the Economic Stimulus Program (ESP) on May 19, 2024, supported by a financial contribution of Nu 15 billion (B) from the Government of India (GoI), about 193 applications were submitted to participating financial institutions, of which only 12 projects have been approved as of October 8, with a total sanction of Nu 8.3 million (M). The remaining applications are still under review.
Conceding that the ESP program is ‘not going as initially planned’ in a previous interview, Prime Minister (PM) Dasho Tshering Tobgay said, “Participating FIs are concerned about client’s ability to repay loans due to the lack of collateral and mortgages.”
“FIs are worried about who will bear the loss in such situations,” PM said. However, the PM also stated that the government is discussing solutions with FIs to address the issue.
Additionally, the PM has called on all the FIs chief executive officers to assist applicants struggling to complete loan applications and to expedite the disbursement process. “The government is aware of the inconveniences related to loan applications and is ready to take responsibility to resolve these issues,” PM said.
Chencho Tshering, the Chief Planning Officer at the Ministry of Finance, reported that as of October 8, 2024, a total of 193 applications had been received by participating financial institutions.
“Of these 193 applications, 12 projects have been approved with a total sanction of Nu 8.3 million. The remaining applications are being assessed by the financial institutions,” Chencho said, adding that, of the total applications, 148 are related to primary agriculture and livestock, while 47 are in the production and manufacturing sector.
Chencho also clarified that construction businesses are not eligible for concessional loans. However, this sector (except for housing) is eligible under the reinvigoration fund with a 4% interest subsidy.
Similarly, new startups are not eligible for concessional loans, except for existing startups planning to scale up. Records from financial institutions show that no applications have been received from existing startups for scaling up, though a few startups have approached them for inquiries about scaling up loans.
Meanwhile, the ESP Secretariat is closely coordinating with the central bank, and FIs have been conducting question-and-answer sessions regarding the ESP loan application process with gups, tshogpas, GAOs, DPOs, community center operators, and 1199 call center representatives. Furthermore, communication materials are being developed and shared through BBS, radio, and social media to explain the application process.
The ESP aims to help the economy recover from the impacts of the COVID-19 pandemic. Its primary goals are to enhance domestic production in selected sectors that can generate employment and promote self-employment, improve foreign currency reserves, and promote new businesses, amongst others.
By Sherab Dorji, Thimphu
