The Bhutanese Leading the way.
The much-anticipated Concessional Credit Line and Reinvigoration Fund, part of the Economic Stimulus Programme (ESP), were officially announced on August 7.
The government has unveiled a Nu 5.3 billion concessional credit package as part of the ESP.
The ESP is set to inject Nu 5.3 billion directly into financial institutions. The government will provide this funding to the banks interest-free, enhancing their capacity to support economic activities and investments.
Finance Minister Lekey Dorji shared that the concessional loan program aims to generate new business opportunities and support the expansion of existing enterprises, ultimately boosting economic activity and aiding in the economic recovery. Additionally, the reinvigoration fund will offer subsidized interest rates to struggling businesses with the potential for recovery and growth.
The Economic Stimulus Programme (ESP) will utilize two funding windows to support businesses. Window 1 focuses on the Concessional Credit Line (CCL), which provides new business loans and expansion funding at a low interest rate of 4% per annum. These loans are collateral-free but require backing by project assets.
Window 2 introduces the Reinvigoration Fund (RGF), designed to assist distressed businesses impacted by the COVID-19 pandemic and other external challenges. It offers two types of support:
Modality I provide an interest subsidy of 4% per annum on existing loans for up to three years, with clients covering any difference between the subsidized and prevailing rates. Lenders will evaluate borrowers annually to assess their progress and decide on the continuation of the subsidy.
Modality II allows for subsidized interest at 4% per annum on additional loans from participating financial institutions, with clients again responsible for the rate difference. Borrowers may choose either Modality I or Modality II, but not both.
The Concessional Credit Line, supports primary agriculture, livestock, cottage and small industries, and medium-scale manufacturing enterprise. The Reinvigoration Fund is designed to provide partial and time-bound interest subsidies to help revive distressed businesses.
Lyonpo expressed hope that businesses will fully embrace this initiative and leverage it to drive economic progress.
An official from Bhutan National Bank (BNB) stated, “We are developing a Standard Operating Procedure (SOP) to ensure a uniform eligibility criterion across all financial institutions. To qualify for the loan, we will review the credit history of borrowers. Currently, no guarantor is required for Window 1 instead, we will evaluate the project assets to determine loan approval.”
Bhutan Development Bank Limited (BDBL) CEO Tshering Om shared that they will screen the application and see the liability of the project to provide loan.
Nu 500 million is allocated for small-scale investments in agriculture and livestock, including crop cultivation, poultry farming, and aquaculture, with a 4% interest rate.
Nu 500 million is designated for small-scale manufacturing, excluding services and construction. It includes Nu 300 million for startups and Nu 200 million for movie production. Medium-scale businesses in manufacturing will receive Nu 1.8 billion, also at a 4% interest rate.
Nu 2 billion is aimed for reinvigoration fund, with a 4% interest rate and a maximum three-year loan tenure.
The banks are in the process of developing a Standard Operating Procedure (SOP) to establish a consistent framework for customer eligibility across all institutions which is excepted to be done by this month.
