Financial inclusion and challenges in 11th FYP

There were 200 gewog banks established in the 11th Five Year Plan (FYP). 13,571 bank accounts have been opened by rural based clients amounting to a total saving of Nu 178 million (mn), which according to the report by the Gross National Happiness Commission (GNHC)  signifies that the rural communities are prospering every year, and there is a growing culture of saving amongst the community.

Rural Enterprise Development Cooperation (REDCL) in the 11th FYP has approved 3,828 projects with loans amounting to Nu 1.1 billion (bn) from the total Nu 1.9 bn set as the budget. The scheme is said to have benefitted many rural famers in easily accessing financial support and improving productivity. REDCL provided concessional interest rate at 4 percent and collateral free interest rates to the farmers.

During the 11th FYP, to create an enabling environment for financial inclusion, upon the Royal Command, a priority sector lending (PSL) program was initiated to promote and develop cottage and small industries, and as a result, all banks now provide 1 percent of their total loans to agriculture and an additional 1 percent for rural based cottage and small industries. Through the PSL initiative, 27 projects worth Nu 43.95 mn has been approved within five months.

Remit Bhutan was launched to allow non-resident Bhutanese to remit their saving and earnings to Bhutan and to improve convertible currency reserves, whereby USD 3.23 mn as been remitted to Bhutan as of December 2017, Bhutan Immediate Payment was introduced by Royal Monetary Authority (RMA) to facilitate the use of digital payments in the country, and RMA also initiated rules and regulations for micro-loan institutions to facilitate financial services in rural pockets. Agent Banking Rules and Regulations was introduced in 2016 by RMA to enhance financial services outreach and RMA also initiated the Minimum Lending Rate and the benefits accrued by the clients amounts to Nu 3.231bn.

However, some of the issues faced in better implementation of the programs included credit being availed of by only a few dzongkhags, low level of financial literacy among the people, and lack of capacity to develop financially viable proposals.

GNHC also pointed out on the need to accelerate digital financial services program and ensure that the financial services products are easily accessible and convenient. GNHC report also points to the need for the enhancement of financial literacy and capability of end-users, and further more to develop initiatives and strategies for advancing women’s financial inclusion in the next plan.

“Despite the various schemes and initiatives launched by the financial institutions, due to a lack of financial literacy among prospective clients, credit particularly those related to cottage and small scale industries were availed only in few Dzongkhags,” stated the findings by the GNHC.

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