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The government launched the National Credit Guarantee Scheme on Monday.which it will guarantee large portions of loans without any collateral.
The ones eligible for these collateral free loans will be from the Cottage and Small Industries (CSI) who will not require collateral except 10% equity and startups under this category will be eligible for 100 percent debt financing under the NCGS.
Unlike practices across the globe, the medium and large categories will also be eligible for loans under the NCGS. However, under such categories, a loan financing up to 50% or Nu 30 million, whichever is lower will be guaranteed by the government and the balance will be shared between the lender and the borrower.
In addition, CGS will also be available for up-gradation of businesses from CSI to medium and medium to large.
Therefore, the NCGS has been designed to be an inclusive instrument for all categories of industries.
The projects under the NCGS will focus on Boosting exports; Reducing economic dependency by investing in import substitution-based projects; Promoting innovation and technology; and Creating jobs to absorb the displaced and unemployed.
The NCGS will be implemented under the overall guidance of a National Credit Guarantee Committee, which will be chaired by the Finance Minister with representative from key economic sectors;
The NCGS will be implemented in partnership with the State-owned Banks, namely Bank of Bhutan, Bhutan Development Bank and the National CSI Development Bank (NCSIDBL).
A full time NCG Support Facility (NCGSF) will be established with the NCSIDBL, to provide all necessary support in availing loans and implementing projects under the NCGS.
The government team will screen the loan proposals to ensure that the loans go to the right people and also productive sectors.
This team will also ensure that chances for fraud and misuse of the money are reduced by not only screening the applications, but it will also follow up once the money is released to ensure that it is being used in the right areas.
The banks on their part will also have their own credit appraisal system and follow ups and due diligence like in the case of normal loans ensuring a double layer of checks.
The government is expected to give the guidelines on how these loans are to be given, who are eligible and what the processes will be.
A banker said that one of conditions of the loan is that it is not for big projects that can take years to start, but for CSI projects which have a gestation period of six months to a year.
The total amount set for this program is Nu 3 bn.
According to a government official in terms of liquidity of the banks he said there is more than enough liquidity with banks.
The tenure or term of the loans has also not been decided yet as the government will decide this.
Both the Prime Minister Dr Lotay Tshering and the Finance Minister Lyonpo Namgay Tshering in past interviews with this paper have said that the government is considering collateral free loans.
The private sector COVID-19 task force also requested collateral free loans for start ups and CSIs who have more difficulty coming up with collateral.
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Still waiting for NCGS loan to pass…I have apply for loan but waiting till now….