World Bank and RMA launch a book on connecting the disconnected

A Royal Monetary Authority (RMA) and World Bank publication, ‘Connecting the Disconnected-Coping Strategies of the Financially Excluded in Bhutan’, was launched at the Taj Tashi hotel on Wednesday in the presence of World Bank and RMA representatives.

Improving access to financial services and building of inclusive financial systems are gaining priority for the policy makers in many countries around the world, and not just those that are developing to set priority for policies on boarding financial access.

Om Bhandari, Acting Representative of World Bank to Bhutan said the report captures household financial management practices in Bhutan. He said, “It is a diagnostics assessment of financial practices and strategy among urban and rural Bhutanese. This was commissioned in spring last year by RMA and World Bank at request of government working group. This working group lead by RMA was printed in order to formulate Bhutan’s Financial Inclusion Policy.”

Financial Inclusion Policy (FIP) in the Bhutanese context is defined as access to suit of basic and appropriate financial services such as savings, insurance, payment, remittance facilities, and credits by various financial service providers such as bank, non-bank financial institutions, microfinance institution, cooperatives, NGOs, and mobile network operator to those section of population that do not have access to mainstream financial systems, in particular, those living in rural areas and those with low income.

The FIP working committee was chaired by a deputy governor and key officials of RMA, banks, government ministries, mobile network operators and NGOs, all of whom have demonstrated strong interest and commitment to enhance FIP in Bhutan.

The Acting Representative of World Bank said the report was prepared at the time of drafting FIP, and does not represent recommendations of research, but mainly captures the prospective of Bhutanese household gathered through qualitative field research using focus group discussions and in-depth interviews in a few Bhutanese communities.

In some economies, growth had been an all-inclusive one, as a result world leaders have recognized a need to rethink and reframe micro-economic policy that focus not just on GDP growth, but also on equality, rights and social development.

Deputy Governor and FIP chairperson, RMA Eden Dema said, “Bhutan’s case is no different as being a GNH country Bhutan’s development policy is guided by four pillars of GNH that is sustainable development, conservation of environment, preservation and is actively promoting financial inclusion in collaboration with other stakeholders.”

Landscape of financial inclusion in Bhutan and recent development in the sector

Bhutan’s financial sector had experienced a compounded annual growth rate of 40% credited to private sector stood at 47% of GDP in 2011, which is at par with that of South Asian region. Access to financial services in Bhutan has also significantly progressed in the recent years. In 2007, only about 49 adults in 1,000 held a loan account in banks in Bhutan which had increased to 130 in 2011. This is almost 1.5 times that of South Asian region, in terms of deposited account 437/1000 adults in 2011. In absolute terms, it is 203 more accounts as compared to South Asian region.

Financial services are constrained by numerous challenges like lack of proper coordination between various stakeholders in understanding and implementing financial inclusion policy and Bhutan’s geography, which is characterized by mountainous terrain with lower density of population. Also, many rural poor live far away from banks, which mean long distances to cover to get access to financial services such as making deposits, and withdraw money. These conditions generate inconveniences and limit operations of financial institution in rural areas.

Financial sector specialist, World Bank Miha Andrianaiva, said, “The objective of the studies was to provide information on household use and is meant for financial services, and in that light, it is one of the first efforts to capture household financial management practices in Bhutan, the background of the survey was to capture financial inclusion in Bhutan.”

She said, “Some criteria were based on social economics characterized by rural vs. urban and lower income vs. higher income and geographic distribution mainly based on NSB and World Bank poverty map 2010. Basically, what we did is qualitative survey, had discussions and interviewed 200 people which can be segmented into four groups as follows women, youth, employee, entrepreneur, subsistence farmers and unemployed.”

Senior economist with the World Bank Cecile T. Niang, said, “Finding on financial inclusion policy Presentation first research that was done there has main three messages; cash remains predominant in Bhutan, financial management strategy might be there, but they remain informal, several reasons for that is access to financial institution.”

She also added, “Bhutanese households keep informal strategy for their financial sectors for savings, remittances, credit and insurance. Second message is that rural areas have less financial sector infrastructure, financial practices in households are beginning to reassemble. Excess to bank might not be there, but what is undermined is that saving for children’s education is there, unfortunately of course opportunities to save and investment in rural area is missing.”

Deputy Head, FIU, RMA Tshering Dhendup, said, “Financial literacy is very limited. The low level of financial literacy increases the risk perceived by financial institution as serving the rural population so while deforming Financial Inclusion we need to take in consideration this challenges.”

The goal of FIP is to ensure increase asset to financial services to unbank under bank population enabling them to build asset and increase income and reduce their risk to economy stress, thereby assuring them into main stress of economy and make them economically productive citizens.

Under directives from the former Prime Minister, the Ministry of Finance (MoF) requested RMA to take a lead role in formulating FIP and regulations. After that, a working group comprising members from RMA as chair, banks, NGOs, various ministry, and mobile operator was established.


Tshering Dorji 

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