|Rural credit is crucial in improving lives in the farm|
Bhutan needs to adopt a national policy on micro finance. This was the message at a seminar on creating a suitable environment and regulatory framework for micro financing yesterday.
“There is no national policy at the moment,” said Dr Pema Choephyel, a BDFCL agriculture specialist who spoke at the seminar. With a national policy, Dr Pema told Kuensel, rural poverty alleviation would become more effective and faster. “We’ll be able to focus and target groups critically in need of credits,” he said, “It would also steer us in the right direction on how micro financing actually should be instituted according to international standards.”
More than 20 percent of Bhutan’s population live on less than US$ 1 a day, the threshold considered necessary to maintain an adequate standard of living. The government plans to reduce this poverty rate to less than 15 percent by 2013.
With 98 percent of Bhutan’s poor living in the rural sphere, BDFCL as the only major financial institution mandated by the government to alleviate rural poverty, plays a vital role. The financial institution plans to significantly strengthen its limited micro financing capabilities by seeking the adoption of a national micro financing policy.
BDFCL requires a strategy document to make it the apex organization for micro finance in the country, allowing for greater credit penetration and ease the accessibility of credit to the rural population.
“In Bhutan micro finance is very much in its nascent stage and there is a need to develop proper polices and strategies,” said BDFCL managing director, Nawang Gyetse. BDFCL has in the past launched several rural credit products such as the small individual (SIL) and commercial agricultural (CAL) loan schemes, at interest rates of 13 percent. Borrowers can avail loans starting from Nu 30,001, and if performing well, graduating to over Nu 50,001. Another scheme was the group guarantee lending and saving scheme (GGLS), a replica of the Grameen Bank, Bangladesh, technique where individual members guaranteed the other members. GGLS loans start at Nu 7,500, with borrowers able to graduate till Nu 50,000 at an interest rate of 10 percent.
But the development of such BDFCL schemes has been plagued by factors such a high costs of administration, low recovery rates, poor market linkage and entrepreneurship, low literacy, and a low recycling of funds.
To address such limiting factors, “Micro finance needs to operate with its own regulatory framework and modus operandi,” said Dr Pema.
The seminar was organized by the Asia-Pacific Rural and Agricultural Credit Association and hosted by BDFCL.
By Gyalsten K Dorji