YK Poudel

Agribusiness development in Bhutan faces significant challenges, primarily due to weak private sector participation, a lack of viable projects, and underdeveloped commodity value chains. These barriers have created a disconnect between agricultural enterprises and financial institutions, hindering effective investment and growth.

The challenges are currently being discussed at the Bhutan Country Investment Roundtable, which includes over 25 representatives from financial institutions, agri-businesses, and international agencies

The meeting, organised by the FAO Regional Office for Asia and the Pacific in collaboration with the Asia-Pacific Rural and Agricultural Credit Association (APRACA), aimed to enhance rural financial services across Bhutan and other Asia-Pacific nations.

Participants engaged in discussions about viable agribusiness plans, identified key challenges, and explored innovative financing solutions with a diverse range of stakeholders.

Sonam Pelgen, a senior planning officer at the Ministry of Agriculture and Livestock, highlighted critical issues, including low financial literacy among farmers, restrictive collateral policies, and high-interest rates.

Sonam Pelgen brought to the fore a concerning 24.5 percent decline in agricultural credit in 2022-23. Key findings from a recent scoping study in Bhutan revealed that insufficient private sector participation and a lack of bankable projects hinder progress.

“There is a need to improve policies that facilitate greater private sector involvement in agribusiness development,” he emphasised.

Agriculture plays a vital role in Bhutan’s economy, employing 43.5 percent of the workforce and contributing 14.57 percent to the GDP. The sector’s contribution increased from Nu 12.117 billion in 2008 to Nu 33.422 billion in 2022.

Despite this growth, financing for rural and agricultural enterprises remains limited due to various factors, including inadequate financial infrastructure and an emerging digital finance landscape.

The investment roundtable aimed to create a platform for stakeholders to address these challenges and identify actionable strategies for improving access to finance.

Participants included representatives from financial institutions, farmer organisations, and agribusiness SMEs, who shared insights on developing viable agribusiness proposals.

Tshering D Dorji, a project officer at the Royal Monetary Authority, emphasised the need for supportive macro-economic conditions. “The macro-economic indicators are not favorable for the agri-business sector to thrive with the existing challenges.”

However, he said, the National Financial Inclusion Strategy 2018-2023 worked to establish an appropriate and affordable financial system.

Tshering D Dorji, emphasised the necessity of supportive macroeconomic conditions. “The macroeconomic indicators are not favorable for the agribusiness sector to thrive given the existing challenges.”

However, he noted that the National Financial Inclusion Strategy 2018-2023 has been working to establish a more appropriate and affordable financial system.

“We need to demystify bankability issues for small and medium-sized rural projects,” he added. “The budget for cottage and small industry, as well as the economic stimulus programme, are among the various supports available for farmers in the business.”

Prasun Kumar Das, secretary general of APRACA, said that the forum aimed to foster dialogue and collaboration among stakeholders to enhance financial inclusion and access to digital technologies in the agricultural sector.

“Key recommendations include enhancing financial literacy, expanding infrastructure and networks, developing innovative financial products and services, and strengthening consumer protection,” he said. “These recommendations will take time to be reviewed and implemented, tailored to the country’s context through consultations and collaborative policies to encourage technological innovation.”

During the meeting, participants discussed the potential for investing in research and development, improving policies for private sector participation, and addressing interest rates for farmers. Proposed forums will also seek investment from private sector partners and international development agencies.

The investment roundtable is part of a broader technical co-operation programme involving Bhutan and four other countries: Bangladesh, Laos, Nepal, and the Solomon Islands.

This initiative aims to enhance rural financial services and foster agribusiness development in the region.

The roundtable provided a platform for discussing these challenges and identifying potential solutions. Participants emphasised the importance of improving financial literacy among farmers, enhancing financial infrastructure, and leveraging digital finance to address existing gaps.

An action-oriented plan has been developed, outlining specific steps, responsibilities, and timelines for implementing the strategic recommendations. The plan highlights the importance of monitoring and evaluation to ensure accountability and track progress.

The Bhutan Country Investment Roundtable is the third consultation meeting for the Technical Cooperation Programme, with additional forums scheduled for later this year.

Following the roundtable, participants will attend a rural finance training session from October 1 to 5, to further enhance their understanding of rural finance challenges and solutions.