Dorji Choden

The Ministry of Finance, in collaboration with the Royal Monetary Authority (RMA) and the Financial Institutions Association of Bhutan (FIAB), launched the Bill Discounting Facility yesterday.

This initiative is designed to address the persistent cash flow challenges faced by contractors and businesses, particularly those engaged in government projects.

Bill discounting is a financial product that aims to improve liquidity in the construction sector by providing timely access to funds and ensuring smooth business operations by addressing cash flow gaps by converting receivables into immediate cash.

“For too long, businesses, especially government contractors, have struggled with delayed payments and cash flow problems. These issues have slowed innovation, delayed projects, and hindered growth” said FIAB President Dorji Kadin during the launch. “Bill discounting offers a solution by turning receivables into instant cash, allowing businesses to run smoothly without financial stress.”

He added that bill discounting is a globally recognised financial tool that fosters business growth, encourages competitiveness, and drives economic dynamism by promoting innovation and expansion.

The facility involves three key stakeholders: contracting firms, financial institutions, and procuring government agencies. When a government agency certifies that it cannot release payment to a contractor within the agreed timeline, it issues a bill payable. Contractors can discount this bill with a financial institution to secure immediate funding.

The initiative offers several benefits, including ensuring steady cash flow, reducing reliance on high-cost loans, and minimising the risks associated with payment delays. It will also help contractors complete projects on time and maintain stable operations.

Tashi Wangyel, the president of the Construction Association of Bhutan said the facility will help contractors meet financial obligations and alleviate the stress caused by cash flow disruptions.

“We are grateful to the Ministry of Finance and financial institutions for this forward-thinking measure. We look forward to its extension to running account (RA) bills and other sectors soon,” he said.

The pilot phase is limited to final bills for completed works, but stakeholders are hopeful for its extension to RA bills and other sectors in the near future. 

Currently, the facility is limited to final bills for completed works as part of a pilot phase.

However, stakeholders are optimistic about its expansion to RA bills and additional sectors in the future.

As of now, the facility is only offered to government contractors to ensure smooth rollout and gain valuable insights for future expansion.