…until RMA gets the SME bank regulation
Business: The Business Opportunity and Information Centre (BOiC) will have to wait a little longer before it becomes a state owned enterprise as decided by the Cabinet last year.
“RMA does not have a regulation for SME banking, so only upon the completion of the regulation can we apply for a license for BOiC,” Prime Minister Tshering Tobgay said at the Meet the Press, yesterday.
Until the Royal Monetary Authority has a SME banking regulation, the Bhutan Development Bank will deal with the financing of projects under the Revolving Fund (RF) I as an interim measure, while the BOiC will continue with the RF II economic affairs minister Lekey Dorji said.
The BOiC will continue as a state owned enterprise handing out more loans under the revolving fund II. The fund has a ceiling of Nu 100,000 and is mainly for farmers to help them with small enterprises such as dairy, poultry and piggery, among others.
“BDBL has been providing the loans for the projects until now and BOiC’s duty was to scrutinise and approve applications, and monitor progress in the field,” lyonchoen said.
Lyonchoen pointed out that BOiC has been successful. He said that the agency approved 2,074 projects worth Nu 593 million, of which Nu 357 has been disbursed for 1,161 projects within the 18 months of its establishment.
As of March, 235 projects under RF I have been approved, most of them small and medium enterprises worth Nu 426 million. Of the total approved projects, 142 have started implementation for which Nu 190 million has been disbursed.
The revolving fund II is given to farmers for agriculture and livestock projects. The agency has approved 1,839 projects worth Nu 167 million under RF II, which has a total budget of Nu 400 million. Of the total approved projects, 1,019 are under implementation for which Nu 167 million has been disbursed.
Around 1,000 projects are being processed.
“There seems to be a misunderstanding that BOiC is not delivering the goods,” Lyonchoen said.
He added that the funds and opportunity that BOiC has provided has never been available to the public so far.
Being a new organisation, BOiC took time to review projects because they had to establish standard operating procedures and other regulations, he pointed out.
The dishonesty of many applicants who applied for loans delayed the review of projects and the BOiC’s progress, Lyonchoen said.
“They (applicants) had no intention to use the money for the stated reason,” he said.
The prime minister cited examples of farmers availing the four percent interest loan and not buying the cows they had applied the loan for.
“So six months into the formation of BOiC the agriculture ministry ended up tagging every cow that was bought and sold,” Lyonchoen said. “Can you imagine? We had to go to that level.”
Applicants also sought loans for on-going projects while the loans were only for new projects.
“Because it is a four percent loan and collateral, everybody wanted to apply for it,” he said. He added such things would be wrong and would be robbing other Bhutanese of their opportunity.
He said people resorted to such practise because they wanted to avail the loan to pay their other loans.
BOiC officials, lyonchoen said, lost much time in having to thoroughly investigate the proposals.
However, even if BOiC becomes an SOE it faces acute staff shortage as only a handful remain.
There are farmers grateful for the loans under the RF II and there are small micro enterprises mushrooming across the country established under the RF I, Lyonchoen said.
“But most important it is going to foster a spirit of entrepreneurship in the country,” he added.
“BOiC is not being used for political gain,” he said. “I will not allow a resource that is so important for the country’s development to be misused for the benefit of one and two.”
BOiC was established as part of the government’s economic stimulus plan.
The RF I has a budget of Nu 1.5 billion and a revolving fund II of Nu 400 million.
“We’ve lots of small projects that will have a lot of positive impact, so these would be carried on by BOiC,” Lyonpo Lekey Dorji said.