Phub Dem | Paro

The National Cottage and Small Industry Bank (NCSI) is overwhelmed with hundreds of applications.

Eight months on and the customers are frustrated with long processes, delay in disbursing the loan, and many are losing hope.

Acknowledging the issues raised by the clients, Chief Executive Officer of the NCSI bank, Kinzang, said that the bank was overwhelmed with an average of 80 applications from around the country every day.

He added that the reduction of interest rate to 2 percent and approving loans to vegetable vendors invited many applications.

“All banking officers are new to the CSI sector, and they had to start from scratch,” Kinzang said.

Since its establishment, the bank received 4,041 project proposals but has approved only 2,087 projects based on priority lending.

As of yesterday, the bank had disbursed project worth Nu637 million (M)

Sangay, visited the bank several times to check what was delaying her loan disbursement. She decided to cancel the loan, which took her around five months to process but could not because she had to buy a potato chips machine.

She said that it was convenient and more accessible to borrow money from private lenders than the bank, although the interest rate was much higher with the former. “If we calculate the taxi fare, several times I visit the bank and everything, there are no differences.”

The bank, finally, approved her loan a month ago. But she is still waiting for the money to be credited in her account.

A former member of parliament from Trongsa, Tharchen, highlighted the same issue. 

He took to Facebook about the hassle in availing the loan for commercial farm.

He said that the loan was applied for land development to revive barren land in Lingdi, Trongsa in April and the bank approved the loan in September but a week ago he was told that there was no fund for disbursement. “They disburse the loan when it is harvest time. Such delay in sanctioning loans to youths taking up seasonal agriculture projects who rely wholly on loans has a huge impact.”

He also said that bank should focus on capacity building, as the new project appraisal officers were not confident to take risks.

Kezang clarified that there was no shortage of funds but due to some glitches in fund transfer between agencies, it took some time for the disbursement.

Delay in CSI loan, which is above Nu 500,000, is associated with requirements of various clearances according to Kinzang. “Loans above Nu 2M have to be approved by a board committee.”

Other reasons impeding easy access to finance, he said, was due to the new set of a team who were learning, lack of banking software, and issues with the checklist.

The NCSI bank has to look after two different checklists from the two regulators—government and Royal Monetary Authority.

Having to depend 100 per cent on the government for the funds with no repayments and interest waivers due to the pandemic, he said that it was challenging to speed up the process.

The significant challenge facing the bank is the monitoring of the projects approved by the banks.

There were incidents where people applied for loans to set up poultry farms but bought bolero instead. And some sources were of the view that people invested CSI loans into real estate business.

While the bank releases the funds phase-wise, Kinzang said with a limited workforce, monitoring was a challenge.

The bank was upgraded from Rural Enterprise Development Corporation Limited (a micro-financing institution) to a fully-fledged, non-deposit taking CSI bank in February this year.

It was established in keeping with the government’s priority to diversify economic activities through financial inclusion and improving access to financing to the rural agriculture and CSI sector.


Way forward

In an attempt to address the issues, the bank is developing a core banking system, improving their websites and standardising the checklist.

Furthermore, Kinzang said that the bank would open three regional offices with experienced managers, as the application from all dzongkhags came to the headquarters for approval.

He said that there was a need to study the creditworthiness and viability of projects even if it fell in the priority lending.

For instance, there are already many dairy farms and potato chips businesses, but people follow the suite and concentrate on the limited market.

“We have to stress on market viability, and focus on projects with import substitution, innovative ideas that address unemployment,” Kinzang said.