Not to generalise, but when it comes to money it is said that most Bhutanese are not good managers. We spend more than what we earn and often resort to unnecessary borrowings.

At the slightest opportunity, whether it is agriculture, business or even a staff welfare loan, everybody borrows. When the borrowed money is not put for a gainful purpose, default is bound to happen. Add to this the steep lending rates from our banks. There is trouble.

The problem is seen in the long auction notices banks publish. The most common item up for auction is land: wetland, dry land, orchard or small parcels of land with a house on it. And it is mostly out of the urban areas where land has no value or banks devalue them to ensure safety of their money or maximum returns.

From the auction list, the borrowers are rural people who, for instance, need to fence their agriculture land because of predation from wild animals, a jersey cow for some additional income, or to re-roof their house. In many cases, the borrowed money cannot generate enough to repay, especially when the interest rate is high.

We have lessons to learn from past initiatives. The Bhutan Development Bank was established to help farmer access to cheaper loans. The bank is today trying hard to auction off mortgaged property, most of it land.

The repercussion is not only a farmer losing his inherited land. It leads to rural-urban migration, decrease in agriculture land and banks not being able to auction off the property and recoup their money.

In this light, the establishment of a Cottage and Small Scale Industry Bank comes as a respite to rural communities.  The rates are not revealed or worked out as of now, but the promise of access to low-interest loans come as a respite to rural communities.

In some parts of the country, farmers are food self-sufficient. But cash comes by hard unless you have a son or a daughter with a salaried job. The extra basket of vegetable or a bag of rice cannot be turned into cash when there is no market or it is too far. It can become tricky.

 We will soon know the details of lending formalities from CSI bank, but what we know is that small loans without requiring collateral could transform rural communities and even help reduce poverty and ensure financial independence.

Such incentives to the poor and the underprivileged would be different from commercial banks whose only motive is profit. The beneficiaries will not feel that our institutions are lending them an umbrella when the weather is good and taking it back when it turns bad.