This move aims to streamline loan disbursement, reduce technical requirements, and shorten turnaround time, accelerating the economic recovery

Thukten Zangpo 

Finance Minister Lekey Dorji announced that the Nu 3.3 billion concessional credit line under the Economic Stimulus Programme (ESP) will now be managed by the Bhutan Development Bank Limited (BDBL). 

The decision, which aims to address operational inefficiencies and improve loan processing times, was made following a recent meeting between the Cabinet and the management team of BDBL.

“This decision will resolve most of the ongoing issues, including eliminating the need for technical clearance and reducing turnaround time,” said Lyonpo Lekey Dorji.

BDBL will now exclusively handle Window-I of the ESP, which offers concessional credit, while other participating financial institutions will manage the Nu 2 billion reinvigoration fund. 

Launched in May 2023, the Nu 15 billion ESP is a key initiative designed to stimulate Bhutan’s post-pandemic economic recovery, with a primary focus on supporting businesses affected by COVID-19. The ESP was officially implemented from September this year.

The ESP operates through two main windows: Window-I offers collateral-free concessional loans at 4 percent interest rate, while Window-II, the reinvigoration fund, provides 4 percent interest subsidy on both new and existing loans for businesses affected by the pandemic.

Under the Window-I scheme, the government had allocated Nu 500 million for cottage and small industry, Nu 300 million for scaling up existing startups, Nu 200 million for production and films, and Nu 1.8 billion for production and manufacturing.

During the recent NA session, the EFC chairperson and Bartsham-Shongphu MP, Rinchen Wangdi, outlined several recommendations aimed at improving the effectiveness of the ESP. 

These recommendations include resolving issues related to access to concessional credit, sectoral exclusion, and operational inefficiencies within the programme.

One of the major recommendations from the EFC was to expedite the disbursement of the remaining Nu 10 billion of the ESP budget. So far, only Nu 5 billion (33.33 percent) of the total funds allocated under the ESP have been disbursed. 

MP Rinchen Wangdi urged the government to accelerate the disbursement process, stating that the ESP is designed to address urgent economic needs and should not follow the slower, tranche-based release model used for regular development plans.

“Unlike other budgeted development plans, the ESP requires swift execution to bridge the economic gap caused by the pandemic and stimulate recovery effectively,” he said. 

The Committee observed that some funds had been allocated to recurrent expenditures like capacity building, rather than high-return projects that would better support the country’s recovery.

The chairperson also pointed out the requirement for collateral for loans below Nu 1 million, and cooling period of three months, among others, as major hurdles.

MP Rinchen Wangdi said  that participating banks have been hesitant to offer concessional credit due to perceived high risks. He proposed introducing subordinate debt and other risk-sharing mechanisms to mitigate these concerns. 

The EFC also recommended the inclusion of key sectors such as hospitality, export, and mining in the ESP’s support framework, as these industries were crucial to the nation’s economic recovery. 

The EFC also identified inconsistencies in the guidelines used by the participating banks. The Committee recommended the establishment of uniform procedural guidelines and fixed loan processing timelines to improve the accessibility and efficiency of the loan application process. 

In addition, the Committee called for a simplification of the application process to reduce the excessive documentation requirements and long processing times, which have hindered the effectiveness of the programme. 

To address non-performing loans (NPLs) issues and insolvency risks, the EFC recommended the government to expedite the proposal for a new Insolvency Bill. The Committee stressed the need for legislative action to manage these issues more effectively.

Lyonpo Lekey Dorji said that the finance ministry is working closely with the ESP steering committee, which comprises minister of industry, commerce, and employment, the minister of agriculture and livestock, the deputy governor of the Royal Monetary Authority (RMA), and director of Office of Cabinet Affairs and Strategic Coordination. 

A technical committee, comprising economists, bankers, and officials from RMA and Druk Holding and Investments, also oversee the ESP implementation.

Lyonpo said that loan disbursements under ESP are coordinated through the commercial and non-commercial financial institutions to avoid government favouritism. 

The ESP is designed to span two to two and half years. The government has already received Nu 5 billion from the Indian government. The government plans to request additional Nu 5 billion soon.

Regarding the Insolvency Act, Lyonpo said that the Ministry of Industry, Commerce and Employment is currently working on the bill. 

As of November 14, the seven participating financial institutions approved a total of 158 loans out of 1,249 concessional loan applications under Window I, amounting to Nu 96.65 million. The BDBL approved the highest—142 loans worth Nu 66.69 million. 

Agriculture and livestock sectors saw the highest volume of applications, with 1,047 in total, but only 126 loans, totaling Nu 60.94 million, were approved. In contrast, the production and manufacturing sectors received 202 applications, with only 32 loans approved, amounting to Nu 35.71 million.

Under Window II, 13 applications were approved, totaling Nu 87.73 million.