Eligible borrowers can get loans at low interest rate of 4 percent

Thukten Zangpo

The government is injecting Nu 5.3 billion into the banks under the Economic Stimulus Programme (ESP) to provide collateral free and low interest concessional loans and reinvigoration fund.

This was announced by the ESP secretariat yesterday during the launch of the first phase of the concessional credit line under the ESP.

During the launch, the finance minister and chairperson of ESP, Lekey Dorji, said that the first phase focuses primarily on the concessional credit line while the second aims at developing common infrastructure and business ecosystems to be implemented by the government or state-owned enterprises.

The second phase, covering additional sectors and priority areas, is expected to be announced soon.

There are two-funding windows under the concessional credit-concessional loans and reinvigoration fund.

Lyonpo said that the concessional loans would be for the primary sector in agriculture and livestock ventures, cottage and small industry, medium-scale industries in production and manufacturing.

The reinvigoration fund would be for distressed businesses that have an opportunity to revive by availability in the form of partial and time-bound interest subsidies to revive businesses, he added.

The interest rate for concessional loans would be lower at 4 percent and collateral-free, however, backed by project assets.

Under reinvigoration fund, there are two funding modality – interest subsidy, where the outstanding loan of eligible borrowers will be subsidised at 4 percent per annum for up to three years, and additional loan, where the borrowers are eligible to get additional loans at subsidised interest rate of 4 percent per annum.Suppose, the banks interest rate on a loan is 10 percent, the borrowers will have to pay 6 percent interest rate since 4 percent will be subsidised under this scheme. However, the borrowers would be eligible for either interest subsidy or additional loan schemes and not both.

Lyonpo said that the concessional loan is expected to create new business opportunities and help scale up existing businesses, contributing to the stimulation and revival of the economy.

The reinvigoration fund , Lyonpo said, will make subsidised interest rates available for distressed businesses that have the potential to revive and stimulate economic growth. “We hope businesses will take advantage of this scheme and also take ownership of the initiative wholeheartedly.”

However, Lyonpo cautioned about misusing the support measures and urged the participating financial institutions to take full ownership while assessing the situation. “Failure is not an option. We must make this initiative a great success,” the finance minister said.

He said that extension officials from the Ministry of Agriculture and Livestock will provide technical support in gewogs and dzongkhags to make the fund available to those who genuinely need them to produce and manufacture, and not to import, trade or consume.

Allocation of fund

For the primary agriculture and livestock sector under the concessional loans, the government has allocated Nu 500 million. Eligible borrowers can avail loans up to Nu 1 million at 4 percent interest rate. Loan tenure under the concessional loans will be decided by individual banks.

This sector includes crop cultivation, fishery and aquaculture, poultry farming, piggery, raising of cattle, raising of other animals, mixed farming, agriculture machineries, agri-infrastructures and support, and dairy products.

For cottage and small industry under the production and manufacturing sector (small), except for services, construction, mining in raw form and primary agriculture (as it is covered under agri credits), the government has allocated Nu 500 million.

The government has allocated Nu 300 million for scaling up existing startups, and Nu 200 million for production of films. Loans can be availed up to Nu 10 million for these sectors with loan tenure to be decided by individual banks.

For production and manufacturing (medium-scale) except for services, construction, mining in raw form and agro-based, Nu 1.8 billion has been allocated. Borrowers can avail loans above Nu 10 million and up to Nu 100 million.

The government has allocated Nu 2 billion for the business reinvigoration fund. This scheme would be available to distressed businesses of any scale with potential to revive and stimulate economic growth. However, housing, personal transport, trade and commerce (import-oriented business), personal loans (including credit card, education, term deposits, shares, medical), staff incentive, hotels and tourism sector will not be eligible for this fund.

Under this ESP scheme, the borrowers can avail of loans up to 90 percent of the project cost, based on the project’s value. Additionally, loans can be granted up to 90 percent of the projected cash flow.

Application process

Borrowers will have to submit applications for loans to the participating financial institutions.

The concessional loans or reinvigoration fund would be available from five commercial banks – Bank of Bhutan Limited, Bhutan National Bank Limited, Bhutan Development Bank Limited, Druk PNB and T-bank Limited and three non-banks – Royal Insurance Corporation of Bhutan, Bhutan Insurance Limited, and National Pension and Provident Fund.

Financial institutions are expected to announce the application process and criteria soon. They will also evaluate the loan applications based on the eligibility of the investment areas under the ESP.

The application window for these concessional loans and the reinvigoration would be until December 31 this year.