27 out of 55 taxi drivers had defaulted loan repayment
Defaulting loans, borrowed to buy electric vehicles (EV), has become a hurdle for the government’s project to replace 300 taxis with EVs.
The project, Bhutan Sustainable Low Emission Transportation System, provides a 20 percent subsidy on the cost of EV with a maximum ceiling of USD 5,500 or Nu 412,500 at current exchange rate, and a 70 percent loan facility. The Bank of Bhutan (BoB) has signed a memorandum of understanding (MoU) with the government to provide 70 percent loan without collateral for the project.
However, as of last month, 27 taxi drivers who availed loans from the BoB have defaulted loan repayment. The BoB has disbursed about Nu 92 million in loans to 55 taxi drivers for the project. There are 63 EV taxis on the road today.
The pandemic and the repeated lockdowns has hampered business and loan repayment, according to taxi drivers. A taxi driver in Thimphu has not been able to pay the monthly installment of Nu 29,700 for the last two months. He said that he had been struggling to meet his expenses during the lockdown.
He bought the EV for Nu 2,615,000. He borrowed Nu 1,835,000 from BoB which he has to pay within seven years. He said that he paid the installment for the first two months from his savings and will not be able to pay for the next two months. “I need at least two more months to recover from the losses incurred during the lockdown,” he said.
Dawa Tshering, a laid off employee from the tourism sector bought an EV for Nu 2,450,000 in February and has to pay a monthly installment of Nu 28,400 to the bank. Dawa Tshering, however, claimed that the lockdown started the day after he bought his taxi. “I hope the bank considers to freeze the interest rate. We are hopeful that we can make some income and repay after the lockdown.”
The Chief Credit Officer with the BoB, Tashi Tenzin, said that considering the situation, the bank was not pressurising taxi drivers to repay the loan. “Taxi drivers borrowed money knowing there is a pandemic and it is their moral responsibility to pay the minimal 5 percent penalty on monthly overdues,” he said.
He said that the government would have to bear the loss if they deferred their loan payment or waive off the interest. The credit officer said that the highest non-performing loan (NPL) with the bank is already in the transportation sector.
The bank is targeting to maintain its NPL below five percent.
Records with BoB show that the NPL is 3.34 percent. Total loan disbursed for various sectors such as agriculture, housing and trade is Nu 52.92 billion (B) out of which 1.755B is NPL. Sector wise, the highest NPL is with the transportation sector at 29 percent or Nu 521M.
Tashi Tenzin said that to address NPL in the transportation sector, the bank mandates clients to mortgage collateral property so that they could recover losses if clients failed to repay the loan. The bank however did away with mortgaging property when availing loans for the EV project. They signed a MoU with the government to do away with the mortgage condition and introduced a co-guarantor scheme so that they could track the vehicle if taxi drivers failed to pay.
Project Manager with EV project, Sonam Tobgye, said that there were four loan defaulters before the lockdown out of which three had been resolved. “ One EV taxi driver died and two EV taxis met with accidents and couldn’t repay the loan.”
He said that the project supported and facilitated them to get back in business and they were able to pay the loan. “The project is trying its best to support taxi drivers who bought EVs.”
Sonam Tobgye said that EV taxi drivers claimed that they earned an average income of Nu 100,000 in a month and they assured they could pay the loan when business returns to normal.
He said that he was hopeful the government would come up with measures to support commercial vehicles which had been out of business during the lockdown. “The project is going to consult with taxi drivers and submit a proposal to the government on support measures.”