The issue of private money lending has received some attention recently. We saw the central bank enforcing the Private Money Lending Rules and Regulations from April last year. The Parliament also passed the anti-money laundering bill.
These rules were drafted to regulate private money lending businesses and to bring such activities under the purview of the financial sector.
While these rules may have come in after this unregulated business impacted lives of many a Bhutanese, there is a need to assess how much of an impact these rules have made.
According to the rules, an individual cannot lend more than Nu 90,000 to a borrower without being registered as a private moneylender with the central bank. Almost a year on, the central bank has to date registered only one private moneylender from Chukha.
The central bank also issued a circular to the judiciary to not entertain private money lending case if the party or lender is not registered with RMA. The court could, however, accept it if the case was before April 2017.
But monetary disputes continue to top civil cases in the courts. In 2017, there were 2,936 monetary cases, the highest among 4,897 civil cases registered. Court officials say that now, parities may be backdating their transaction to file a case in the court.
While monetary cases may be an indication, it would also be wrong to assume that a decline in such cases, if any, and now, is a result of these new rules. Not registering a case in court does not mean no such transactions are occurring.
The intent to curb the socioeconomic ills of private money lending may be noble. But if monitoring is weak, implementing the rules will remain a challenge. That a lone private moneylender has registered with the central bank in a year’s time shows how weak compliance has been. This could also be an indication that such transactions are now occurring in new forms and may have gone more private.
Most of these monetary disputes are a result of gambling. We have not yet understood to what extent these rules have helped in curbing gambling and abusive money lending. We claim to be a fairly open society, but cases and discourses on monetary disputes rarely touch on the issue of gambling.
As long as we avoid discussing these issues openly, problems with private money lending will persist.
Authorities concerned must create awareness and inform people of these rules and on the consequences of lending and borrowing. Our bureaucrats often talk on the need for policies and rules and how the lack of these hinders their work. We disagree. Our problem is not the lack of rules and policies but the lack of implementation. Ask on poor implementation and they say that there is no budget.
It is time we implemented the rules we put in place without excuses.