The new SOE will still have to wait for the SME banking regulation
Policy: The Business Information and Opportunity Centre (BOiC) is likely to be transformed into the Rural Enterprise Development Corporation, a state enterprise.
However, the former has to hang on for a while because the transition requires a regulation for SME banking, which is obligatory for the SOE to obtain a financial license.
The economic affairs minister Lekey Dorji said while the concept for the new SOE has been formed, the central bank will have to come up with a regulation to implement.
“Rural Enterprise Development Corporation will be the new name of the SOE,” he said.
During the dzongdag conference last week, the Prime Minister also announced that similar to the Better Business Council, a better business committee would be constituted in the dzongkhags. With dzongdags as ex-officio chairpersons, the committee can approve projects worth Nu 5 million (M).
Until the Royal Monetary Authority has a small medium enterprise banking regulation, the Bhutan Development Bank will deal with the financing of projects under the Revolving Fund (RF) I as an interim measure, while the BOiC will continue with the RF II.
The RF-II has a ceiling of Nu 100,000 and is mainly for farmers to help them with small enterprises such as dairy, poultry and piggery, among others. RF-I pertains to manufacturing sector of small and medium scale.
As of March, 235 projects under RF I have been approved, most of them small and medium enterprises worth Nu 426M. Of the total approved projects, 142 have started implementation for which Nu 190M has been disbursed.
In RF II, BOiC has approved 1,839 projects worth Nu 167. Of the total approved projects, 1,019 are under implementation for which Nu 167 M has been disbursed.
On the contrary, the Opposition Party maintains that the public finance Act does not allow government to form an SOE except on the grounds of carrying out social security or in areas of natural monopoly.
The Act also states that for a budgetary government body, unless there is a compelling reason to deliver goods and services in a commercial environment, such activities should be handed over to an existing enterprise.
The opposition is of the view that there are institutions and agencies like the BDBL, the Department of Small and Cottage Industries and other financial institutions that can manage the fund more efficiently and transparently with the help of local governments.
In November last year, the Cabinet decided to close down BOiC to institute a special financial agency as a state enterprise, to continue providing collateral free loans at four percent.
BOiC was established as part of the government’s economic stimulus plan with an injection of Nu 1.9 billion (B).