Staff Reporter 

A private money lender who lends without a license will be considered an offence and punished under section the Financial Services Act of 2011, according to the new Standard operating procedure.  

The SoP for Adjudication of Private Money Lending Cases 2022 states that courts hereafter would accept all monetary cases irrespective of the amount and the date of lending.

The Financial Services Act of Bhutan 2011 requires any person who provides financial services (lending) for business purposes to obtain a license from the authority concerned, and have charged interest in lending. 

Any private lender without a license who has charged interest higher than what is prescribed under section 17(1) 3 of the Movable and Immovable Property Act of the Kingdom of Bhutan 1999, shall be punished as per sections 3984 and 3995 of Usury law under the Penal Code of Bhutan, 2004. 




Those found guilty of these offences will be liable for consecutive sentencing and both the borrower and lender will be held liable.

However, lending for non-business purposes is allowed as long as such lending does not involve reciprocity in the form of interest leading to lending businesses.

The offences would be graded accordingly by the respective courts with the gravity of the offence. 




Financial services for non-business purpose is interpreted as lending which does not involve charging interest for profit-making. “However, in the civil case proceeding, if it has come to the knowledge of the court and subsequently be proven that interest has been clubbed with the principal amount in the agreement, such cases shall be treated as lending for business purpose,” the SOP stated.  

Some borrowers and their relatives who have been affected by practice welcomed the change in the judiciary’s perspective of illegal money lenders.  

“This SOP has caused some uneasiness within the illegal money lending market. But I’m still hearing of people willing to conduct transactions based on fraudulent cheques and sales deeds,” a relative of a borrower said. 




They called for its strict implementation. “Illegal money lenders must realise that they too will be held accountable as per the prevailing laws of the land. 

They said that they are hopeful that this SOP would discourage money lenders from misusing the police and the courts as part of their illegal business, and perhaps even opt for a legal source of income or investment.  

“The SOP is a step in the right direction and a victory for rule of law,” said another. “It finally evens the scales of justice for private money lending cases. However, whether it succeeds in convincing local loan sharks to become legal money lenders remains to be seen.” 




He said that there was a need for legislation to regulate this market. Parliament should consider a money lending Act that addresses the requirements of both sides to minimise the negative socio-economic effects of this business. 

“We don’t have concrete information on how this black market harms our communities and affects the financial system. But based on my own and others’ experiences, I believe the damage to be significant enough to not ignore,” he said.