MB Subba

Four months after the national credit guarantee scheme (NCGS) was launched on October 5 last year, 24 business proposals worth Nu 65.69 million (M) have been approved under the scheme.

Director of NCGS, Sonam Penjor, said the applications had to be put under a thorough scrutiny given the high risks arising from the collateral-free nature of the loans. “The number of approved applicants may look small but we consider it a good result achieved during the given period.”

He said the approved loans would be disbursed within a week. “We will monitor the implementation of the projects so that the money is used for the intended purpose and provide them support should they encounter any problem.”

The business proposals were selected from a total of 140 applications. The NCGS received a total of about 5,000 queries.

Nine projects are under the agriculture sector, while eight are under the production and manufacturing sector, and seven are under the service sector.

Sonam Penjor said that a majority of the applicants are new and aspiring entrepreneurs, as 22 of the approved projects are small while two are medium.

He said the NCGS has been helpful for those who had business ideas but did not have the capital. “People would otherwise need collateral to get loans. The demand for credit was high.”

Applications approved under the agriculture sector include dairy farms, integrated farming enterprise, poultry farms and vegetable farming enterprise. Manufacturing of books, construction bricks and production of edible oil have been approved under the manufacturing and production sector.

The NCGS has also approved an e-based postal courier service, construction related service provider/labour recruitment agency, and construction of a lodge for domestic tourists.

The NCGS aims to overcome one of the major impediments in availing credit facilities from financial institutions by providing collateral-free loans for investments in the cottage and small category. 

Three state-owned banks, Bhutan Development Bank Limited (BDBL), Bank of Bhutan Limited (BoBL) and National CSI Development Bank Limited (NCSIDBL), will give the money.

The approved projects are spread in nine dzongkhags. Nine projects are located in Thimphu, three each in Punakha, Paro and Dagana, two in Sarpang and one each in Bumthang, Samdrupjongkhar, Tsirang, and Zhemgang. 

The interest rates for cottage and small industries (CSI) have been fixed at 7 percent during the gestation period and 8 percent after commercial operation of the business project.

As per the criteria for applying for the NCGS loans, businesses that concern crop cultivation, agro-processing, livestock farming and forestry can apply for NCGS loans. Import-based retail and whole businesses, however, do not qualify.

Business proposals for production of renewable energy, handicrafts and textiles, wood-based products, traditional and herbal medicines, and manufacturing enterprises also qualify for loans under the scheme.

Under the service sector, ICT, hospitality, entertainment and recreational services, health services, construction and cold storage and cold transportation services have been identified as eligible for loans.