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Youth planning for overseas education and skills development schemes can now avail loans up to Nu 1.5 million from the financial institutions with a gestation period of six months.

This scheme has been identified as one of the priority lending policy schemes the Central Bank is formulating.

Further, the revised Fiscal Incentives 2016 also grants a waiver of taxes on interest income earned by the financial institutions through preferential lending. In this case an interest of up to eight percent per annum would result in a tax waiver.

Another eye-catching aspect of the loan scheme is that the Royal Monetary Authority (RMA) and financial institutions will waive off the collateral requirement and instead “a letter of acceptance from the university/colleges/vocational institutions duly attested by the labour ministry willl be used as a condition for loans under this scheme.

However, the labour ministry must set the criteria of eligibility and select youth either directly or through agents. Should agents be involved, be it local or foreign, a memorandum of understanding has to be signed between the agents and the ministry articulating and defining their roles.

Another memorandum of understanding has to be also signed between the labour ministry and the participating financial institutions detailing the terms and conditions of the loans being extended under this scheme.

Among others, some salient features of the Overseas Education and Skill Development Scheme (OESDS) is that the tenor of the loan is for five years, excluding the gestation period.

The RMA’s prudential regulations prescribing a minimum ratio on loan to value and loan to income is also waived off for the purpose of preferential lending.

A committee with members from the finance ministry, labour ministry, the RMA and the financial institutions shall be established to evaluate the impact and status of the scheme. The committee shall meet at least once in six months or more frequently if deemed necessary and submit the report to the RMA and finance ministry.

Youth availing this loan will be insured for death and natural disability. But the repayments have to be made through REMIT Bhutan for which the applicants are required to open a REMIT Bhutan account. The labour ministry is responsible for monitoring the repayment made through the REMIT Bhutan account.

“The main objective of the scheme is for Bhutanese Youth to access higher education or develop proficiencies/skills abroad to improve their employment opportunities or business positions upon return,” a press release from the RMA states.

The RMA governor, Dasho Penjore, during the launch cautioned that the labour ministry should be mindful of the repercussions should the screening process go wrong. “We don’t want to send youth who are vulnerable and could create more problems,” he said. At the same time, he said the financial institutions could land up in serious problems if the youth are sent to the wrong places.

In the meantime, Dasho Penjore also acknowledged that the Central Bank has requested the financial institutions to consider this as “a new product and new flavour,” to promote financial inclusion. He is also optimistic that this initiative will address the youth unemployment problem.

The labour minister, Ngeema Sangay Tsempo said that the government has been able to bring down the unemployment rate from 2.9 percent in 2013 to 2.5 percent in 2015. However, he said that youth unemployment is a concern and hopefully this initiative will make the OESDS sustainable as the government has been fully funding the programme thus far.

The finance minister, Namgay Dorji, also said that this is the first time that financial institutions are actively participating in the process of social development.

To materialise the scheme, the labour secretary, finance secretary and the governor of the RMA has signed the necessary documents.

Tshering Dorji

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