Socio-economic circumstances were better among those women who had access to RENEW-microfinance services than those who did not, according to a recent study.

The impact assessment study that a team from iDruk consultancy conducted was presented in Thimphu yesterday.

The study was conducted between July and September this year to learn about the difference in socio-economic status of micro-finance clients and non-clients.

The study was also conducted to understand factors that led to the differences in financial behaviours between members and non-members of RENEW-MFI.

Chief Executive Officer (CEO) of iDruk consultancy, Sonam Phuntsho, said that in places where micro-finance services reached early, household income of the clients was found to be higher but the progression was steady. “In general, the socio-economic situation of women who had access to Microfinance Institute (MFI) services was doing better. It indicated that microfinance had a positive impact over the years.”

About 702 people were interviewed in Samtse, Tsirang, Punakha, Trashiyangtse, and Chukha.

Sonam Phuntsho said that in general, non-clients had higher income, which might explain why they do not avail of the services of the scheme. “In Samtse, however, where the RENEW-MFI services were available since 2012, clients had higher income than non-clients. This means that the impact of microfinance was not immediate. However, over the years, it had positive effect.”

The study stated that the saving behaviour and productive asset ownership were also higher among those who availed of MFI services, he said. “Non-clients had difficulties in conducting regular rituals due to cost and delayed urgent maintenance compared to clients.”

Access to financial services was much better in areas served by RENEW-MFI compared to other places, he said. “Social support is reported better in areas served by RENEW-MFI. This is attributed to the system where the client who needs to avail a loan has to have the risks shared by a minimum of five people.”

Perceived access, actual loan uptake and bank account activity was also found to be higher among clients than non-clients, according to the study.

Sonam Phuntsho said that the microfinance scheme paved the way for rural women. “Through the scheme most women were empowered as they had a sense of ownership.”

While the clients were satisfied with the RENEW-MFI services because of its easy access, the study also revealed that the interest rate was high at about 18-24 percent per annum.

Sonam Phuntsho said that it was mainly due to the cost of last mile service delivery in addition to the country’s geographical nature and bad road connectivity. “The rates were lower than Myanmar, India and Bangladesh.”

He said that the clients wanted the loan ceiling to be increased. “At the moment, the highest loan provided was of about Nu 1,20,000.”

These services were indicative of having equalising effect on income and asset ownership, he said.

Some of the recommendations include the continuity of microfinance services and expansion of services to other eleven dzongkhags.

Chief Executive Officer (CEO) of Savings Banks Foundation for International Cooperation, Niclaus Bergmann said that after the introduction of the RENEW-MFI, a break-even point was achieved within four years. “Regulation is a precondition for sustainability in microfinance.”

He said that there were two main objectives of the MFIs, which include social mission and sustainability.

Deputy governor of Royal Monetary Authority (RMA), Phajo Dorjee, said that in the global context, microfinance was flourishing and had become an anti-poverty tool for international and economic development. “However, there are still gaps. Rising potential entrepreneurs have little or no access to finance.”

He said that compatible national policies, regulations, and government interventions have a central role to play to address the gaps in the developing economies.”

Countries have adopted micro-savings, micro-credit and micro insurance as key services of MFI, he said. “Inclusive finance was also promoted in the country through regulatory intervention and measures such as enabling entry of MFI formally.”

He said that the micro finance penetration per 10,000 adults as of December 2017 was 0.55 percent with 29 branches in total. “Of about four MFIs in the country, RENEW-MFI is the only deposit taking MFI licensed by RMA.”

As of August 21, 2018, there were 15, 542 clients with RENEW-MFI.

Today, RENEW-MFI has reached to about nine dzongkhags covering 40 percent of the country.

Rinchen Zangmo