Introduction and Deliberation on the Review of Rural Credit Access in Bhutan
During
the Seventh Sitting, the Economic Affairs Committee (EAC) presented its review
report on Rural Credit Access in Bhutan. The committee recognized the need for
this review following His Majesty the King’s address at the 109th National Day
celebration in Trongsa, which emphasized the urgent need to enhance rural
credit access to promote entrepreneurship and agricultural development.
The Chairperson of the EAC, Hon'ble Tshewang Rinchen, outlined the report, covering its background, objectives, governing regulations, key rural lending institutions, and sectoral credit allocation. The report revealed that, despite the agriculture sector employing 44.08% of the labor force, it receives less than 5% of the total credit portfolio. The committee identified Bhutan Development Bank Limited (BDBL) as the primary institutional source of rural credit in Bhutan.
He also highlighted several constraints faced by lending institutions, such as difficulties in assessing borrowers' creditworthiness and exposure to agricultural credit risks, which are exacerbated by inadequate insurance coverage. Borrowers face challenges including high-interest rates, limited financial literacy, and cumbersome documentation processes. Notably, collateral requirements and valuation challenges were identified as key deterrents.
To address these issues, the EAC proposed 11 recommendations, including revising loan ceilings, streamlining documentations, and improving market access for rural communities. The committee also emphasized the importance of diversifying economic activities and enhancing financial education to empower rural residents.
Following the presentation, Members sought clarifications on the report and provided valuable feedbacks. The House assigned the committee to revisit the report, incorporating the additional feedbacks proposed by the Hon'ble Members.
The House will continue deliberating on the recommendations proposed by the Economic Affairs Committee regarding the review of rural credit access in Bhutan on November 27, 2024.
Tomorrow, the House will deliberate on the National Assembly (Amendment) Bill of Bhutan 2024.
