The Bhutan Development Bank Limited (BDBL) has temporarily suspended Micro and Small Enterprise (MSE) loan scheme for seven dzongkhags because of high Non-Performing Loans (NPL).
The dzongkhags include Bumthang, Thimphu, Paro, Punakha, Trongsa and in the areas of Gelephu and Mongar town. The highest NPL is in Bumthang.
The bank has stopped giving loan from 2016 owing to a high number of NPL. A loan is classified as non-performing when the borrower fails to pay the interest or the principal amount.
Bhutan Chamber of Commerce and Industry (BCCI) had initiated the MSE loan scheme realizing that the major constraint detrimental to the growth of micro enterprise was lack of access to finance for MSMEs by signing a MoU with BDBL.
During the 32rd Annual General Meeting of BCCI yesterday, the dzongkhag business representatives raised issues on business communities facing challenges from the suspension of the loan.
Representatives requested the chamber that if the bank could immediately disburse the loan or at least timely advice on the unavailability or suspension of loans under such scheme. They also requested to revisit the terms and conditions under the revised MoU between BCCI and BDBL.
As per the revised MoU, the amount of loan ceiling was increased from Nu 150,000 to Nu 300,000 and interest rate decreased from 12% to 11%.
According to the officials of BCCI, loans in these dzongkhags were temporarily suspended because of the high percentage of Portfolio At Risk (PAR NPL). The NPL should be maintained below 8%.
Bumthang dzongkhag representative Phurba said just because of one or two gewogs not maintaining and crossing 8% of NPL the other gewogs were also not given loans.
“Some of the genuine business people who require the loan, their businesses are affected,” said Phurba.
He requested that if BDBL could disburse loans to those people who do not have bad loans.
Similarly, Mongar dzongkhag representative Touchung said that in Mongar there is high percentage of NPL just because in the past years the wives of civil servants had asked for loans for small businesses.
“When their husband got transferred, they left their businesses and they did not pay the loan back. When we tried to contact them their mobile numbers were switched off,” he added.
“Just because of this the business communities and Mongar town residents are not getting the loan,” he said.
He added that now they will work together with bank officials to repay the loan on time and encourage the business communities to pay loan on time.
Chukha dzongkhag representative Lobzang Tshering said if the ceiling of the loan could be increased to Nu 500,000.
However, the Chief Executive Officer of BDBL, Phub Dorji said the bank suspended loan to a few dzongkhags because to maintain the NPL of 8.5%.
The CEO said that it was already signed in the MoU with BCCI to maintain NPL below 8.5%.
“We have to comply with the MoU,” said the CEO.
The vice president of BCCI, Tandin Wangchuk, said that they will look into the matter.
However, he said that to maintain the NPL below 8%, the representatives have to work together with bank officials and encourage the people to pay the loan on time.
The representative of Wangduephodrang, Tharpa Lhamo, said Wangduephodrang is the best performing dzongkhag in terms of NPL. The bank has been giving loan to people.
She said that she encourages the people to pay the loan on time and sometimes she goes herself to collect the loan from the people.
As of July this year, there are 706 borrowers of MSE loans and the total amount disbursed was Nu 169mn.
The number of loan defaulter totes up to 185 clients with a total overdue amount of Nu 21mn.
Dechen Dolkar from Thimphu