Thirty-three-year-old Pema has been running a hotel since 2017 Trongsa. A single mother of three children, she got married at the age of 17 and stayed in Thimphu with her husband and two children from him for eight years. When she got divorced, she returned to her village Langthel and married a second time. The relationship lasted only a couple of months. She got pregnant and divorced again.
Pema would have had a difficult time sustaining herself and her family through this ordeal had it not been for Respect, Educate, Nurture, and Empower Women’s (RENEW) microfinance services. RENEW officials visited her village in 2012 offering to support rural women entrepreneurs.
She grabbed the opportunity. “At our village, we don’t have enough land to cultivate so I decided to start a small business.”
She took a beginner-phase loan of Nu 25,000 from RNEW micro-finance to set up a grocery shop at Langthel. Since then, there has been no looking back for her. “I used to save a sum of Nu 150 daily for the loan repayment,” she said.
She repaid the loan in six months and again she availed the second phase of the loan to upgrade her shop.
Pema has availed loan from RNEW microfinance seven times so far. In 2017, Pema shifted to Trongsa and she upgraded her shop to a hotel. Now she is saving money to educate her children. “Now I am living independently with my children and I do not want to get married again,” said Pema.
So far, the Royal Monetary Authority (RMA) has approved five microfinance institutions (MFIs) in the country. They are RNEW, Bhutan Association of Women Entrepreneurs (BAOWE), Tarayana Foundation, Bhutan Care Credit, and Rural Enterprise Development Corporation Limited (REDCL).
The central bank initiated microfinance in 2014 and also outlined the rules and regulations of deposit-taking micro-finance institutions and regulations on microloans institutions.
Most women in the rural communities do not have access to financial services but this initiative by RMA has been a turning point for many.
RNEW’s micro-finance project was initiated in 2012. As of November 2018, RNEW microfinance had more than 15,500 clients in nine different dzongkhags and around 2,200 borrowers who have been lent around Nu 79mn. The dzongkhags include Samtse, Trashigang, Dagana, Trongsa, Bumthang, Punakha, Thimphu, Wangduephodrang and Tsirang.
RENEW’s micro-finance project strives to improve the living status of women and their families, especially those living under extreme circumstances. Assistance is extended to vulnerable women to help them become economically sustainable and independent.
Chief Operating Officer of RNEW Microfinance Private Limited, Tshering Dema said like any other bank, clients have to open an account with RNEW to avail the loan but the loan is collateral free. Since it is an unsecure loan, to mitigate risks of defaulting, the members need to form a group of a minimum of five members.
The field officers of RNEW go to each village every single day, so a lot of cost is involved. They have designated spots where people can avail loans and deposit the money. If one member needs to avail a loan, four members need to sign as guarantors.
Tshering Dema said that most of their clients are women including housewives. “We don’t want any kind of complication arising between the couple and family, so husband or family are also involved as external guarantor because most of the loans are for households,” she said.
Clients who avail microfinance services should be aged 18 to 60. They need to save money in their savings account for at least four months before they avail the first loan. This is to minimize risks and know the clients better.
The clients can save a minimum of Nu 100 and maximum of Nu 3000 and by the time they avail the loan they must have 10% of the loan amount in the voluntary account.
The maximum loan ceiling is Nu 120,000 while minimum is Nu 5,000. The repayment duration is 12 months for loans ranging from Nu 5,000 to Nu 80,000 while it is 18 months for Nu 100,000 to Nu 120,000.
The minimum interest rate for loan is 18% per annum and maximum is 24%.
Most of the loans are for business purposes, agriculture loan, multipurpose loans and emergency loans. “Most of the loans are business loans because we want our clients to generate income,” said Tshering Dema.
RNEW micro-finance also gives loan to single fathers who comprise around 15 male clients.
It is mandated by the central bank that 80% of the microfinance services should cover rural areas and 20% the urban areas.
So far, RENEW’s saving amount has reached to Nu 100mn.
Similarly, Khandu Sherpa, 50, from Patshaling Gewog in Tsirang has availed a loan from RNEW micro-finance to grow and sell vegetables. The mother of five availed a loan of Nu 40,000 and bought seeds and cultivated the vegetables.
She sells her produce at Tsirang, Gelephu and sometimes in Thimphu. She availed loan thrice and has repaid her loans.
She said though the interest rates are higher than the other banks it is more convenient for them because RNEW officials come to their door steps to collect the loans whereas at other banks, it takes two to three months to disburse the loan and land and building are required as mortgage.
Similarly, BAOWE also focuses on women in rural areas. They give business, educational and seasonal agriculture loans.
BAOWE has given loans up to Nu 300,000 to Lumung Feed Cooperative in Trashigang – a group of 16 members producing cow feed and chicken feed in 2016.
Tsheychey, 50, the chairman of the cooperative said that the loan helped them set up business and they bought machineries.
He said that now the products are ready and they sell in the market.
Tashi Wangchuk, 53, from Khengkhar gewog in Mongar said that they have availed group loan of Nu 100,000 from Tarayana Foundation. The group consists of 25 people.
Tashi Wangchuk said that they availed the loan to open a shop in their village, and some to fund their children’s education. “One of the members has even bought a vehicle through the loan. It helps us to reach our agriculture products to the market,” said Tashi Wangchuk.
Finance officer of BAOWE, Namgay Wangmo said so far they have disbursed around Nu 1mn to around 30 clients.
They give loans to individuals and groups. The interest rate for loans is 10% per annum and 6% for savings.
However, Tarayana Foundation focuses on general loans in rural areas. They also give loans for business and agriculture ventures.
Program Officer of the Tarayana Foundation, Dhendup Tshering said so far they have disbursed loan amount of Nu 2.4mn to around 258 clients.
The interest rate of Tarayana microfinance loan is 7 % per annum.
He said the very small loans provided by the Tarayana Foundation have helped small groups and households improve their living standards.
Meanwhile, RMA officials stated that MFIs provide a range of financial products such as microloans, micro-savings and micro-insurance products to their clients. Therefore, MFIs will be in a position to promote financial inclusion among the rural population, low-income groups and young entrepreneurs.
According to the micro-finance rules and regulations 2016, MFIs will have lending activities constituted by 80% in rural areas and only 20% in Yenlag Thromde.
One of the objectives of MFI is to increase financial services penetration in rural population. The client should consist of micro-client, rural inhabitants, farmers and low-income groups unlike banks and insurance companies.
RMA also said that MFIs gives loan without collateral unlike banks, which require collateral such as fixed assets to get loans. MFIs are not allowed to give loans for consumption whereas banks are allowed to give personal loans.
“MFIs are expected to address the gap between rich and poor, create employment and promote access to finance particularly amongst the rural populace and unemployed youths,” said an RMA official.
Dechen Dolkar from Thimphu
