Agriculture is finally getting some real place in our development strategy. What the commercial banks ought to have done long ago is now happening. From the total domestic loan of about Nu 97 billion, agriculture sector holds only five percent of the share. Investment in agriculture has been painfully negligible. The Royal Monetary Authority’s initiative to make loans accessible to entrepreneurs and farmers is commendable.
Priority sector lending (PSL) policy will be launched next month. This means youth and farmers will enjoy equal access to finance whether they avail loans from commercial banks or micro finance institutes. Best of all, availing of loan will not require collateral and guarantor.
So far, this has been lacking, and we have had to confront with some of the biggest problems of modern Bhutan – rising youth unemployment and decreasing contribution of the agriculture sector. Skewed vision and policy failures have been costly. The government’s overseas employment programme is receding ingloriously into the shadows.
As the new dawn breaks, PSL shines like the promise of the day. It is estimated that PSL will inject a total of Nu 1.5 billion capital for cottage and small industries (CSI) – Nu 530 million for primary agriculture and livestock production and Nu 950 million for non-agriculture CSI. Commercial banks will now provide collateral-free loan for CSI. Interest rates would also be slashed. With interest rate at 8.5 percent, the maximum loan ceiling is Nu 500,000 for farmers and Nu 10 million for cooperatives and companies.
Improving access to finance and encouraging economic stimulation is good. However, the proof of the pudding is in the eating.
Currently, Bhutan Development Bank Limited (BDBL) holds the highest loan portfolio in agriculture sector. The bank charges an interest of about 10 percent. BDBL will now have to lower its interest rate to compete with other banks. This much, until here, is all good. But the problem with the Bhutanese have always been implementation. How do we make sure that these initiatives are not misused?
Bhutan is now poised to graduate from the group of the least developed countries. Time has now come to look at agriculture seriously. There must be earnest efforts, but our focus should be more on implementation of plans and programmes. We are told that insurance-based lending scheme will be introduced and insurance companies will cover the risk. Sounds all right.
But loan default is one of our biggest challenges today. It is not enough to tell the borrowers to be responsible. There could be wilful defaulters and insurance schemes may not be able to cover the cost.
PSL is a beautiful policy. This policy succeeding, we can address a lot of challenges that we are confronting today. We can employ our young and enterprising. There wouldn’t be rural to urban migration. And in the end, we will have achieved our national dream of making Bhutan a self-reliant nation.
But we must give the policy some teeth. What is coming at long last is indeed encouraging.