Central bank approves two micro finance institutions
The central bank, Royal Monetary Authority (RMA.) licensed two micro financial institutions recently in a bid to make credit more accessible to rural communities.
Rural Enterprise Development Corporation Limited (REDCL) and micro finance unit of Respect, Educate, Nurture, Empower, Women (RENEW) have been registered with RMA to provide micro finance services, particularly to encourage investments in rural enterprises.
According to the RMA Governor, Dasho Penjore, this initiative is part of the central bank’s Inclusive Financial Policy, which is currently in draft stage. The policy aims to improve the livelihood of rural communities by providing credit facilities.
The RMA Governor said following the address made by His Majesty The King during the 109th National Day, the policy will also include provisions to provide credit facilities to youth and rural communities.
“We are expecting more organizations and private individuals to come up once the new policy is in place,” said Dasho Penjore. “More micro finance institutions will be able to penetrate into the rural communities to make credit accessible.”
To register for the micro finance services with the RMA, individuals and organizations would have to obtain a trade license and submit a detailed proposal outlining the operational structure and procedures to offer micro finance services. The loan ceiling will be up to Nu 500,000.
The central bank is yet to identify the priority sectors for providing loans through micro finance institutions.
“We are thinking to accomplish the command of His Majesty The King to provide credit in agriculture sectors in rural areas,” said Dasho Penjore,
The central bank will work with the agriculture ministry to identify priority sectors. The priority areas under the agriculture sector will be ready in about three months.
“Interest rates cannot be preempted. It has to be calculated by the micro finance institutions. They have to follow certain norms,” said the RMA Governor.
The financial inclusion policy as a broad policy instrument aims to cover the entire country.
“If financial inclusion is put into the system, it will create employment opportunity to the youth in rural areas and contribute to gross domestic product growth,” added the Governor.
The central bank will also be licensing deposit taking micro finance institutions. These institutions can take deposits from the public and lend money to the public up to Nu 500,000 at the same time. The deposit taking micro finance institutions can take deposits and lend only within the dzongkhag.
“This is a new opportunity which will come in to effect from the quarter of next year,” said the Governor.