Low access to finance, a major hurdle for micro & small businesswomen
Low access to finance is one of the main challenges faced by businesswomen in the country, according to a research report released by the National Statistics Bureau (NSB) in May this year.
The report “Challenges facing micro and small businesswomen in Bhutan,” states that 49.3% of the respondents mentioned poor access to finance as one of the biggest challenges.
Most businesswomen are subsistence business rather than transformational. Businesswomen availing formal finance (27.8%) are relatively close to those availing informal sources (22.7%).
A food vendor near JDWNRH, Yeshi Choden, 37, said she took loan from her relatives and friends since she was afraid that she would not be able to repay on time if she borrowed from a financial institution. “I didn’t have any equity to process the loan either.”
Similarly, the report further reveals that although micro and small businesswomen are in need of money to operate and expand their businesses, they do not prefer commercial loans mainly because they fear defaulting on loans.
The problem associated with accessing business loans from commercial banks are due to highinterest rates, requirements of collateral, complex loan procedures and loan not suitable to need.
As a result, a huge percentage of businesswomen have started businesses with their own savings.
During the survey, Bhutanese businesswomen pointed out 30 different challenges they face including lack of financial capital followed by difficulty attracting customers, informal competitions, tax rates, labor regulations, lack of business space, skills, fear of failure, and lack of education as the main business challenges.
The competition is not only from the increasing number of businesswomen doing similar business but from the informal sector (unlicensed business) such as online shopping business.
Besides, Yeshi Choden added that businesswomen compete to deliver similar products and services rather than developing new, innovative ones. “The competition of similar business is a negative challenge.”
Businesses competing to provide similar products and services can benefit the consumers at large through price cut but can reduce the profitability and sustainability of the micro and small businesses.
Women who run their businesses from privately rented houses are reported to bear the burden of exorbitant rents and have poor facilities. And those operating business from the non-prime area faces shortage of customers, hence low income.
Women who operate bars and restaurants are unsatisfied with the tax rates. Bar operators said that they have to pay high rentals for the bar license besides annual contribution to the BCCI.
The report cited a businesswoman from Mongar who said that she is paying her restaurant’s license annual fee, a separate bar license annual fee of Nu 15,000 and Nu 15,000 to BCCI. “All my profits are wasted on paying taxes and fees.”
Some businesses face shortage of labor due to labor regulations by the government. It is common knowledge that the shortage of skilled labor and unwillingness of young people to take up menial jobs have many businesses/enterprises in the country recruit expatriate skilled workers from nearby countries. The restrictions imposed on the recruitment of skilled labor from outside seem to affect businesses like hotels, furniture house, small manufacturing units, etc.
A fast-food vendor, Phub Lham, 58, said that getting a good business space is a major problem. Though Bhutan Association of Women Entrepreneurs (BAOWE) provides them free space to do business, it is clustered and they have to face a lot of challenges while dealing with customers.
“Eighteen registered street hawkers are clustered together and we face problems related to water shortage and sanitation,” she said.
Going by the socioeconomic profiles of businesswomen, the majority of them had reported either to be uneducated or just attended primary education. Therefore, lack of education or low education seems to impact the success of their business.
Besides, the study reveals that businesswomen have low confidence in running their trade and it is likely caused by lack of or low education and business skills, low profitability of the business, and their aversion to taking risks.
However Non Government Organizations such as BAOWE, RENEW and Tarayana are providing financial assistance to these businesswomen.
The Finance Officer of BAOWE, Tashi, said they provide financial assistance on the basis of projects and loan through Micro Finance Institute. “We provide technical advice, guidance and support to aspiring women entrepreneurs.”
Just 0.3% of the businesswomen considered ‘male domination in business’ as a challenge
The report highlights expectations of the businesswomen from the government, NGOs and other agencies with regard to business education and training, opening up more market space, coordinating business support, planning for support schemes, promoting women’s access to associations and vital business information, promoting marketing support, and promoting innovative business.
The report suggested that there is no lack of policy pertaining to promotion of business and entrepreneurship among business women, however “there certainly is room to improve implementation of policy and programs directed at businesswomen in micro and small business sector.”
The quantitative data analysis was collected from 363 businesswomen from Mongar, Samdrup Jongkhar, Gelephu, Phuentsholing and Thimphu.
The research was approached from the perspective that economic empowerment of women is essential for promoting their social and economic status.
It aims to identify ways in which the government, donors, NGOs and private sectors can improve the prospects for women in business and entrepreneurship in the country.