Bhutan

UN Support to the Formulation of Policy Framework and Development of MSMEs for Employment Generation and Pro-poor Growth

Bhutan’s macroeconomic performance has been robust, with an average GDP growth rate of about 7 percent over the last decade.  The sound macro picture also includes a high savings rate, increasing investment in basic social services and infrastructure. As the government has recognized the private sector as the engine of growth, private sector development and industrialization are essential components of the development strategy, which will help generate employment and diversify the economy.

The mandate of Bhutan Development Finance Corporation Ltd (BDFCL) is to provide credit to rural areas as well as to SMEs. However, the system of microfinance in Bhutan has not developed enough to support the difficulties faced by poor farmers and small entrepreneurs in accessing finance.

The 10th Five Year Plan stressed that due to the lack of clear industrial policy and institutional framework the growth of the industries sector is quite low. It has further noted that Micro, Small and Medium Enterprises (MSMEs) contribute to the economic growth significantly through employment and income generation.

Accordingly, the project will support the Ministry of Economic Affairs (MoEA) and the Bhutan Development Finance Corporation Ltd (BDFCL) in the following activities:

• Formulation of an Economic Growth Policy targeting Private Sector Development with a focus on SMEs.

• Protection and the promotion of consumer rights by reducing or eliminating unfair trade practices and restrictive trade practices that harm consumers.

• Capacity Development of Micro Hydro Power Agencies and supporting beneficiary communities

• Provide knowledge on international markets and  marketing techniques

• Support community income generation activities through the establishment of groups of local farmers, artisans and business persons under the concept of “one village, one product.”

• Development of community based microfinance models based on self-help and self-management.

• Enhance financial management skills of rural cooperatives and farmers associations/groups and support implementation of micro-finance services in rural areas.

UNDAF Outcome	1: By 2012, opportunities for generation of income and employment increased in targeted poor areas. 5: By 2012, national capacity for environmental sustainability and disaster management strengthened.
CT Outcome	1.1.3 Access of targeted farmers, both women and men, to rural credit and markets improved, 1.3.1 Capacity of RGoB enhanced to formulate industrial and trade policies that are pro-poor, gender sensitive and cultural and heritage based, 1.3.3 a) Access to international markets enhanced through improved negotiation capacity and understanding of global and regional trade agreement and facilities; b) Capacity of relevant government agencies to prepare and enforce a Consumer Protection Act and a Fair Trading and Competition law developed, 1.4.1 Community based MSMEs and cooperatives, particularly those of women and youth, supported through improved access to micro-finance, business development services, marketing, group formation and post harvest management services, 5.3.1 Capacity of relevant agencies and communities to implement Renewable Energy Program improved
CT Output	1.1 Access to socio-economic services, markets and information improved for smallholder and marginal farmers in targeted rural areas; 1.3 Capacity of the RGOB strengthened to formulate policy framework for Private Sector Development with focus on employment generation and pro-poor growth through the promotion of Micro and SMES (MSMEs); 1.4 New Micro and SMEs and jobs created with emphasis on women and youth; 5.3 Access to sustainable energy and livelihoods for remote gewogs improved.
Project Location	All Regions
Project Duration	January 2009 - December 2010
Budget Outlay	US$ 491,057
MDG Goal
Link to Workplan	Click on the icon to download