Bhutan

Training Programme on Promoting Micro-Finance

Statement by Ms. Claire Van der Vaeren, UNDP Resident Representative

Paro

Managing Director, Bhutan Development Finance Corporation, Mr. Nawang Gyetse

Officers of the Bhutan Development Finance Corporation
Ladies and gentlemen:

It is my pleasure to be here with you today at the certificate awarding ceremony of the microfinance training workshop jointly organized by the Bhutan Development Finance Corporation and UNDP. I would like to thank BDFC for inviting me to speak at this event and for giving me this opportunity to award certificates to the participants of this workshop.

As we all know, poverty in Bhutan is predominantly a rural phenomenon with 98.1 percent of Bhutan’s poor living in rural areas. Rural poverty is directly linked to low levels of agricultural productivity and inadequate access to markets, social services and economic services such as credit facilities. The micro-finance is a cost effective way of addressing poverty and it provides sustainable economic impact among program members. As a result, rural areas are economically stimulated and poverty at village level is reduced. The Gross National Happiness Commission, under its Rural Economy Advancement Programme, recently conducted a study on the rural poor. This study reports that in a rural village in Mongar located about 3 days walk from the nearest road head, 8 out of the 12 households have access to rural credit from BDFC. While this is a great achievement, we cannot be complacent. We must strive to do more to increase access to finance for Bhutan’s rural poor. Accordingly, if we are to assist the Government in realizing its poverty reduction target of 15% by the end of 10^th Five-Year Plan and the achievement of the MDGs by 2015, we must diversify the micro-finance and savings services currently offered.

The United Nations’ concept of Inclusive Financial Sectors for Development stresses the importance of increasing the outreach of financial services such as safe savings, appropriately designed loans for the poor and MSMEs, to help people raise their level of income and lift themselves out of poverty.

While offering financial services to match the current demand, financial institutions also need to consider products that can attract marginalized communities including poor women, who are sometimes reluctant to approach formal financial services due to cultural factors, social traditions and lack of literacy. There is a significant gender inequality in the adult literacy level in Bhutan. The literacy rate among women is 46 percent which is 20 percent lower than that of men. In many countries, including Bhutan, access to credit is often limited for women and youth who do not have assets such as land or other property to offer as collateral. Here, rough terrain also separates poor communities from services, while the low population density of rural areas causes higher transaction costs per person. Financial institutions in Bhutan should address these challenges head-on and provide financial services to poor communities in order to reduce poverty.

The ongoing UNDP collaboration with BDFC aims to improve access to microfinance services for rural poor households through capacity development of BDFC’s outreach staff. Furthermore, it supports the promotion of micro-finance services among rural cooperatives and farm associations, and enhances capability in the management and utilization of resources. The project is being successfully implemented, and today I feel fortunate to be here at the conclusion of one of the key activities of this collaboration.

UNDP will continue to support the expansion of micro-finance services to rural households and rural enterprises which we consider vital for the improvement of living standards of both men and women. You will be pleased to note that the United Nations Capital Development Fund (UNCDF) has recently agreed to support BDFC in expanding its services to a larger group of beneficiaries with technical assistance provided by BASIX, a successful finance organization in India.

I am confident that with the continued efforts of your organization including its network of branch offices in the twenty Dzongkhags, the BDFC beneficiaries will steadily grow and prosper towards better quality of life and overall happiness in rural areas.

Thank you and Tashi Delek!