Bhutan: Financial Sector Development Program (formerly Financial Sector & Nonbank Financial Institutions Reform Program) - Program Loan

Sovereign Project | 37164-023

Summary

The FSDP aims to address the main constraints in the financial system that impede financial sector development and efficient financial intermediation. The main constraints include (i) a weak legal, regulatory, and supervisory regime; (ii) poor governance structures and inefficient operations of financial institutions; (iii) vulnerability to malpractice for lack of effective anti-money laundering (AML) and combating the financing of terrorism (CFT) regimes; (iv) the absence of national accounting and auditing standards; and (v) an inadequate system of financial information disclosure. Consequently, FSDP aims, through improved governance, specifically to enhance the investment environment, improve access to finance, and promote market-based incentives for providing diversified financial services aimed at encouraging private sector activity and promoting economic growth.

Latest Project Documents


Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Project Name Financial Sector Development Program (formerly Financial Sector & Nonbank Financial Institutions Reform Program) - Program Loan
Project Number 37164-023
Country Bhutan
Project Status Closed
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 2279-BHU: Financial Sector Development Program (formerly Financial Sector & Nonbank Financial Institutions Reform Program) - Program Loan
Asian Development Fund US$ 11.00 million
Loan 2280-BHU: Financial Sector Development Program (formerly Financial Sector & Nonbank Financial Institutions Reform Program) - Project Loan
Asian Development Fund US$ 2.00 million
TA 4885-BHU: Institutionalizing Skills and Capacity Development (formerly Institutional Strengthening for Financial Sector Development)
Technical Assistance Special Fund US$ 250,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Finance - Finance sector development
Gender Equity and Mainstreaming
Description

The FSDP aims to address the main constraints in the financial system that impede financial sector development and efficient financial intermediation. The main constraints include (i) a weak legal, regulatory, and supervisory regime; (ii) poor governance structures and inefficient operations of financial institutions; (iii) vulnerability to malpractice for lack of effective anti-money laundering (AML) and combating the financing of terrorism (CFT) regimes; (iv) the absence of national accounting and auditing standards; and (v) an inadequate system of financial information disclosure. Consequently, FSDP aims, through improved governance, specifically to enhance the investment environment, improve access to finance, and promote market-based incentives for providing diversified financial services aimed at encouraging private sector activity and promoting economic growth.

The purpose of the project loan is to facilitate the implementation of the FSDP and ensure the smooth implementation and sustainability of its policy reforms. The project loan will provide (i) urgently needed training of the regulator and key institutions in the areas covered under the FSDP, (ii) the development of adequate AML/CFT regulation and infrastructure, (iii) improved accounting and auditing practices, (iv) technical support to create a CIB, and (v) improved securities information disclosure.

Project Rationale and Linkage to Country/Regional Strategy The proposed reforms under the FSDP are fully in line with the Government's development objectives and the country strategy of ADB. The FSDP is designed to strengthen governance in the financial sector-including, among other aspects, the legal, regulatory and supervisory framework, governance structure and operational efficiencies, and institutional capacity of the financial sector-with the aim of improving the depth, soundness, and stability of the financial system and thereby bolster business confidence, encourage private sector activity, and foster sustained economic growth.
Impact Improved depth, soundness, and stability of the financial system for supporting private sector development and economic growth
Project Outcome
Description of Outcome Improved governance of the whole financial sector and more efficient financial sector and more efficient financial intermediation
Progress Toward Outcome

The program has reached important milestones in strengthening the governance of the financial system through an improved legal, regulatory, and supervisory framework for all financial services and institutions.

Reform measures undertaken under the prgoram have significantly strengthened the regulation and supervision of the financial sector as a whole. It enabled the financial markets to be deepened, with greater market competition, enhanced corporate governance in the banking system and improved financial stability.

Implementation Progress
Description of Project Outputs

1. Improved regulation and supervision of the financial sector

2. Strengthened corporate governance structure and operations of financial institutions

3. Effective AML/CFT regime established

4. Developed national accounting and auditing policies and standards

5. Strengthened information sharing

Status of Implementation Progress (Outputs, Activities, and Issues)

RMA Act was enacted.

FSA bill was passed in June 2011.

The Government approved the establishment of AASB in May 2010.

The AASB will conducted final discussions in May 2011 with regard to adoption of Phase OneI of the new Bhutanese national GAAP and GAAS. On behalf of the Government, the implementation plan was formally submitted to the ADB on 10 October 2011 by the Department of Public Accounts at the Ministry of Finance.

The CIB was inaugurated on 9 September 2009 under the management of the Royal Monetary Authority. The official ceremony was organized by RMA and graced by the Hon. Finance Minister, with participation from ADB mission.

Geographical Location Bhutan
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services The Consultants will be recruited in accordance with the Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers (as amended from time to time). The Project will also finance the secondment and traineeship programs for medium- to long-term technical training in specialized financial business areas.
Procurement Procurement of goods and services will be subject to the provisions of ADB's Guidelines for Procurement (as amended from time to time).
Responsible ADB Officer Anqian Huang
Responsible ADB Department South Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SARD
Executing Agencies
Ministry of FinanceNim DorjiRoyal Government of Bhutan
Thimphu, Bhutan
Attention: Director
Timetable
Concept Clearance 30 Sep 2005
Fact Finding 26 Jun 2006 to 08 Jul 2006
MRM 11 Sep 2006
Approval 07 Dec 2006
Last Review Mission -
PDS Creation Date 31 Jan 2007
Last PDS Update 27 Sep 2012

Loan 2279-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Dec 2006 08 Mar 2007 04 Jun 2007 30 Jun 2010 30 Jun 2012 30 Jul 2012
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 13.60 Cumulative Contract Awards
ADB 11.00 07 Dec 2006 11.45 0.00 100%
Counterpart 2.60 Cumulative Disbursements
Cofinancing 0.00 07 Dec 2006 11.45 0.00 100%

Loan 2280-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Dec 2006 08 Mar 2007 04 Jun 2007 30 Jun 2010 30 Jun 2012 12 Nov 2012
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 2.00 Cumulative Contract Awards
ADB 2.00 07 Dec 2006 1.36 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 07 Dec 2006 1.36 0.00 100%

TA 4885-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Dec 2006 26 Dec 2006 26 Dec 2006 03 Jun 2009 30 Jun 2011 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
250,000.00 0.00 0.00 0.00 0.00 0.00 250,000.00 07 Dec 2006 172,871.21

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.