MANILA, PHILIPPINES (25 October 2021) — The Asian Development Bank (ADB) has approved a $30 million loan to support Bhutan’s efforts to strengthen its financial markets and mitigate the impact of the coronavirus disease (COVID-19) pandemic.
The Financial Market Development Program Subprogram 3 will support the progress achieved in the two previous ADB-supported loans to the country’s financial sector, which helped to initiate the issuance of government bonds, increased bank deposits, and supported reforms to expand private sector’s access to finance.
“A stable, efficient, and inclusive finance sector is a key element to help transform Bhutan into a productive, diverse, and innovative economy,” said ADB Senior Financial Sector Specialist for South Asia Manohari Gunawardhena. “The reforms under this program will promote well-functioning financial markets, strengthen institutions, regulations and, enhance transparency. It will help improve financial inclusion, particularly for women, and mobilize resources to help diversify Bhutan’s economy.”
Bhutan’s finance sector has been growing rapidly. The country’s market capitalization was 26.4% of gross domestic product as of December 2020. Credit provided to the private sector increased from 15.4% in 2005 to 67.9% in December 2020. However, the finance sector needs to further develop its nonbank financial institutions, strengthen the financial infrastructure, build capacity in banks, and enhance financial literacy and inclusion.
The latest program will contribute to strengthening the capital market through the listing of government bonds; improve rules to enhance liquidity to cottage and small industries; establish an insurance strategy, including expanding insurance products and number of providers; strengthen the integrity of the financial system with better information management systems and use of digital platforms for payment systems.
In addition, it will introduce new finance sector reforms such as data warehousing, stress testing of insurance business, and developing a green taxonomy. It will focus on the implementation of the rules on anti-money laundering.
This loan will also institute measures to mitigate the effects of the coronavirus disease (COVID-19) pandemic on the financial market through comprehensive nonperforming loan management strategies, additional reforms in the insurance sector, and the use of financial technology to maximize digital inclusion.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.