THIMPHU, BHUTAN (14 December 2020) — The Asian Development Bank (ADB) and the Royal Government of Bhutan have signed financing agreements today to support the ongoing Phuentsholing township development and enhance access to finance for rural cottage and small industries (CSIs).

Under the agreements, the government will receive an $18.5 million concessional loan and a $10 million grant as additional financing for the Phuentsholing Township Development Project, as well as a $20 million concessional loan for the Rural Finance Development Project in Bhutan.

“The additional financing for the Phuentsholing Township Development Project will enable the ongoing planned urbanization project to expand the livable city area with improved resilience to flooding. The project will develop approximately 66 hectares of vacant land adjacent to the existing city along the bank of the Amochhu River. It will also support capacity development to improve flood risk management and the delivery of urban services. The project is under implementation by the Druk Holding and Investments Limited. The Rural Finance Development Project will provide financing support to the Bhutan Development Bank Limited to enhance access to credit for rural cottage and small industries (CSIs), fully aligned with the government’s 12th Five Year Plan on creating income-generating opportunities for vulnerable populations and enhancing the rural community,” said Bhutan Finance Minister Namgay Tshering.

ADB has been supporting the development and expansion of Phuentsholing by constructing flood and riverbank erosion defenses along the Amochhu River and facilities in the new modern urban area since 2018. This additional financing will continue funding the ongoing activities until their successful completion, which is targeted for 2025.

Phuentsholing is the country’s largest commercial and industrial hub and serves as Bhutan’s strategic trading gateway. It is the country’s second-most populous city and is anticipated to grow by 5% per annum. Phuentsholing has reached its current limit for expansion due to being confined by steep terrain and close proximity to the Amochhu River. The project will be a part of efforts to develop Phuentsholing into becoming a regional growth center and main trading gateway, facilitating its economic development.

The Rural Finance Development project builds on ADB’s successful finance sector project experience in Bhutan and improves access to finance for CSIs, including start-ups and informal CSIs.

“ADB is fully committed to supporting the Government of Bhutan to implement an integrated solution to development that aims to improve people’s living conditions and livelihood,” said ADB Country Director for Bhutan Kanokpan Lao-Araya. “The first project expands livable urban areas of Phuentsholing with effective flood resilience designs. As Bhutan’s major strategic trading gateway, the investment in township improvement will have spillover effects to the rest of the country. The second project, Rural Finance Development Project, will enhance access to finance for rural CSIs through Bhutan Development Bank Limited, thereby increasing rural employment and promoting economic development. The project will also provide financial literacy training and business development support to rural CSIs, in particular CSIs owned by small and marginal farmers and women.”

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.

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