ADB Program Supports Financial Inclusion, Private Sector Development in Bhutan
THIMPHU, BHUTAN (27 November 2019) — The Asian Development Bank (ADB) has approved a $30 million policy-based loan for the first subprogram of the Financial Market Development Program to support ongoing efforts by the Government of Bhutan to develop the country’s finance sector, which is key to promoting financial inclusion and mobilizing resources to provide much-needed capital for supporting private sector development.
Bhutan’s economy has grown significantly over the last few decades, averaging 7% of gross domestic product growth from fiscal year (FY) 1998 to FY2018. But there is a need to diversify the economy, which is dominated by state-led, capital-intensive hydropower production, to include other growth engines with more private sector participation, which can generate greater employment and growth opportunities for its citizens. The country’s private sector, which is relatively small, is mainly comprised of micro, small, and medium-sized enterprises hampered by a lack of access to finance because of relatively high costs and cumbersome processes.
“ADB remains committed to supporting the Government of Bhutan in its efforts to enhance the country’s finance sector, with the goal of achieving a more broad-based, private sector-led growth path,” said ADB Country Director for Bhutan Ms. Kanokpan Lao-Araya. “We are confident that the program will contribute to this goal and help make economic growth more inclusive for all Bhutanese.”
The Financial Market Development Program will assist the government in making Bhutan’s finance sector more effective and efficient by stabilizing both short-term and long-term funds through improved financial infrastructure. It will also help make the country’s finance sector more financially inclusive by improving financial literacy. The initiative’s first subprogram has already kickstarted efforts to improve the country’s nonbank financial system, with the Ministry of Finance approving a long-term government bond issuance strategy and implementation plan, while establishing a committee to assess corporate bonds issuance and the development of a new domestic bond market.
In addition, Subprogram 1 has helped the government set up sustainable, inclusive pension and provident fund schemes for Bhutan by including the private sector and previously excluded self-employed individuals, 61% of whom women. The government adopted a policy to ensure affordable housing finance. It has also enacted legislation and corresponding regulations addressing anti-money laundering and how local financial institutions can combat the financing of terrorism. To improve financial inclusion and literacy, the government also approved the National Financial Inclusion Strategy 2018–2023 and the National Financial Literacy Strategy 2018–2023.
Along with the policy-based loan, ADB is providing a $500,000 technical assistance grant to support program implementation.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.