The project will enhance access to finance for rural cottage and small industries (CSIs), thereby increasing rural employment and promoting economic development. The project focuses on (i) expanding collateral-based rural CSI financing through Bhutan Development Bank (BDB), Bhutan's key rural finance intermediary; (ii) extending, through BDB, non-collateral-based group loans to rural CSIs that lack assets; (iii) strengthening BDB's institutional capacity, including enhancement for rural CSI financing operations; and (iv) providing financial literacy training and business development support to rural CSIs, in particular CSIs owned by small and marginal farmers and women.
|Project Name||Rural Finance Development Project|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Gender Equity and Mainstreaming
Governance and capacity development
Private sector development
|Sector / Subsector||
Finance / Banking systems and nonbank financial institutions - Inclusive finance - Small and medium enterprise finance and leasing
|Gender Equity and Mainstreaming||Gender equity|
|Description||The project will enhance access to finance for rural cottage and small industries (CSIs), thereby increasing rural employment and promoting economic development. The project focuses on (i) expanding collateral-based rural CSI financing through Bhutan Development Bank (BDB), Bhutan's key rural finance intermediary; (ii) extending, through BDB, non-collateral-based group loans to rural CSIs that lack assets; (iii) strengthening BDB's institutional capacity, including enhancement for rural CSI financing operations; and (iv) providing financial literacy training and business development support to rural CSIs, in particular CSIs owned by small and marginal farmers and women.|
|Project Rationale and Linkage to Country/Regional Strategy||Out of a total population of about 807,600, 62.2% live in rural areas where agriculture is the primary source of livelihood. In rural areas, opportunities for both on-farm and off-farm employment are extremely limited and farmers mostly depend on subsistence production of crops and livestock for their living. In Bhutan, cottage and small industries (CSIs) constitute more than 90% of total enterprises and employ about 99,288 people, with 22,064 registered CSIs in 2019. In addition to registered CSIs, there are many informal CSIs. CSIs face various constraints, including poor access to finance and bureaucratic hurdles related to labor regulation, taxation, and registration. Among these, access to finance is the largest constraint. Men- and women-owned CSIs face similar challenges; however, these challenges are often greater for women, who suffer from low literacy, low self-confidence, and a lack of education, training, and entrepreneurial and technical skills. Other key constraints for women-owned CSIs include labor shortages and inadequate business premises. As a result of these constraints, most women-owned CSIs are unable to scale up their businesses, and therefore remain at a subsistence level. Rural CSIs lack access to finance because rural CSI financing requires a different set of expertise and methodology from regular commercial banking. Many CSI owners are illiterate or semiliterate and have limited financial literacy, therefore lack the capacity to develop business proposals, which are needed for financing from formal financial institutions. Commercial banks lack business expertise in CSI financing and impose stringent collateral requirements, as per standard commercial banking risk management practices. This generally excludes them from lending to CSIs, most of which do not own sufficient physical collateral. BDB, the key formal financial intermediary with a CSI financing mandate, offers collateral-based loans to CSIs by mostly accepting rural land; however, the value of rural land is difficult to assess. As a result, it does not facilitate an effective CSI credit risk management. The project will provide financing support to BDB to expand its rural CSI financing outreach under ADB's financial intermediation loan modality.|
|Impact||Productive and gainful rural employment opportunities generated. (12th Five Year Plan, FY2018-FY2023)|
|Description of Outcome||Finance sector's rural financing capacity enhanced|
|Progress Toward Outcome|
|Description of Project Outputs||
Collateral-based rural CSI financing expanded
Non-collateral-based rural CSI financing expanded
BDB's institutional capacity strengthened
Financial literacy training and business development support extended to rural CSIs
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Consulting Services||not applicable.|
|Responsible ADB Officer||Ozaki, Mayumi|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, SARD|
Department of Macroeconomic Affairs, Ministry of Finance
Tashichho Dzong, Post Box No. 117
|Concept Clearance||30 Jun 2020|
|Fact Finding||24 Jun 2020 to 29 Jun 2020|
|MRM||09 Oct 2020|
|Approval||11 Dec 2020|
|Last Review Mission||-|
|Last PDS Update||14 Dec 2020|
|Approval||Signing Date||Effectivity Date||Closing|
|11 Dec 2020||14 Dec 2020||18 Dec 2020||30 Jun 2025||-||-|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||20.00||Cumulative Contract Awards|
|ADB||20.00||11 Dec 2020||0.00||0.00||0%|
|Cofinancing||0.00||11 Dec 2020||0.00||0.00||0%|
|Financing Plan/TA Utilization||Cumulative Disbursements|
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.
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|Title||Document Type||Document Date|
|Loan Agreement (Ordinary Operations [Concessional]) for Loan 4042-BHU: Rural Finance Development Project||Loan Agreement (Ordinary Resources)||Dec 2020|
|Project Agreement for Loan 4042-BHU: Rural Finance Development Project||Project/Program Agreements||Dec 2020|
|Rural Finance Development Project: Project Administration Manual||Project/Program Administration Manual||Nov 2020|
|Rural Finance Development Project: Gender Action Plan||Gender Action Plans||Nov 2020|
|Rural Finance Development Project: Report and Recommendation of the President||Reports and Recommendations of the President||Nov 2020|
|Capacity Building for Rural Finance Development: Technical Assistance Report||Technical Assistance Reports||Nov 2020|
|Rural Finance Sector Development Program: Initial Poverty and Social Analysis||Initial Poverty and Social Analysis||Jul 2020|
|Rural Finance Sector Development Program: Concept Paper||Concept Papers||Jul 2020|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
|Title||Document Type||Document Date|
|Rural Finance Sector Development Program: Environmental and Social Management System Arrangement||Environment and Social Management System Arrangements||Sep 2020|
Evaluation Documents See also: Independent Evaluation
None currently available.
None currently available.
The Access to Information Policy (AIP) 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.
ADB Boosts Its Funding for Bhutan’s Phuentsholing Township Development and Loan to Finance Rural Cottage and Small IndustriesThe Asian Development Bank and the Royal Government of Bhutan have signed financing agreements today to support the ongoing Phuentsholing township development and enhance to finance for rural cottage and small industries.
ADB to Enhance Access to Finance of Rural Industries in BhutanADB has approved a $20 million loan to improve access to financial services of rural cottage and small industries (CSIs) in Bhutan.
|Tender Title||Type||Status||Posting Date||Deadline|
|Environmental and Social Safeguards Specialist||Individual - Consulting||Closed||09 Jan 2021||15 Jan 2021|
|Technical Advisor to BDBL||Individual - Consulting||Closed||07 Jan 2021||13 Jan 2021|
|Bank Restructuring Specialist||Individual - Consulting||Closed||07 Jan 2021||13 Jan 2021|
No contracts awarded for this project were found
None currently available.