REPORT - RMA

iSTATE OF THE FINANCIAL INCLUSION 2019

REPORT

NATIONAL FINANCIAL INCLUSION COLLABORATIONN F I C

In-pursuit of an Inclusive, Innovative and Resilient Economic Development through Collaborative Engagements

ii STATE OF THE FINANCIAL INCLUSION 2019

iiiSTATE OF THE FINANCIAL INCLUSION 2019

REPORT

NATIONAL FINANCIAL INCLUSION COLLABORATIONN F I C

In-pursuit of an Inclusive, Innovative and Resilient Economic Development through Collaborative Engagements

iv STATE OF THE FINANCIAL INCLUSION 2019

Financial Inclusion at a Glance

vSTATE OF THE FINANCIAL INCLUSION 2019

Financial Inclusion (Percent)

Account Ownership 2017 2018 2019

Saving 64.30 63.80 67.56

Credit 16.00 16.80 19.70

Life Insurance 16.30 18.00 19.56

Access Points Numbers Percent per 10,000 Adults

Branches 2017 2018 2019 2017 2018 2019

Population 496,044 506,220 515,224

Total Branches 170 170 174 3.43 3.36 3.38

Total Bank Branches 98 98 105 1.98 1.94 2.04

Total Insurance Branches 68 40 36 1.37 0.79 0.70

Total MFI Branches 29 32 33 0.58 0.63 0.64

Total Extension offices 66 70 81 1.33 1.38 1.57

Others Access Points

Total Agents 2,333 2,396 2,442 47.03 47.33 47.40

Total ATMs 188 246 274 3.79 4.86 5.32

Total POS 759 779 1,035 15.3 15.39 20.09

General (Bhutan)

Area (sq. km) 38,394

Administrative Units (Nos.)

Dzongkhags 20

Dungkhags 15

Gewogs 205

Financial Service Providers (Nos.)

Banks 5

Insurance 3

Pension 1

Micro Finance 6

Brokers 9

Private Money Lender 3

DPNB

BOB BNB

BDBLTBANK

BHUTAN

vi STATE OF THE FINANCIAL INCLUSION 2019

Disclaimer Note

Banks Non-Banks Stock Exchange and Micro Finance Institutions

1) Bhutan National Bank Ltd. 1) Royal Insurance Corp. of Bhutan Ltd. 1) RSEBL

2) Bank of Bhutan Ltd. 2) Bhutan Insurance Ltd. 2) RENEW

The report outlines the state of Financial Inclusion in Bhutan. The data was collected from different financial institutions in Bhutan as listed in the table below:

3) Druk PNB Bank Ltd. 3) REDCL

4) TBank Ltd. 4) BAOWE

5) Bhutan Development Bank Ltd.

It outlines different supply-side data which includes access points,saving deposit, credit, life and non-life insurance policies, shares and value-added services like ATMs, POS and mobile banking.

Disclaimer: We have made every attempt to ensure accuracy and reliability of information provided in this report, however, there may be cases where data is not 100% accurate. Due to the COVID-19 global pandemic and lockdown in India, the data for Druk PNB Ltd could not provide the data for the 2019. Therefore, the data for Druk PNB Ltd is as of 2018.

©2013 Royal Monetary Authority of Bhutan

All rights reserved. Published in 2020.

Printed in Bhutan.

viiSTATE OF THE FINANCIAL INCLUSION 2019

It is to my greatest pleasure to endorse the financial inclusion and financial

literacy reflection for the past three years with our enthusiastic planning and

action efforts. The initiatives ranged from improving the formal supply side

financial service landscape to organizing financial literacy programs at schools.

Much efforts were put in place to structure the facilitating platforms towards

inclusive access to finance backed by suitable regulatory interventions.

On the supply side front, effective regulations enabled more financial service

players to enter into the financial market system in addition to agent banks,

e-money institutions, MFIs and Private Money Lenders; Bhutan now also has a

fully functional CSI Bank set up at Paro to further improve access to micro credit

with low interest rates. New financial schemes such as Priority Sector Lending

(PSL) still continues to be in operation and are popularly availed by many youths.

Additional platforms to drive alternate access to finance other than the bank

lending, were also initiated through the platforms of ‘Jabchor’ (equity financing

through angel investors) and crowdfunding.

The State of Financial Inclusion Report aims to provides evolution of financial

inclusion with multidimensional measurement data highlights in terms of

financial access points, financial inclusion value store transaction accounts,

regulatory initiatives and financial literacy programs. Although data highlights

in this report reflects much progress on the financial inclusion indicators over

the years, however policy makers still need to continue and ensure mechanisms

related to inclusiveness, technology advancements and initiate more digital

payment transformation.

All access points seem to be improving over the years and notably agents and

POS are picking up at a fast pace than traditional bank branches. Mobile banking

has become popular in a short span of time and usage has been continuously

improving for all the banks. Bhutan targets an ambitious collective achievement

of 85% account penetration by 2023 and we are on track progress with 68%

saving account penetration for 2019, almost 4% increase as compared to 2018.

Credit accounts reflects almost 19.70% in 2019 (almost 2% increase from 2018)

and life insurance accounts also stands at 19.56% in 2019 (almost 2% increase

from 2018). As usual, the account ownerships are significant in populated areas

such as Thimphu and Chukha Dzongkhag because of the higher population,

more business dwellings and more employment opportunities.

FOREWORD

viii STATE OF THE FINANCIAL INCLUSION 2019

This report highlights that savings account ownership is relatively higher for our younger

population aged between 26-35 years and least with the age group of 66 and above. Rest

assured, our new wave of younger population seems to be more conscious of holding a

formal account than the older generation. Analysis also depicts an interesting finding

that about 6.5% of our adult population has availed savings, credit and insurance all

together and about 1,750 adults do not have a bank account while availing credit

facilities extended by MFIs. In terms of gender-based access to financial services, there

is no significant gender gap in terms of savings account holding. However, the gender

gap is higher for credit (7.4% higher for men) and ownership of non-life insurance (6.7%

higher for men) signifying more property and business ownership for men are higher

than women in Bhutan.

Owing to some of the data highlights above, our focus towards enabling and unlocking

financial inclusion further for the next few years could cluster around the following

areas of financial sector development in addition to capitalizing our current efforts:

1. Create more relevant products and platforms such as Inclusive green finance,

collateral replacements schemes, credit guarantee and e-commerce.

2. Fintech development to bridge offline customers to online merchants, digital

identity and enabling P2P, B2B and PPP initiatives.

It is to my greatest appreciation to express gratitude to all the key Government agencies,

Financial Institutions, Alliance for Financial Inclusion, Savings Bank Foundation

for International Development (SBFIC) and other relevant stakeholders involved in

partnering with RMA to pursue the collective goal of enhancing ‘greater financial

inclusion’ in the 21st century.

Dasho PenjoreGovernor, RMA

ixSTATE OF THE FINANCIAL INCLUSION 2019

NFIS GOVERNANCE STRUCTURESTEERING COMMITTEE

DASHO PENJORE, CHAIRGOVERNOR

ROYAL MONETARY AUTHORITY OF BHUTAN

MR. KARMA, DEPUTY CHAIR

CEO, RICBL

MS. YANGCHEN TSHOGYELDEPUTY GOVERNOR, RMA

PERMANENT MEMBER

MR. THINLEY NAMGYELSECRETARY, GNHC

MEMBER

MR. PEMBA WANGCHUKDG, RSTAMEMBER

MR. KARMA JURMECEO, BTLMEMBER

MR.PHUB DORJICEO, BDBLMEMBER

MR. DORJI KADINCEO, BOBLMEMBER

MR. Karma YesheySECTEARY, MOE

MEMBER

MR. DORJI PHUNTSHOCEO, RSEBL

MEMBER

MR. PHAJO DORJEE DEPUTY GOVERNOR, RMA

PERMANENT MEMBER

x STATE OF THE FINANCIAL INCLUSION 2019

CONTENTSFOREWORD VII

NFIS GOVERNANCE STRUCTURE IX

EXECUTIVE SUMMARY 11. Introduction 12. Account ownership 33. Access points: Developing infrastructure to enhance financial accessibility 54. Expanding sources of finance: financing for economic development 75. Reforms and initiatives: Enhancing financial capability and consumer protection 9

CHAPTER 1: INTRODUCTION 11

CHAPTER 2: ACCOUNT OWNERSHIP 152.1 Introduction 162.2 Account Ownership and Gender 172.3 Multiple financial product ownership: 182.4 Account ownership of life and non-life insurance 182.5 Saving account ownership by dzongkhag 192.6 Adult credit ownership by Dzongkhag 202.7 Insurance ownership by Dzongkhag 202.8 Saving account ownership by age 212.9 Volume of saving and credit 222.10 Volume of saving account ownership 222.11 Volume of credit account ownership 232.12 Total bank account and penetration rate 232.13 Insurance ownership and premium 242.14 Lending exposure to the micro, cottage, small, medium and large industries 24

CHAPTER 3: ACCESS POINTS 273.1 Introduction 283.2 Branches by districts 293.3 ATM and POS by district 293.4 Mobile banking 31

CHAPTER 4: EXPANDING SOURCES OF FINANCE 334.1 Priority sector lending 344.2 Jabchor 354.3 Crowd Funding 37

CHAPTER 5: REFORMS AND INITIATIVES 395.1 Revision of Private Money Lending Rules and Regulations 2016 (PMLRR) 405.2 Consumer Protection for Financial Services Rules and Regulations 2019 405.3 Financial Literacy and Education 40

xiSTATE OF THE FINANCIAL INCLUSION 2019

a. Integration of Financial Literacy into the formal mainstream curriculum 40b. YE-Banking 43c. Student Business Seedling (SBS) 44d. Little CEO 2020 44

CONCLUSION: SCOPE, OPPORTUNITIES AND SOLUTIONS 46

FINANCIAL INCLUSION SECRETARIAT TEAM (FIS) 48

LIST OF FIGURES Figure 1: Financial Inclusion Milestones from 2016-2019 13Figure 2: Account ownership by products and year 17Figure 3. Insurance and investment ownership 17Figure 4. Account ownership by gender to total male and femal adult population 18Figure 5. Account ownership by saving credit and insurance 18Figure 6. Ownership of life and non-life insurance 19Figure 7. Account ownership distrubtion by Dzongkhag 19Figure 8. Number of credit account by Dzongkhag 20Figure 9. Insurance ownership by Dzongkhag 21Figure 10. Saving account ownership by age group 21Figure 11: Volume of saving and credit (2014-2019) 22Figure 12: Saving account ownership by year and bank 22Figure 13: Volume of credit account ownership 23Figure 14: Number of insurance accounts (2018-2019) 24Figure 15: Total insurance premium (in million) 2018-2019 24Figure 16: MCSML exposure by number of accounts and amount in millions 24Figure 17: MCSML exposure in 2018 and 2019 by amount in millions 25Figure 18: Growth trend in loans, savings deposit and GDP 25Figure 19: Number of branches and extension by Dzongkhag and type of services 29Figure 20: Distribution of ATM and POS by district 30Figure 21: Number of mobile banking users by bank 31Figure 22: PSL project application and approval by Dzongkhag and FIs 34Figure 23: Amount of PSL loan disbursed 35Figure 24: Number of participants in Little CEO by Dzongkhag 45

LIST OF TABLESTable 1. Total bank account and penetration rate 23Table 2- MCSML exposure interms of percentage 24Table 3- MCSML performance (2018-2019) 25Table 4: Number of access points by year 28Table 5: Access point per 10,000 adults from 2017 to 2019 29Table 6: Fund recipient of Jabchor Season 1 and 2 35Table 7: Details of first crowd funding 37Table 8: YE-banking list of schools penetration and total students 43

CONTENTS

xii STATE OF THE FINANCIAL INCLUSION 2019

1STATE OF THE FINANCIAL INCLUSION 2019

1.1. Financial inclusion is recognized as one of the pillars for achieving sustainable

and inclusive socio-economic growth. There is a growing body of literature

suggesting that access to basic financial products and services, such as

savings, payments, credit and investments, make a substantial positive

difference in people’s lives. Therefore, the Royal Monetary Authority of Bhutan

initiated numerous regulatory reforms, development of infrastructure

including the establishment of Financial Inclusion Secretariat, and other

programs to enhance inclusive access to formal financial services.

1.2. Expanding access to affordable and quality financial service requires a

coordinated effort between the government, central bank, educational

institution, financial institutions, NGOs and individuals. Towards this, the RMA

initiated the development of National Financial Inclusion Strategy (NFIS) and

the National Financial Literacy Strategy (NFLS) with setting up of the NFIS

Governance members such as the NFIS Steering Committee and working

groups to implement the strategic activities outlined in the Financial Inclusion

National Action Plan (FINAP) 2019-2023.

EXECUTIVE SUMMARY1. Introduction

2 STATE OF THE FINANCIAL INCLUSION 2019


2.1. Financial inclusion in general refers to access to useful and affordable financial

products and services by individuals and businesses that meet their needs -

transactions, payments, savings, credit and insurance - delivered in the most

responsible and sustainable manner. Having a bank account, credit and insurance

in general is used by many institutions as an indicator of financial inclusion.

Therefore, Bhutan has also adopted the same indicators to measure financial

inclusion.

2.2. Of the 515,224 adult Bhutanese population above the age of eighteen, 67.56

percent of adult Bhutanese population owns a bank account in one of the formal

financial institutions including micro-finance. Around 20 percent of Bhutanese

population has availed credit facility which is currently active with one of the

financial institutions in Bhutan. In terms of insurance, 19.56 have an insurance

policy with one of the insurance company in Bhutan. From 2017 to 2019, credit

ownership saw the highest growth with 23 percent followed by insurance with

20 percent growth. Saving account ownership recorded the growth of around

5 percent account ownership. The number of account ownership, credit and

insurance by both value and volume for each financial institution has increased

from 2014 to 2019.

2.3. However, like in many countries around the world, gender difference in account

ownership of various financial products and services in Bhutan is noted as well.

While the gender gap in not high in saving account ownership, the gap is higher

in ownership of non-life insurance and credit. In terms of credit, 7.4 percent more

men have availed credit facility than women.

2. Account Ownership: Expanding access to affordable and appropriate financial products and services


3.1. Access points plays a pivotal role in enhancing access to finance as it facilitates

and eases transactions cost considering the distance to be traveled in order to

avail the closest access points for the clients.

3.2. The number of physical access has increased from 2017 to 2019. Among the

establishment of branches and extension officers, the highest increase is

recorded in the number of total bank branches. During the same period, Bhutan

saw a significant increase in alternative delivery channels such as ATM, POS and

Agents.

3.3. The number of total branches which includes banks, insurance and branches

of other financial service providers have remained same per 10,000 adults from

2017 to 2019. The number of bank branches and extension offices have seen some

growth from 2017. There has been significant growth in the number of ATM and

POS machines, and extension office. Over all, there is an increase in the access

point per 10,000 adults in Bhutan from 2017 to 2019.

3. Access Points: Developing infrastructure to enhance financial accessibility

BOB BNB BDBLTBANK DPNB


4.1. One the initiatives of expanding alternate source of financial is Priority Sector

Lending. Following the launch of the initiative, committees were instituted and

focal persons were appointed at the districts including the financial institutions.

A total of 1,561 projects were received from all the district after its launch in

2018. Of the total project received 1,278 were approved by the Dzongkhag and

recommended to the financial institutions. After the review of all the proposals,

the financial institutions approved 494 projects.

4.2. Jabchor is an initiative to partner with entrepreneurs and grow with them into a

successful venture, based on trust and confidence supported by legally executed

business partnership deed, recognized by laws of the Bhutan. The second season

of Jabchor was conducted on 17th July 2019 during the 2nd biennial summit of

the Bhutan Economic Forum for Innovative Transformation (BEFIT). Of the five

businesses that pitched during the conference, three businesses secured a total

funding of Nu. 11.25 million.

4.3. Following the issuance of Crowdfunding Rules and Regulations in July 2019, three

companies accelerated from the Jabchor platform were able to successfully

campaign through crowdfunding portal (Bhutan Crowdfunding Portal- BCP).

The three companies raised a total capital of Nu. 24.23 million from 245 investors.

4. Expanding Sources of Finance: Financing for economic development


5.1. In 2019, RMA revised the Private Money Lending Rules and Regulations 2016 and

Consumer Protection for Financial Services Rules and Regulations 2019. The rules

and regulations aim to expand access to finance and provides mechanism to

protect the consumers.

5.2. In view of the increasing role of financial literacy and education, a MoU was signed

between Ministry of Education, Royal Education Council, and the Royal Monetary

Authority to integrate financial literacy and education in the mainstream

school curriculum. As a result of the collaboration, the text books for grade IV

Social Studies, IX Economics, XI & XII Accountancy with components of financial

education have been published for implementation from the 2020 academic

session. Other subject integrations are under way.

5.3. Youth Ethics Banking, known as YE Banking was designed and implemented

in 2018 with the aim to bring young students in to the banking system. In 2019,

the YE-Banking incentive camp, which is an annual event, was held in Goshing

Primary School, Zhemgang on 30th October 2019. A total of 16 schools in 14

Dzongkhag with a total student of 5,382 benefited from the program in 2019.

A total payout of Nu. 794,444 was made to the schools in 2019 to be further

deposited into children’s account.

5.4. Royal Monetary Authority (RMA) in collaboration with relevant agencies organized

two entrepreneurship programs for school going youth. Student Business

Seeding, an entrepreneurship program was organized in Gelephu where a total

of 63 students, 35 girls and 28 boys participated in the program. Little CEO, which

is part of the SBS program, was organized in Thimphu where 24 students from

across the country participated in the program. Of the total student who attended

the Little CEO program, 50 percent of the participants were girls and 50 percent

were boys.

5. Reforms and Initiatives: Enhancing financial capability and consumer protection


CHAPTER 1INTRODUCTION

...There is a great opportunity for the financial institutions and banks to make a positive impact by improving access to credit for our youth and rural people.

We can gauge the extent of the impact by considering that today, in Bhutan, the total loan stock that has been lent out is Nu. 85 billion, but out of this, only 4.5 billion, or about 2.5% has been utilized in the agriculture sector. This must change...

His Majesty the King, Jigme Khesar Namgyel Wangchuck


Expanding access to affordable and quality financial service would require a coordinated effort between the government, central bank, educational institution, financial institutions, NGOs and individuals. Towards this, the RMA initiated the development of National Financial Inclusion Strategy (NFIS) and the National Financial Literacy Strategy (NFLS) with setting up of the NFIS Governance members such as the NFIS Steering Committee and the cross sectoral working groups to oversee and coordinate the implementation of the endorsed Financial Inclusion National Action Plan 2019-2023.

The strategy aims to enhance access to and usage of quality and affordable formal financial services by all Bhutanese through an inclusive financial system. The following are the strategic objectives of financial inclusion:

1. Expanding access to affordable and appropriate financial products and services,

2. Developing infrastructure to enhance financial accessibility for all citizens of Bhutan,

3. Improving accesses to finance for economic growth and development,

4. Enhance the financial capability of the citizens and consumer protection.

Financial inclusion is recognized as one of the pillars for achieving sustainable and inclusive socio-economic growth. There is a growing body of literature suggesting that access to basic financial products and services, such as savings, payments, credit and investments, make a substantial positive difference in people’s lives. Financial inclusion, therefore, has been recognized one of the potential drives to improve the financial well-being of the unserved and underserved segments of the population.

His Majesty’s address to the country at the 109th National Day of Bhutan celebrations on 17th December 2016 clearly articulated the potential of the financial sector to create opportunities and improve access to finance for our youth and rural populace. Consistent with his Majesty’s aspiration, financial inclusion has been acknowledged as an important national tool to ensure access to affordable financial services for all citizens. Therefore, the Royal Monetary Authority of Bhutan initiated numerous policy reforms, development of infrastructure including the establishment of Financial Inclusion Secretariat, and other programmes to enhance inclusive access to formal financial services. The following figure highlights the initiatives of RMA since 2016.


Figu

re 1:

Fin

anci

al In

clus

ion

Mile

ston

es fr

om 2

016

to 2

019


CHAPTER 2ACCOUNT OWNERSHIP

EXPANDING ACCESS TO AFFORDABLE AND APPROPRIATE FINANCIAL PRODUCTS AND SERVICES


2.1 IntroductionFinancial inclusion in general refers to access to useful and affordable financial products and services by individuals and businesses that meet their needs - transactions, payments, savings, credit and insurance - delivered in the most responsible and sustainable manner. In Bhutan, it is defined as “the provision of appropriate financial products and services at an affordable cost by formal financial service providers that meet the needs of the unserved and underserved segments of Bhutan’s population.” The World Bank and many other international institution stresses on account ownership to measure financial inclusion. Since ‘accounts provide a safe way to store money and build savings for the future, and make it easier to pay bills, access credit, make purchases, and send or receive remittances. Having an account is therefore used by the World Bank and other institutions as an indicator of financial inclusion.

Determining account ownership is difficult and complex given that an individual can own saving and other accounts in more than one bank, or region. In order to determine the level of financial inclusion for Bhutan, an individual with multiple accounts in one bank or more than one bank was considered as owning only one account. This was made possible by screening based on the unique citizenship number. For the purpose of deteriming proportion of population owing saving account ownership, access to credit and insurance ownership, only one account was considered using the unique CID card. Therefore, there may be differences in the total account ownership as reported by the banks and the current report.

Of the 515,224 adult Bhutanese population above the age of eighteen, 67.56 percent of adult Bhutanese population owns a bank account in one of the formal financial institutions including micro-finance. Around 20 percent of Bhutanese population has availed credit facility which is currently active with one of the financial institutions in Bhutan. In terms of insurance, 19.56 have an insurance policy with one of the insurance company in Bhutan. From 2017 to 2019, credit ownership saw the highest growth with 23 percent followed by insurance with 20 percent growth. Saving account ownership recorded the growth of around 5 percent account ownership.

FINANCIAL INCLUSION

SAVINGS

MOBILE BANKING ACCESS POINTS

CREDIT & DEBIT


Figure 2: Account ownership by products

and year

Among the adult population, 13.69 percent have a life insurance policy and 9.50 percent owns a non-life insurance policy. Among the adult population, around 11 percent has invested and owns shares or stock in one of the 20 publicly listed companies.

2.2 Account Ownership and GenderThe World Bank and other international agencies note the gender differences in account ownership globally irrespective of the development stage of the country. In Bhutan too, there is a gender difference in account ownership of various financial products and services. While the gender gap in not high in saving account ownership, the gap is higher in ownership of non-life insurance and credit. In terms of credit, 7.4 percent more men have availed credit facility than women. Similarly, for non-life insurance products, 6.7 percent more men own the policy compared to women. This may be because of higher property and business ownership by men. From among the population that owns saving account, women accounts for 46.6 percent and the remaing 53.4 percent are men. Simillarly, among those adults who has availed credit from a formal institution, 63 percent are men and remiaing are women.

Figure 3: Insurance and Investment Ownership


Figure 4: Account ownership by gender to total male and femal adult population

2.3 Multiple financial product ownership: Account ownership of saving, credit and insuranceAnalysis of accounts ownership among the adult shows that 33,624 (6.52 percent) owns a saving account and insurance policy, and availed credit from one of the financial institutions. A total of 32,071 (6.22 percent) owns a bank account and an insurance policy. Although all those availing credit facilities are required to open a bank account, around 1,750 do not have a bank account. These individuals may be those who availed credit facilities from the National CSI Development Bank (formally known as Rural Economic Development Centre Ltd). as they are not required to open a bank account. A total of 223,624 adults (43.40 percent) only owns a bank account but has not availed credit or owns insurance.

2.4 Account ownership of life and non-life insuranceA similar analysis of insurance policy ownership was conducted to see the ownership of life and non-life insurance by individuals. The analysis suggest that life insurance is more common in Bhutan than non-life insurance. While the number of individuals owning only life insurance is 51,833, the number of individuals owning only non-life insurance is 30,245. A total of 18,705 owns both life and non-life insurance products.

Figure 5: Multiple account ownership by saving, credit and insurance

33,624(6.52%)

65,810(12.77%)223,624

(43.40%)

Saving Credit

Insurance

1,747(0.34%)

32,071(6.22%)

314(0.06%)

4,529(0.87%)


Figure 6: Ownership of life and non-life insurance

2.5 Saving account ownership by dzongkhagThe ownership by district shows that Thimphu has the highest number of saving account ownership while Gasa has the lowest ownership. However, it may be noted that the account ownership by district is based on where the individual opened a bank account. Since an individual can open a bank account in any of the branch and operate the account from other branches of the same bank, the account ownership may not necessarily represent the level of financial inclusion in the district. Nevertheless, the number of ownerships corresponds to the size of the population indicating that number of ownerships is higher in populated districts of Thimphu, Chukha, Sarpang, Paro, Samtse, Wangdiphodrang, Mongar and Trashigang. Owing to the population size of these districts, most of the banks operate a full-fledged branch in these districts. The higher account ownership in Thimphu may also be a result of higher proportion of population in employment who are required to own a bank account.

Figure 7: Account ownership distrubtion by

Dzongkhag

51,833(10.06%)

18,705(3.63%)

30,245(5.87%)

Life Non-life


2.7 Insurance ownership by DzongkhagOwnership of insurance policy also shows a similar pattern with highest number of insurances in Thimphu followed by Chukha, and with least number of insurance policy holders at Gasa. Thimphu has almost twice the number of insurance policy holder to Chukha and 130 times more the number of insurance holder compared to Gasa. Since Haa, Lhuntse and Gasa have relatively fewer population compared to other Dzongkhags in Bhutan, the number of account ownership in both saving, credit and insurance are fairly lower.

Figure 8: Number of credit accounts by Dzongkhag

2.6 Adult credit ownership by DzongkhagThe number of individuals accessing credit facilities also shows a similar trend with ownership of saving account. Higher number of individuals have accessed loans from bank and branches located in Thimphu. Thimphu has provided almost two times more the number of loans than Chukha, and 53 times more the number of loans than Gasa (which has the lowest loan ownership). Thimphu’s disproportionate number of loans compared to other district may be result of the bank’s loan approval procedure where loan beyond certain amount requires the approval of corporate head office. Since the corporate office of all the financial institutions are based in Thimphu, number of loan accounts are much higher.


2.8 Saving account ownership by ageAmong the adult population, the number of saving account ownership is highest among age categories of 26 to 30. The number of account ownership decreases as the age increases after 30. Although the proportion of population in different age groups between 20 and 45 is almost equal, the number of account ownership is relatively higher among those between the age of 26 to 35 years. This may be due to higher literacy rate among the younger population and their employment in formal sectors which requires mandatory account ownership. Towards encouraging saving among children and minors, many banks provide saving facilities to those below the age of 18 years. Some of the notable saving scheme are Piggy Bank of Bhutan National Bank and Young Savers Account of Bank of Bhutan. In 2019, a total of 5200 unique child saving accounts were reported by the banks.

Figure 9: Insurance ownership by Dzongkhag

Figure 10: Saving account ownership by age group


Figure 12: Saving account ownership by year and bank

Figure 11: Volume of saving and credit (2014-2019)

2.9 Volume of saving and creditThe current total savings amount is observed to be at Nu. 38.54 billion, a growth of 17.90% as compared to 2018. Similarly, loan amount stands at Nu. 154.31 billion in 2019, an increase of 26.89% as compared to the previous year. Bhutan has seen consistent growth in both credit and deposit from 2014 to 2019

2.10 Volume of saving account ownershipThe number of account ownership by both value and volume for each bank has increased from 2014 to 2019 as reported by the banks. The increase in the value of saving account is higher than the increase in the volume of the saving account. This suggest that the average saving per saving account has increase over last six years. The increase in volume of account ownership ranges between 15 percent to 92 percent in 2019 compared to 2016.

Among the banks, BOBL has the highest account ownership and also the amount of saving account. TBank, on the other hand reported the lowest number of saving accounts and amount of saving. TBank, nevertheless recorded one of the highest growths between 2014 to 2019.


Figure 13: Volume of credit account ownership

2.11 Volume of credit account ownership The trend in credit account ownership and amount of credit availed also shows similar trend with saving account. While BDBL has the highest number of loan accounts followed by BNBL and BOBL. While all bank recorded growth in both number of credit account and amount of credit extended to clients, the growth is higher for BOBL and BNBL from 2016 to 2019.

In addition to credit services provided by the banks, other financial service providers such as the insurance companies, Micro Finance Institutions, and National CSI bank also provided credit facilities. Given the increasing number of financial service providers that provides credit facilities and with increasing number of credit accounts and value of credit being observed, the access to credit facilities also have increased over the years years.

2.12 Total bank account and penetration rate From among the five banks that currently operates in Bhutan, BOBL has the highest number of accounts followed by BDBL and BNBL. Penetration rate which is expressed as percentage of total saving accounts to overall adult population for each of the bank was computed to see the overall coverage of each of the bank. BOBL has the highest coverage with around 58 percent followed by BDBL with 40 percent. In terms of credit, DBDL has the highest coverage with around 10 percent coverage followed by BNBL.

Bank Saving Account Credit Accounts

Total Accounts Penetration Rate Total Accounts Penetration Rate

BOBL 296,300 57.51% 29,224 5.67%

BDBL 204,030 39.60% 52,962 10.28%

BNBL 187,450 36.38% 34,385 6.67%

DPNBL 89,720 17.41% 2,159 0.42%

TBank 35,660 6.92% 4,828 0.94%Table 1: Total bank account

and penetration rate


2.13 Insurance ownership and premium In terms of number of insurance ownership and the premium, there is a slight increase in non-life insurance ownership compared to 2018. However, there is a slight decrease in the insurance ownership of life insurance policies. When it comes to the amount of insurance premium, there is a decrease in both life and non-life insurance policies. This suggest the decrease in average insurance premium for non-life insurance.

Table 2- MCSML exposure interms of percentage

By amount of exposure, large and medium enterprises constitute close to 43 percent although the number of accounts is lesser than smaller enterprise. Although small enterpsie consitute the highest exposure, the proportion of exposure in terms of amount is only around 9 percent.

Type % holdingMCSML Micro 1.85

Cottage 2.55Small 8.45Medium 21.62Large 20.59

MCSML Total 55.06Non-Enterprise 44.94Total 100

2.14 Lending exposure to the micro, cottage, small, medium and large industries (MCSML) sector The MSCML sector in Bhutan is classified by number of employees and level of capital investment. The following table shows the MCSML sector lending as of December 2019. The MSCML’s percentage holding was 55.06%, largely contributed by medium and large industries. Medium and large industries hold lesser number of accounts but contribute to the highest MCSML amount. Micro and Cottage industries from the least exposure in the total MCSML. The current status is depicted in the table below. The total micro, cottage and small industries hold only 12.85% of the total loan portfolio.

(Left) Figure 14: Number of insurance accounts (2018-2019)

(Right) Figure 15: Total insurance premium (in million) 2018-2019

Figure 16: MCSML exposure by number of accounts and amount in millions


From 2018 to 2019, the exposure increased significantly for large and medium enterprise while the micro enterprise recorded decrease in the amount of exposure

Table 3- MCSML performance (2018-2019)

Figure 17: MCSML exposure in 2018 and 2019

by amount in millions

Figure 18: Growth trend in loans, savings deposit

and GDP

As compared to 2018, the MCSML lending performance, in terms of amount, increased for cottage, small, medium and large industries except for micro which has decreased by 0.83%. Overall, MCSML lending exposure increased by 17.19% in 2019 as compared to 2018.

MCSML exposure in Value(Nu. in Million)

MCSML Type 2018 2019 % increase/decrease

Micro 2,872.92 2,849.18 -0.83%

Cottage 3,599.69 3,934.57 9.30%

Small 12,503.70 13,032.91 4.23%

Medium 27,731.94 33,357.22 20.28%

Large 25,775.36 31,768.10 23.25%

MCSML Total 72,483.61 84,941.99 17.19%

Non-Enterprise 60,090.85 69,374.43 15.45%

Total 132,574.46 154,316.43 16.40%

The figure depicts growth trends in loans, saving deposits and nominal GDP for the last 5 years. Credit has grown more than GDP during the period outlining excessive credit creation in the economy. Loans has grown by around 27 percent and deposit has grown at around 17 percent in 2019. Deposit forms major portion of the funds for credit creation in the economy.


CHAPTER 3ACCESS POINTS

DEVELOPING INFRASTRUCTURE TO ENHANCE FINANCIAL ACCESSIBILITY


3.1 IntroductionAccess points plays a pivotal role in enhancing access to finance as it facilities and eases transactions cost considering the distance to be traveled in order to avail the most closest access points for the clients. Having a greater number of access point encourages easy accessibility for the population to access finance from the formal sector. Therefore, understanding the current financial infrastructure is important in designing policy and interventions to enhance access to formal financial sectors for the underserved and unserved populace. Access points are defined in terms of both physical and IT based infrastructures that enables an individual to transact through the financial institution. In this report, access points focus on physical access points such as branches, ATM, POS, agents and other physical infrastructures.

The overall number of physical access has increased from 2017 to 2019. The highest increase is recorded in the number of total bank branches. This increase may have been the result of increasing focus on expanding access through agents and other alternative banking services. However, insurance reported reduction in the number of branches as the branches with few customer bases may have been either closed or downgraded to extension offices. This could also be the result of growing emphasis on insurance agents.

Table 4: Number of access points by year

A number of international organizations have defined a set of quantitative indicators that capture the state of financial inclusion in a country. While most focus on access per 10,000 adults, some have defined in terms of access point per km2. For Bhutan, the indicator per 10,000 adults is used as less than 3 percent of the total land area of Bhutan is reported to be under cultivation. Therefore, indicator expressed in km2 may be misleading because of the low population density.

The population of Bhutanese adult over the age of 18 is estimated to be 515,224. Table 2 provides access points per 10,000 adults. The number of total branches which includes banks, insurance and branches of other financial service providers have remained same per 10,000 adults from 2017 to 2019. The number of bank branches and extension offices have seen some growth from 2017. There has been significant growth in the number of ATM and POS machines, and extension office. Over all, there is an increase in the access point per 10,000 adults in Bhutan from 2017 to 2019.

Access Points Total

Branches 2017 2018 2019

Population

Total Branches 170 170 174

Total Bank Branches 98 98 105

Total Insurance Branches 68 40 36

Total MFI Branches 29 32 33

Total Extension offices 66 70 283


Total Agents 2,333 2,396 2,442

Total ATMs 188 246 274

Total POS 759 779 1,035


Table 5: Access point per 10,000 adults from 2017

to 2019

3.2 Branches by districtsThe number of bank and insurance branches and extension offices are higher for populated areas like Thimphu, Trashigang, Samtse and Chukha. The number of branches is higher for districts with higher number of Gewogs. Thimphu has the highest number of bank and insurance branches and extension office while Gasa which is the least populated district has the lease number of bank and insurance branches. The higher number of bank and insurance branches for districts like Trashigang, Sandrupjongkhar and Samtse is because of the higher number of extension offices in these districts.

Figure 19: Number of branches and extension

by Dzongkhag and type of services

Access Points Per 10,000 Adults

Branches 2017 2018 2019

Population 496,044 506,220 515,224

Total Branches 3.43 3.36 3.38

Total Bank Branches 1.98 1.94 2.04

Total Insurance Branches 1.37 0.79 0.70

Total MFI Branches 0.58 0.63 0.64

Total Extension offices 1.33 1.38 5.49


Total Agents 47.03 47.33 47.40

Total ATMs 3.79 4.86 5.32

Total POS 15.3 15.39 20.09

3.3 ATM and POS by districtThe distribution of ATM and POS also shows a similar pattern to distribution of bank and insurance branches. Thimphu has the highest number of ATM and POS with 102 and 524 respectively followed by Paro and Phuntsholing. Less densly populated districts such as Gasa and Lhuntse has less than 3 ATMs. Dzongkhags that are considered remote like Gasa, Lhuntse, Zhemgang and Dagana has only one POS machine each in the whole district.


Figu

re 2

0: D

istr

ibut

ion

of A

TM a

nd P

OS

by d

istr

ict


3.4 Mobile bankingPrior to the launch of first mobile banking app in April 2015 by Bank of Bhutan, the mobile banking services were offered through SMS by telecom companies. Within four years, all banks and an insurance company offered mobile banking and insurance services. The services offered by most of the mobile banking services include utility bill payment, insurance and loan payment, fund transfers, QR code payment, making donations, among many others. BOBL has the highest number of mobile banking users with close to 140,000 users followed by BNBL with around 40,000 users. The higher number of mobile banking user for BOBL reflects higher customer base and also pertains to be the first mobile banking application in Bhutan.

Figure 21: Number of mobile banking users by

bank


CHAPTER 4 EXPANDING SOURCES OF FINANCE

FINANCING FOR ECONOMIC DEVELOPMENT


4.1 Priority sector lendingThe Priority Sector Lending (PSL) initiative was launched on 13 December 2017 for implementation with effect from 1 January, 2018. The main objectives of the programs are

a. To transform the CSI sector into a more enterprising and commercially-oriented sector through coordinated interventions and better access to finance,

b. To increase opportunities for youth employment

c. To promote domestic production and import substitution

d. To catalyse the CSI sector as a driver of Bhutan’s economic transformation

Following the launch of the initiative, committees were instituted and focal persons appointed at the District and also the financial institutions. A total of 1,561 projects were received from all the district after its launch in 2018. Of the total project received 1,278 were approved by the Dzongkhag and recommended to the financial institutions. After the review of all the proposals, the financial institutions approved 494 projects. Similar to trends in banking, credit and insurance, the number of project proposal received and approved is higher for Thimphu followed by Samtse and Sarpang. On the other hand, Trashiyangtse and Lhuntse has the least number of proposals received and approved.

Within two years, a total of Nu. 474.81 million was approved and disbursed to the applicants. Of the total, around 40 percent were disbursed to applicants in Thimphu. Chukha had the second highest amount of loan sanctioned with Nu. 42.23 million. On the other hand, Trashiyangtse and Lhuntse had the least amount with combined loan amount of less than Nu. 1 million.

Figure 22: PSL project application and approval by Dzongkhag and FIs


4.2 JabchorJabchor is an initiative to partner with innovative entrepreneurs and grow with them into a successful venture, based on trust and confidence supported by legally executed business partnership deed, recognized by laws of the Bhutan. The Jabchor ventures will help investors enter into a financial partnership with a trust worthy entrepreneur, who will function within a legally defined relation to help investors earn dividends, both in cash and goodwill.

The Season 2 Jabchor was conducted on 17th July 2019 during the 2nd biennial summit of the Bhutan Economic Forum for Innovative Transformation (BEFIT). After a series of careful screening and interview, it brought business opportunities for 5 entrepreneurs, each one of them from different industry with very lucrative offer and a big market appeal that goes beyond the boundaries of the country.

Table 6: Fund recipient of Jabchor Season 1 and 2

Figure 23: Amount of PSL loan disbursed

Company Fund Raised (in

million Nu.)

Investors

Season 1

housing.bt 2 Yarkay Group Pvt Ltd

Chechey Sanitary pads 3.5 Rigsar Construction

Green Path 1 CSI fund

Eco-Waste Solution 3 PHPA

Freelance Bhutan 0.6 Loden Foundation

Season 2

Sadone Design 2 Mr. Kuenzang Dechen

Himalayan Food 7 Mr. Kuenzang Dechen

Kingdom Essences 2.25 Ms. Tashi and Ms. Thinley Choden, Mr. Wangdi Jamyang, Mr. Rabsel and Mr. Penjor of Naturally Bhutan Enterprise

36 STATE OF THE FINANCIAL INCLUSION 201936 37STATE OF THE FINANCIAL INCLUSION 2019 STATE OF THE FINANCIAL INCLUSION 2019

4.3 Crowd FundingFollowing the issuance of Crowdfunding Rules and Regulations in July 2019, three companies successfully raised fund through crowdfunding portal (Bhutan Crowdfunding Portal- BCP). These companies are the Himalayan Food, the Bhutan Alternatives & One Click Shop. The Bhutan Alternatives raised Nu.8.34 million within three months, the Himalayan Food was able to raise Nu.4.5 million within a time span of three months and One click Shop raised Nu.8.5 million. More recently, the BCP has also started with donation-based crowdfunding with the focus on making finance accessible to social entrepreneurs, projects, charities and other activities as deemed fit by the platform which will have a positive impact on the community and the country as a whole. So far, one organization (Ability Bhutan Society) was able to raise Nu.700,000.

Particulars

Applicants 4

Project Financed 3

Fund Raised 21,340,000

Number of Investors 245

A. Individual 233

B. Institution 12

Table 7: Details of first crowd funding

1.

Sado

ne D

esig

n: N

u. 2

Mill

ion

for 3

0%

Equi

ty

Inve

stor:

Mr.

Kun

zang

Dec

hen

2.

Him

alay

an F

ood:

Nu.

7 M

illio

n fo

r 30%

eq

uity

Ø

In

vesto

r: M

r Kun

zang

Dec

hen,

Bhut

an C

row

dfun

ding

Pla

tform

4.5%

for 1

8% eq

uity

3.

Kin

gdom

Ess

ence

s: N

u. 2

.25

Mill

ion

for 2

0%

equi

ty. I

nves

tors

Ms.

Thin

ley ch

oden

and

Ms.T

ashi

.

Das

ho W

angd

i Jam

yang

. Mr.R

abse

l and

M

r.Pen

jor

of N

atur

ally

Bhu

tan

ente

rpris

e. 4.

Bhu

tan

Alte

rnat

ives

Nu.

8.3

4 M

illio

n fo

r 30%

equi

ty.

Inve

stors

: Bhu

tan

Crow

dfun

ding

pl

atfo

rm.

5. O

ne C

lick

Shop

Nu.

8.5

Mill

ion

for 3

7% eq

uity

.

Inve

stors

: Bhu

tan

Crow

dfun

ding

pl

atfo

rm


4.3 Crowd FundingFollowing the issuance of Crowdfunding Rules and Regulations in July 2019, three companies successfully raised fund through crowdfunding portal (Bhutan Crowdfunding Portal- BCP). These companies are the Himalayan Food, the Bhutan Alternatives & One Click Shop. The Bhutan Alternatives raised Nu.8.34 million within three months, the Himalayan Food was able to raise Nu.4.5 million within a time span of three months and One click Shop raised Nu.8.5 million. More recently, the BCP has also started with donation-based crowdfunding with the focus on making finance accessible to social entrepreneurs, projects, charities and other activities as deemed fit by the platform which will have a positive impact on the community and the country as a whole. So far, one organization (Ability Bhutan Society) was able to raise Nu.700,000.

Particulars

Applicants 4

Project Financed 3

Fund Raised 21,340,000

Number of Investors 245

A. Individual 233

B. Institution 12

Table 7: Details of first crowd funding


CHAPTER 5REFORMS AND INITIATIVES


5.1 Revision of Private Money Lending Rules and Regulations 2016 (PMLRR) The Private Money Lending Rules and Regulations (PMLRR) aims to expand access to finance by formalizing the private money lender and ensuring stability and protection was approved in 2016. In order to ensure financial stability and enhance consumer protection, the rules were reviewed and amended in 2019 by the RMA. The revised rules are expected to professionalize the private money lending business and ensure better service provisions to the customer. In addition, the revised rules are expected to encourage individuals to take up private money lending resulting in increased access to finance.

Name of Lenders Registration certificate issued on

No. of borrowers

No. of live client/s

No. of litigation

Chimmi D. Finance & Investment, Thimphu 12th September 2018 2 2 nil

Thimphu Finance, Thimphu 12th September 2018 3 3 nil

Kunzang Choden, Thimphu 21st May 2019 0 0 nil

5.2 Consumer Protection for Financial Services Rules and Regulations 2019RMA and the Office of Consumer Protection (OCP) under Ministry of Economic Affairs (MoE) signed a Memorandum of Understanding on 18th June 2019 to strengthen collaboration towards effective implementation of consumer protection in the financial sector. Further, in July 2019, the Board approved the Consumer Protection for Financial Services Rules and Regulations 2019. These Rules and Regulations which were formulated in consultation with relevant stakeholders, aims to ensure fair market business conducts in the financial sector. The by-laws provide provisions that facilitate impartial dispute resolution in case the customers are aggrieved with the decisions of the financial service providers. The rules and regulations are aligned with the relevant provisions of the Consumer Protection Act 2012 and Consumer Protection Rules and Regulations 2015.

5.3 Financial Literacy and Educationa. Integration of Financial Literacy into the formal mainstream curriculumRecent development has led to the emergence of financial literacy as one of the critical components for wellbeing of the population. The availability of complex and alternative financial options, longer life span of the population, and the changing financial landscape has led to consumers having to make more financial decisions. Therefore, in view of the increasing role of financial literacy and education, a MoU was signed between Ministry of Education, Royal Education Council, and the Royal Monetary Authority to integrate financial literacy and education in the mainstream


school curriculum. Following the signing of MoU, seven subjects viz. English, Dzongkha, Mathematics, Accountancy, Commerce, Economics and Social Studies were identified to incorporated financial education.

Relevant subject curriculum frameworks were reviewed to incorporate learning objectives specific to developing financial competencies and capabilities. These educations include:

a. Learning to earn through entrepreneurship; b. Economic impact; c. Budget management; d. smart savings and long-term planning; e. Productive credit and debt management; f. Financial shopping; g. Digital financial services and fintech; h. Consumer protection; i. Insurance, risks and investments.

As a result of the collaboration, the following books with the components of financial education have been published for implementation from the 2020 academic session:

a. Accountancy class XI & XII, b. Economics class IX, c. Social Studies class IV.

Other textbooks like Commerce class XI & XII, Economics class X to XII, Social Studies class V, English class PP- XII, Dzongkha class IX & X, and Mathematics class PP-III will be published in the subsequent years as and when the development stages in the curriculum process are completed.


Sl# Dzongkhag Number of Schools Total Students Total Payout

1 Bumthang 1 871 117,630

2 Chukha 1 552 32,642

3 Dagana 1 479 58,592

4 Gasa 1 152 18,428

5 Lhuntse 1 134 33,242

6 Paro 1 106 30,790

7 Pemagatshel 1 265 54,126

8 Samdrupjongkhar 1 141 26,576

9 Samtse 1 404 78,020

10 Sarpang 2 327 56,320

11 Thimphu 1 914 120,000

12 Trashigang 2 275 79,968

13 Wangduephodrang 1 656 58,692

14 Zhemgang 1 106 29,418

16 5,382 794,444

b. YE-BankingYouth Ethics Banking, known as YE Banking was designed and implemented in 2018 with the aim to bring young students in to the banking system. This concept has been designed to inculcate the savings habit and educate the Bhutanese children and youth on practical financial knowledge on banking, insurance and others products and services. In 2019, the YE-Banking incentive camp, which is an annual event, was held in Goshing Primary School, Zhemgang on 30th October 2019.The senior leaders of the Dzongkhag and financial institutions graced the camp.

A total of 16 pilot recipient schools from across the country participated in the annual camp. Since remotes schools are generally perceived to be at a disadvantage, YE Banking focused mostly in remote primary schools. Sakteng, Laya, Lauri, Zangkhar, Goshing, Dechenling are few among the others with some schools of these schools as far as three to five days walk from the nearest road point. The schools were selected across the country in coordination with MOE based on school’s remote location, pro-activeness, enthusiasm and geographical penetration. A total of 16 schools in 14 Dzongkhag with a total student of 5,382 benefited from the program in 2019. A total payout of Nu. 794,444 was made to the schools in 2019.

Table 8: YE-banking list of schools penetration and

total students


d. Little CEO 2020Little CEO, which is part of the SBS program, is an annual event organized to develop entrepreneurial skills and financial capability of young school going children. The first Little CEO was organized in 2018 with participants from schools in Thimphu. In 2019, the program focused on rural youth as rural areas generally lack resources and opportunities resulting in those students falling behind their urban peers when it comes to learning and discovering new aspects of life. The 2nd Batch of Little CEO’s Session was conducted from 6th – 17th January, 2020. A total 24 students from across the country participated in the program. Of the total, 50 percent of the participants were girls and 50 percent were boys.

c. Student Business Seedling (SBS)Royal Monetary Authority (RMA) in collaboration with Entrepreneurship and Self-Employment Division (ESED) under Department of Employment of Human Resources (DoEHR) of Ministry of Labour and Human Resources (MoLHR) conducted “Student Business Seedling” Program at Gelephu, Sarpang. The SBS program was aimed at promoting entrepreneurship and building entrepreneurial competencies for students and YE-Banking teachers. A total of 63 students, 35 girls and 28 boys participated in the program and the top 5 students were awarded cash prizes.

The 10 days program consisted of two courses:

1. Entrepreneurship education2. STEMSEL (Science Technology Engineering Mathematics Social Learning

Enterprise)

The STEMSEL program was included to encourage participants to take interest in programming in an era where digitalization is getting more prominent by the minute. It teaches the participants to use the programming lessons in their real life to capitalize their ideas as commercially viable ventures in future.


Figure 24: Number of participants in Little CEO

by Dzongkhag


Conclusion: Scope, opportunities and solutionsThe state of financial inclusion provided in this report highlights the current state and progress over years in terms of supportive regulations promoting financial inclusion, infrastructural access points, access to basic financial products and services, digital channels, alternate sources of financing and financial literacy.

Financial inclusion efforts have been prioritized at the national level with joint support from the key government agencies and financial service providers. The RMA has taken several measures to diversify and enhance financial inclusion towards strategic economic development. The National Financial Inclusion Strategy provides a road map for Bhutan to collectively plan and strategize financial inclusion initiatives to enable regulatory interventions, enhance appropriate financial products and services through digitally defined solutions to the unreached and underserved population in the country.

The report also explores opportunities for furthering and unlocking financial inclusion in the next three to five years and includes the following:

• Recreating Appropriate financial products: Financial inclusion in Bhutan currently measures at 68%. Within the basic financial products, the scope of deepening inclusion will relate to increasing more access to formal savings. Sustainable and new credit products need to be promoted such as Inclusive Green Finance, collateral replacement products such as warehouse receipts, credit reports, shares and other accounts receivables, credit guarantee schemes etc. All FSPs collectively must focus on financial service delivery to geographical areas other than Thimphu and Chukha to meet the national financial inclusion target of 85% by 2023.

• Improving access points: To promote financial inclusion to the unserved and underserved, access points particularly agent banks could be promoted further.

• Introducing new market players: Bhutan currently has smaller but adequate numbers of financial players catering to a segment of adult population. But there is scope for introducing new and effective players strategically to increase and facilitate access to finance particular welcoming the private sector involvement in terms of Fintech development. Additionally, BCCI and RSEBL could redefine its respective roles towards facilitating alternate access to finance such as the angel investment platform and crowd funding platform. There is also scope for including cooperative and self-help groups to the formal financial service provider’s list.

• Leveraging Fintech and DFS: Fintech is another area of accelerating digital initiatives and technologies for financial inclusion. Sandboxing regulations initiated could further incorporate and open up new fintech products and


schemes from the private fintech firms. There is untapped potential in fostering interoperability, particularly with QR code and wallet services. There is scope of promoting e money to be also included in the FI value store transactions.

• Enhancing financial literacy and consumer protection: Enhancing financial literacy is one key area to promote financial capabilities in terms of improving financial knowledge, skills and behavior towards making effective financial decisions. While promoting financial inclusion, all policies must focus on balancing growth with consumer protection capacity in terms of having in place effective redressal mechanisms, fair market conduct and inclusive treatment, consumer information privacy and extending rights and responsibilities of both consumers and service providers. Financial literacy curriculum developments could also extend further to Non-formal education and vocational institutes in addition to the current integration with REC in the mainstream curriculum. A modified version of Fintech curriculum could also be developed to be implemented for the National Service, FITI, GCBS, CRST etc. All other efforts to increase knowledge products and other social media promotion should continue based on the popularity of the delivery channel.

• Enhancing Effective measurement: There is indeed a need for a demand side survey to gauge the financial inclusion penetration in the underserved and unserved population for further supportive interventions and redefining financial inclusion objectives where relevant. Additionally, a financial capability measurement tool could also be developed to gauge the financial literacy index.

The possibilities listed above can extend to other requirements and demand in keeping with the country’s situation and development policies.

To meet financial inclusion objectives, collaboration and collective efforts are key to drive access to finance. All agencies outside the government should also partner to supplement Government initiatives for overall inclusive development and attainment of the country’s sustainable goals

48 STATE OF THE FINANCIAL INCLUSION 2019Fi

nanc

ial I

nclu

sion

Sec

reta

riat T

eam

(FIS

)


Royal Monetary Authority of BhutanChhophel LamKawajangsaThimphu, BhutanPost Box No. 154

Telephone: 02-330521Email:[email protected]

All publications related to the Royal Monetary Authority of Bhutan can also be assessed online at https://www.rma.org.bt/

ALLdesignPRINTING & PUBLISHING

REPORT - RMA

Documents

Transcript of REPORT - RMA