Money and Microenterprises in Bhutan ; The Land of Zorig Chug Sum : Thirteen Arts and Crafts

by Samirendra Nath Dhar Saamdu Chetri

About the BookThe book “Financing Microenterprises in Bhutan” is based on the empirical study. It investigates how microfinance system applies to Bhutan, assesses the problems and prospects of microenterprises and analyses the role of various agencies, particularly the financial institutions in meeting the vital needs of the microenterprises for finance. It is said that the major problem of the microenterprises is financial in nature. Literature review and bibliography are rich and well adapted in the book.Providing an overview of economic development and growth of microenterprises in Bhutan, the book confirms that microenterprises have started as early as human inhabitation and were rural based. In Bhutan they are known as Zorig Chu Sum (thirteen arts and crafts), which were slacked in the face of development. Growth of microenterprises in Bhutan has begun only about two decades ago. The book reflects the importance and need of microenterprises in a developing economy like Bhutan, especially when it is moving from subsistence farming to modern economy. It deals with types of institutional support and policy issues, determines the sources of funds and analyses composition and application of funds by microenterprises, and discusses formal financial system, lending patterns of financial institutions to different sectors of economy and examines financial institutions’ and others’ role in microfinance. The book indicates that problems are with lenders as well as borrowers. One of the break through made is the study in informal financial sector; the moneylenders. It examined their role in lending to microenterprises, problems faced and their operating system in Bhutan. The study examined that microenterprises preferred moneylenders to the financial institution because of less formalities and quick access to loans.Microenterprises that are heterogeneous in character consisting of different lines of manufacture, production and services are defined in the book. The investment level ranges from a few hundreds to several hundred thousands. This study deals with microenterprises identified and licensed by the Ministry of Trade and Industry, the Royal Government of Bhutan, with investment level up to Nu half a million with fewer than 5 people employed. Microenterprises evidences that a large part of their capital needs are met through informal sector such as the moneylenders. 50% of the fund requirements are for working capital and the other half is for fixed assets. It is found that all financial institutes in Bhutan provided credit/loan of less than 4% average of their total loan portfolio to microenterprises. The borrowing cost of microenterprises was as high as 15% of the loan amount and the financial institutions have an imbedded perception that microenterprise lending is costly, unprofitable and that default rates are high. The interest rates charged by moneylenders were found to be very high averaging to 88% per annum, yet microenterprises used this source for borrowing.The book delves into the problems of financial systems/intermediation and answers numerous questions in the subject basing its study on a basic Development of the financial system in Bhutan has resulted in proper and easier access to credit for microenterprises. Various other hypotheses related to this were advanced and statistically tested when required in the course of the study. The study lays a foundation in the subject to enable policy makers and future researchers to examine further the need of microenterprises and how to address their future growth and development.

293 pages, Hardcover

First published January 1, 2004