challenges & opportunities in sme financing 2... · opportunities to contribute greater share...

CHALLENGES & OPPORTUNITIES IN SME

FINANCING

BACKGROUND ON REDCL

The Royal Government of Bhutan established Rural Enterprise Development Corporation Limited (REDCL) as a State Owned Enterprise (SOE).

The office is entrusted with the mandates to carry out the services of the access to Revolving Fund (RF II).

Rural Enterprise Development Corporation Limited was inaugurated by His Excellency Prime Minister Tshering Tobgay on 21st May 2016.

MANDATES OF REDCLRevolving Fund (RF) II – Non-Formal Rural ActivitiesFund access to non-formal rural activities involved in

production & Manufacturing.

Base-line financing for individuals & cooperatives engaged in agriculture, livestock, forestry, fishery and manufacturing.

Purpose is to boost overall production of rural communities and support the rural entrepreneurs.

To improve the living standards of the rural communities.

FUND TERMS & CONDITIONSFund size : Maximum of Nu. 5, 00,000.Interest  : 4%.Tenure   : Maximum of 10 years (depending on the nature of 

project).Gestation period      : Maximum of 12 months (depending on the nature 

of project).Mode of Repayment : Monthly/Quarterly/Half‐yearly.Repayment Source   : Cash flow from activities/Identified repayment 

source.CIB Report : Applicable.Guarantor : who has good credit history with other Financial 

Institutions.Sector : Production/ Manufacturing and Non‐formal Rural 

Activities.Licenses and Clearances : Depend upon the nature of the business.

SOURCES OF FUND Economic Stimulus Plan – Total Nu. 5.00 billion (Grant from GoI)

Fund Allotment to REDCL (Former BOiC) – Nu. 400.00 million

Additional Allotment in 2018 – Nu. 100.00 million

Further Commitment from the Government – 200.00 million

FUND STATUS

Fund Approved = Nu. 595.163 million

Fund Disbursed = Nu. 466.452 million

Ratio of Operational cost to Interest Income = 1: 3

CHALLENGES Limited or no other sources of fund.

Institutional sustainability (With Interest rate of 4% p. a )

Diversion of fund by the clients

Force Majeure (Insurance Companies do not cover all the risks associated with the borrowers & and the projects)

Recovery of fund (NPL as of Nov. 2018‐13.8%)‐ Allowable rate is 30% as per ESP.

Geographical difficulties 

Risky Target Group

OPPORTUNITIES To contribute greater share to GDP (currently 17.37 % by pry sectors)

Generation of employment

Reduce Import ( For 3 Q alone in 2018, imports = Nu.8 billion)

Enhance Export ( For 3 Q alone in 2018 exports – Nu. 3 billion)

Curb rural‐urban migration

Enhance livelihood of the rural population

And…SomeoftheSuccessfulProjects

ofREDCL…

Yathra Production in Bumthang

Sherkar’s Yoghurt Production

YONTEN JAMTSHO PARZO KHANG

Tengma Production

Mrs. Pema WangmoGreen Tea plantation

Mushroom projects

Sowing seed

Billet storage shed Mushroom available in the local markets

Nazhoen Gonor Yarpel Tshogpa,TashiYangtse

Poultry farming in various Dzongkhag

REDCLApprovedProjectsMapasofNovember30th,2018• https://www.google.com/maps/d/viewer?mid=1hVjcomVwkeeO11jodXEbL0kywP49ww7M&ll=27.359472005512742%2C90.99005074570312&z=8