Lazy banks

My last entry provoked Zekom to exclaim: “…calling Bhutanese Banks conservative is a praise they don’t deserve. I’d call them lazy!”

She is correct.

Because our banks our lazy, money lenders are doing a thriving business throughout rural Bhutan, where our farmers are compelled to take loans at exorbitant rates. It’s common for money lenders to charge farmers interest rates of 5% per month, which works out to 60% per year!

This, of course, is illegal. The Moveable and Immoveable Property Act (1999) stipulates that “… no lender other than a registered financial institution which has been duly licensed to engage in the extension of credit, may charge interest greater than 15 percent per annum expressed as a simple annual rate.” But the complete absence of meaningful banking services in rural Bhutan means that desperate farmers are willing to accept extremely high rates, even though they are illegal. It also means that our farmers find it very difficult to repay loans. And those that can’t lose their land and, sometimes, even their houses.

But that’s not all. I’ve learnt that money lenders do brisk business even in Thimphu. And how much do they charge? Get ready for this: as much as 20 percent a month! That works out to 240% a year.

This is ridiculous. And illegal. And heartbreaking.


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  1. Anonymous says

    Competition in sector makes the regulation of the public services easier. It has proved right in Bhutan also, say for example in 2003-04-05 cellular mobile communication is very expensive. It is only with the wealthier section of our population and without competition (Tashi cell) who would have thought that a constrution worker for that matter a low level civil sevants could afford to use one.

    similarly we hope that the banking senario in Bhutan should also change with the coming in of the two new banks by next year.

    atleast the attitudes of the bank clerks would change….


  2. while giving loans to rural people at good rates sounds very good on the surface, I would be very interested in seeing some data on existing loans to rural people and how those loans are doing. Are rural people good at paying back the loans? What percentage of the loans to rural people go bad (amount owed has to be written off because the borrower has no way of paying back)?

    I think the last thing that Bhutanese banks should be doing loaning money to rural people because it feels and sounds good. This will lead to the collapse of the banking system and lead and affect the economy. Something similar to this happened in the U.S. Banks started lending to unqualified poorer people because of some pressure for certain people in the government. A lot of those loans ended going bad because the borrowers did not consider their financial situations carefully.

    If loans are made borowers should be vetted to make sure they have a viable enough plan to make money and enough collateral for the loan. I do agree with you that it is absolutely criminal to be charging 60% interest.

  3. Anonymous says

    perosnally i think many things in Bhutan are starting to seem
    bullshit. Everything good = people who already have and laws and policies = ordinary citizen. If required – let’s change the policy to suit.
    media and their bright journalists only choose stories that are appealing in terms of being juicy to people ( resulting in crappy – often insensitive stories) and they call it a sensational story…….that’s what people want. well of course ….. if you start a culture like that. today, many people around the world are looking for what we have in our country and we look at the opposite side and almost are on the verge of throwing all that. today, people around the world look at us and are awed with our values ( superficial to a Bhutanese) and tradition and we are moving away.
    the government -only time government tries really hard is when there’s something personal to benefit. and of course all things equal…people continue to suffer and not quite apparently because we are buddhist and we are supposed to accept everything that happens to us since we are paying for what we did in our past lives.

    while some people live king size life ( because of their past good deeds) some people barely have a source for thier next meal ( because of their past lives). And yet we are a happy country. this is what makes us special but we don’t want to stay that way because those who have want more
    in the nut shell.
    about Bhutan and our pursuit to GNH!!!!!

  4. Yep. Those money lenders are beneath earthworms.

    Such usury and the misery it causes on fellow human beings is one reason why All Bhutan Farmers’ Cooperative makes a lot of sense.

    We ought to learn from the best of the best practice in micro-finance (small-shareholder cooperatives in banking and insurance). Especially when the world’s best is right next door — BRAC, in Bangladesh, lead by a sterling leader Fazle Abed Hasan.

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