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.