BDFCL jumps on board the bankwagon
From Kuenselonline.com
RMA approves a ‘specialised banking license’ to expand into urban centres
18 March, 2010 - The Bhutan development finance corporation limited (BDFCL), the country’s sole development bank, will soon be expanding domestic banking services to the urban centres with the royal monetary authority (RMA) approving a ‘specialised banking license’ on March 2.
The license basically allows the development bank to provide all kinds of banking services, from accepting deposits to checkbook facilities, but only within the country. It already accepts savings deposits in the rural areas, but had to apply for a special license to do the same in the larger urban centres.
“It’ll help lower the cost of funds to sustain our rural credit operations,” said the BDFCL managing director, Nawang Gyetse. With donor grants drying up, he said, the bank was compelled to borrow money from commercial banks to fund rural lending. “The deposits from the urban centres will be used to fund rural lending,” he said.
With its savings deposit rate at least a percent higher that existing rates, basically to encourage rural savings, BDFCL officials are optimistic that it will draw people in the urban centres to keep their money with them.
It has also made its corporate deposit rates as competitive as possible to attract corporate agencies that make up 90 percent of all deposits in banks.
Nawang Gyetse said that one of its advantages was its large network of branch offices all over the country, through which it could extend banking services. It has 25 branches nationwide and planes to open branches in Dorokha, Gelephu, Lhamoizingkha and Daifam this year.
Even though the bank has about 20,000 active clients, of whom 18,000 are farmers and villagers, bank officials said that there were still a lot of people in rural Bhutan who did not have access to credit. “Our target is to increase our overall client base to at 30,000 by 2012,” said the managing director. “Delivery of financial services still remains a challenge for us, given the rugged terrain, scattered settlements and lack of adequate market and business opportunities.”
While the issuing of the special banking license is expected to ease the problem of lack of funds, the other constraint plaguing the bank was the shortage of skilled and trained manpower. “Despite all possible steps being taken to retain the best, we’ve been losing well trained people to other institutions and organisations,” said the managing director. “This is mainly because we’re a state-owned company and our salary scales have to follow government regulations.”
Several trained and experienced BDFCL employees are working with the new banks and international organisations. “Even our decision making here isn’t like the other corporate bodies, which is a major hindrance,” said the managing director.
Despite the challenges and the natural calamities that hit the country last year, BDFCL did surprisingly well in 2009. For the first time in its history it made a profit of Nu 150 mn, even though its asset base is under Nu 3 bn.
While the bank reduced its non-performing loans (NPL) from 16.49 percent to 13.83 percent in 2009, it must further reduce it to 13 percent this year. It is one of the conditions set by RMA after it issued the special banking license.
The RMA had initially asked for NPL to be brought down to eight percent when the bank applied for the special banking license.
By Phuntsho Wangdi
