While Bhutan likes to present itself as a nation guided by equity, inclusion and Gross National Happiness, yet when it comes to something as basic as access to affordable credit, the reality on the ground—especially in rural Bhutan—tells a far less comforting story.
The Economic and Finance Committee’s latest report to the National Assembly is not just a routine review of banking practices but an indictment of a financial system that has consistently failed to reach the grassroots while charging citizens some of the highest bank interest rates in the world.
For years, rural Bhutanese have been told that reforms are coming. Minimum Lending Rates, Common Land Base Rates, and standardized frameworks among many. However, these phrases sound impressive in policy documents and parliamentary debates.
But for farmers, small entrepreneurs, and rural households struggling to finance productive activities, they remain largely theoretical. The Committee’s findings confirm what citizens already know: despite reforms, rural borrowers still face higher interest rates, undervalued collateral, and limited access to meaningful loans.
The excuse offered by financial institutions is always the same—risk. Rural land is illiquid, markets are weak, collateral is difficult to sell. While these challenges are real, they have become a convenient justification for conservative lending that borders on institutional indifference. Banks continue to devalue rural land, often using outdated valuation models, while administrative valuations paint a very different picture.
The result is a cruel contradiction: land that is deemed valuable enough for taxes and fees suddenly becomes “worthless” when a farmer seeks a loan.
This gap between policy intent and operational reality is not accidental. It reflects a deeper failure of Bhutan’s financial institutions to design products and systems that work for rural economies. Instead of innovating, banks have chosen the path of least resistance while passing costs and risks onto borrowers.
High interest rates, rigid collateral requirements, and opaque lending decisions have effectively locked rural citizens out of the formal financial system.
It is particularly galling that this happens in a country where bank interest rates remain among the highest globally, despite repeated assurances of reform. While urban borrowers with liquid assets and strong market access begin to see marginal benefits, rural borrowers are left behind, paying more for less. This is not financial inclusion, but financial exclusion dressed up as prudence.
The Committee’s call for a joint action plan from the Royal Monetary Authority, Ministry of Finance, PAVA, and Bhutan Development Bank Limited is necessary and long overdue. Oversight without accountability will achieve little.
What Bhutan needs is not another report or framework, but measurable outcomes and lower effective interest rates for rural borrowers, realistic land valuations, and credit products tailored to agricultural and small-scale enterprises.
At its core, access to credit is about dignity and opportunity. When rural citizens cannot borrow to farm, build, or start small businesses, economic development stalls and inequality deepens.
Policy success cannot be measured by how neat regulations look on paper, but by whether a farmer in a remote gewog can actually get a fair loan.
