In a recent meeting with three political parties, including the current government, the issue of merging the National CSI Development Bank Limited and Bhutan Development Bank Limited (BDBL) has sparked a heated debate. The former board member of CSI Bank, Leki Dawa, strongly advocated keeping the two banks separate, citing the importance of maintaining access to finance for entrepreneurs (CSI sectors) and private business entities in the country.
Leki Dawa emphasized that while the mandates of BDBL and other commercial banks are almost identical, BDBL serves a distinct purpose as a rural-based with a focus on collateral-backed loans. On the other hand, the National CSI Development Bank caters to business and aspiring entrepreneurs without collateral, functioning as a social bank with a mission to provide low-interest loans.
The reforms in the financial sector have significantly impacted the CSI bank, resulting in a positive impact on over 6,500 individuals, with a total disbursement of Nu 2,255.54 million within two years, the report stated.
However, Leki Dawa expressed concern over the reduced threshold for collateral acceptance, which was set at 30% previously but has now been aligned with other financial institutes at 5%. He argued that this change undermines the unique position of CSI bank as a social bank and disadvantages aspiring entrepreneurs (CSI sectors).
“Maintaining the same threshold for social banks as conventional financial institutions is inherently unfair and potentially detrimental to the mission and purpose of CSI banks,” he said, adding that these specialized institutions were designed to serve the community, fostering development in rural and underserved areas, and promoting social welfare. By raising concerns over the lowered threshold, CSI banks could face challenges in fulfilling their intended purpose effectively.
Advocates for keeping the banks separate highlighted that the CSI bank has a solid foundation with well-equipped regional offices and a trained staff. Merging the two institutions could jeopardize the efficacy and success of the CSI bank.
Leki Dawa also called for a redefinition of BDBL’s mandates, mission, and vision to reinforce its identity as a rural-based bank. While acknowledging that government initiatives like NCGs have been beneficial for entrepreneurs, he stressed the need to identify the responsible parties behind such programs.
The political parties present in the meeting concurred with the view that the two banks should not merge, and instead, remain separate from commercial banks. Some entrepreneurs voiced their concerns, emphasizing that the expertise of the CSI Bank and its positive impact on private entities should be preserved.
Critics of the merger highlighted that the government has a history of initiating new banks with each new administration, leading to wasteful spending without significant benefits for the economy. They also expressed dissatisfaction with BDBL’s focus on loan disbursement based on projects without a proper evaluation of their success.
Meanwhile, the potential merger of the National CSI Development Bank and BDBL has raised serious concerns among political parties, entrepreneurs, and stakeholders. The debate continues as stakeholders call for the preservation of the CSI bank’s distinct identity and mission to support entrepreneurs without collateral while suggesting reforms to strengthen BDBL’s rural-based banking approach.
By Kinley Yonten
