In a comprehensive exploration of Bhutan’s credit landscape, a recent survey has unveiled distinct patterns, emphasizing a strong inclination among rural banked adults towards Bhutan Development Bank (BDB). A staggering 72.7 percent of rural banked adults favor BDB, marking a substantial 2.3 times higher preference compared to their urban counterparts.
Engagement with Credit: A Bhutanese Perspective
The survey, encompassing 45.1 percent of all banked adults in Bhutan, sheds light on the nation’s credit behavior, revealing a substantial engagement with credit. Both formal and informal sources have been tapped by Bhutanese individuals, showcasing a diverse financial landscape.
Gender and Geography: Unveiling Disparities
When examining borrowing behavior through the lenses of gender and rural-urban location, notable disparities emerge. Male banked adults lead in credit engagement with 51.7 percent availing loans, while females follow closely at 40.1 percent. Likewise, rural areas exhibit a higher propensity for credit engagement (50.3%) compared to urban zones (37.0%).
Formal Credit Preferences
Formal credit sources take precedence among Bhutanese seeking loans, with 59.5 percent choosing Bhutan Development Bank (BDB) as their preferred credit source. Bank of Bhutan (BOB) secures the second position at 19.2 percent, followed by Bhutan National Bank (BNB) at nine percent. In contrast, microfinance institutions witness less than five percent utilization, and Druk PNB and T-Bank fall behind with only 1.1 percent and 2.5 percent usage, respectively.
Purposeful Borrowing: Insights into Loan Motivations
The survey delves into the motivations behind availing loans, uncovering that 29.2 percent of banked adults cite household establishment as their primary reason. Other prevalent purposes include vehicle purchases (19.0%), initiation of new businesses (16.3%), investment in building or flats (14.4%), and agricultural pursuits (11.7%).
Microfinance Dynamics and Regional Preferences
Microfinance institutions find greater favor in rural areas, with 5.9 percent engagement compared to 2.7 percent in urban zones. Furthermore, female banked adults show a greater affinity for microfinance, with 7.3 percent choosing this option, while their male counterparts lag behind at 2.7 percent.
Urban and Male Preferences: Traditional Institutions Take the Lead
Conversely, urban and male banked adults lean towards traditional financial institutions, showcasing a distinct preference for Bank of Bhutan, Bhutan National Bank, and T-Bank.
Challenges in Credit Access and Satisfaction Levels
The survey highlights challenges faced by those seeking loans, with a considerable 24.0 percent experiencing difficulty in repaying installments. However, satisfaction levels among those availing loans are notably high, reaching 73.3 percent. Friendliness of credit officers, fees charged, required documentation, and approval time also contribute to overall satisfaction, emphasizing the positive aspects of the borrowing experience.
Implications and the Road Ahead
As Bhutan navigates the complexities of its credit landscape, understanding these nuanced patterns is vital for financial institutions aiming to enhance financial inclusion. Addressing location-specific challenges and offering tailored solutions can further contribute to a more equitable and accessible credit environment for all Bhutanese individuals.
