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Plagued by poor money management and misuse of loans by rural borrowers, BDFC will now be packaging non-financial services along with their micro-loans.

These non-financial services include monitoring and supervision of rural borrowers.

From accounting lessons, designed for both semi-literate and illiterate borrowers, to providing the most up to date market information, BDFC will teach micro-loan borrowers to manage their money efficiently and profitably, said the project’s coordinator, Karma T Dorji. BDFC will regularly visit their micro-loan clients to ensure their projects are being conducted properly.

“It’s very much linked with the millennium goals of poverty alleviation,” said BDFC’s agriculture specialist, Dr Pema Choephyel, on the scheme. By 2015, the government plans to halve the poverty level. Today 23 percent of Bhutan’s population is below the poverty line, categorised as living on less than USD 1 a day. Of these, 98.1 percent live in rural areas.

As the only organisation in the country with loan schemes for rural development, “this project is very critical in helping us refine our micro-financing structure,” said Karma T Dorji. Dr Pema said it was not enough to just give loans, but important to ensure they were utilised properly. He also said that micro-loan amounts would also have to be increased.

An UNDP micro-finance specialist, Tofayel H Basunia, said, “It’s one of the best tools to alleviate poverty.” But he said Bhutan’s dispersed rural communities and the costs incurred in reaching them would be a challenge.

BDFC trained in non-financial services 62 of its officials, who will, in turn, train the rural borrower. The training was funded by UNDP.

UN resident representative Claire Van der Vacren said, “In many countries, including Bhutan, access to credit is often limited for women and youth, who don’t have assets, such as land or other property, to offer as collateral,” she said. She encouraged Bhutanese financial institutions to address these challenges “head-on”.

The success of the new micro-financing scheme will be measurable by the end of 2009, said Dr Pema. If the micro-loan borrowers are able to qualify for larger loans, this will be measured as a success. He said women and youth could also qualify for loans, collateral free, as long as they applied under the group scheme.

BDFC currently has USD 45,000 for providing micro-loans.