In a landmark move aimed at invigorating the national economy, the government has announced a substantial investment of Nu 5.3 billion into the banking sector under the Economic Stimulus Programme (ESP). This initiative, revealed yesterday during the launch of the programme’s first phase, is designed to offer collateral-free and low-interest concessional loans, alongside a reinvigoration fund for distressed businesses.
Finance Minister and Chairperson of ESP, Lekey Dorji, detailed that the first phase of the ESP will focus on providing concessional credit lines. This phase aims to support primary sectors including agriculture, livestock, and various industries such as cottage, small, and medium-scale production and manufacturing.
“The first phase of the ESP is all about enabling growth through concessional loans,” Dorji stated at the launch event. “Our goal is to stimulate new business opportunities and scale up existing ventures to drive economic recovery.”
The ESP’s concessional loans will be available at a notably low interest rate of 4 percent, with the added benefit of being collateral-free but backed by project assets. In addition to these loans, the programme will also provide a reinvigoration fund aimed at reviving distressed businesses with the potential for recovery. This fund offers two distinct modalities: interest subsidies on existing loans and additional loans at the same subsidized rate.
Under the interest subsidy scheme, eligible borrowers will receive a 4 percent per annum reduction on their outstanding loans for up to three years. Alternatively, they can access additional loans at the same subsidized rate. However, borrowers can only choose one of these schemes, not both. For example, if a bank’s standard loan interest rate is 10 percent, borrowers under the ESP scheme will effectively pay only 6 percent due to the 4 percent subsidy.
The reinvigoration fund is set at Nu 2 billion and is targeted at businesses of all scales that are facing difficulties but have the potential to rebound and foster economic growth. Exclusions apply to sectors such as housing, personal transport, and trade, including import-oriented businesses.
The allocation for the concessional loans is significant: Nu 500 million each for primary agriculture and livestock, as well as for cottage and small industries in the production and manufacturing sector. An additional Nu 300 million has been set aside for scaling up existing startups and Nu 200 million for film production. Medium-scale production and manufacturing ventures will have access to Nu 1.8 billion in loans.
The application process will be managed by five commercial banks and three non-bank financial institutions. Applicants will need to submit their loan requests to these institutions, which will then evaluate them based on the ESP’s eligibility criteria. Financial institutions are expected to outline their specific application procedures and criteria soon.
Finance Minister Dorji emphasized the importance of proper utilization of these funds and cautioned against misuse. He urged participating banks and institutions to thoroughly assess loan applications to ensure that the support reaches those who truly need it. “We must ensure that this initiative succeeds in its mission to rejuvenate our economy,” Dorji asserted.
Extension officials from the Ministry of Agriculture and Livestock will offer technical support to ensure that the funds are directed towards productive ventures in agriculture and manufacturing, rather than consumption or trade.
The window for applications under this ESP initiative will remain open until December 31 of this year, offering a substantial opportunity for businesses to benefit from this economic stimulus and contribute to the nation’s economic revival.
