Recognizing the private sector as a critical partner for the economic growth, the Government has always placed high importance on the private sector. Further, to enhance access to financing, the Government has launched the National Credit Guarantee Scheme (NCGS), as a counter cyclical policy measure during the COVID-19 pandemic situation on October 5th 2020. It will sustain investments by easing access to credit during the COVID-19 times. The NCGS is an intervention under which the Government guarantees a portion of the loans availed for establishing a viable business entity.

Growth in domestic credit is critical for investments, boosting domestic demand and generating employment. However, collateral requirement has been a major impediment, in particular, for aspiring entrepreneurs to avail financing. Therefore, the NCGS will alleviate this challenge of aspiring entrepreneurs. Under the NCGS, for availing loans, Cottage and Small category will not require collateral except 10% equity and startups under this category will be eligible for 100 percent debt financing under the NCGS.
Unlike practices across the globe, the medium and large categories will also be eligible for loans under the NCGS. However, under such categories, a loan financing up to 50% or Nu 30 million, whichever is lower will be guaranteed by the Government and the balance will be shared between the lender and the borrower.

In addition, CGS will also be available for up-gradation of businesses from CSI to medium and medium to large.
Therefore, the NCGS has been designed to be an inclusive instrument for all categories of industries.
The projects under the NCGS will focus on the following thrust areas of:

• Boosting exports;
• Reducing economic dependency by investing in import substitution-based projects;
• Promoting innovation and technology; and
• Creating jobs to absorb the displaced and unemployed.

Implementations:

• The NCGS will be implemented under the overall guidance of a National Credit Guarantee Committee, which will be chaired by the Finance Minister with representative from key economic sectors;
• The NCGS will be implemented in partnership with the State-owned Banks, namely Bank of Bhutan, Bhutan Development Bank and the National CSI Development Bank (NCSIDBL); and
• A full time NCG Support Facility (NCGSF) will be established with the NCSIDBL, to provide all necessary support in availing loans and implementing projects under the NCGS.

Conclusion:

Under the COVID-19 Pandemic situation, the NCGS will go a long way in securing financing for the establishment of viable new business entities besides supporting the upgradation of existing businesses.
There will be challenges and risks in the journey of implementing the NCGS. Globally, monitoring and support mechanisms of such initiatives have been critical in determining the success of such schemes. While the government will ensure that and fulfill its responsibility to create the environment and platform, we urge the private sector to grab the opportunity, with responsibility. Through collaboration with responsibility, the investments that emerge as a result of the NCGS shall sustain economic activities, and turn aspirations into a reality for a resilient economy.

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