Bhutan is a landlocked country in the Himalayas bordered by China and India. With an annual per-capita income of about some 2,000 USD, Bhutan is one of the poorest developing countries in the world. It was in the 1990s that the country started to open itself to the world. Tourism and hydroelectric power generation are Bhutan’s most important sources of income. The majority of the Bhutanese population lives on agriculture; more than a fourth of the people in Bhutan have to make do with less than 1.25 USD per day. For them there is no access to financial products. Since 2011, the Sparkassenstiftung für internationale Kooperation (Savings Banks Foundation for International Cooperation) has worked on closing this supply gap by setting up a financial institution according the German Sparkassen model. After the successful completion of the necessary groundwork, the RENEW Microfinance Bank was able to start business in 2012.
Breaking even despite high infrastructure challenges
At first sight, the starting point for setting up an economically viable financial institution in Bhutan does not look very promising: The country is scarcely populated and the villages are difficult to reach with only few streets available.
Against all odds, the Sparkassenstiftung together with the Bhutanese partner organisation RENEW (Respect, Educate, Nurture and Empower Women) and the German partner savings bank, the Sparkasse Germersheim-Kandel, has reached its goal. The RENEW Microfinance Bank provides financial services to some 5,000 female customers in four rural areas in Bhutan.
The branches in Samtse in Western Bhutan, Bumthang and Trongsa in Central Bhutan and and Trashigang in the Eastern part of the country form the base camps. From there, the staff members travel to their female customers in order to hold centre meetings. During these meetings, micro and small savings are collected, loans disbursed and repaid and – last but not least – experiences are exchanged. In addition to that, the centre meetings are used to impart basic financial literacy skills. Due to the country’s poorly developed infrastructure, the remote villages and the poor respectively non-existent road network, the organisation of centre meetings is extremely challenging for all participants. Unlike in other Sparkassenstiftung projects, where it is possible to execute up to five centre meetings per day to serve the financial needs of female customers, a maximum of two centre meetings per day is manageable in Bhutan. More than often, both the staff of the RENEW Microfinance Bank and the female customers have to walk long distances to attend a centre meeting.
Against this backdrop, the current development is all the more encouraging: At the end of the fiscal year 2014 / 2015 it was succeeded in breaking even for the first time ever. Dr. Ilonka Rühle, Sparkassenstiftung’s Head of Division for the Caucasus and the Himalayan Region, was highly satisfied, too, about the result: “The lending business of the RENEW Microfinance Bank has taken a very positive trend, enabling the bank to cover its high expenses incurred by infrastructural demands through generated profits.”
Expansion of branch network runs at full speed
As a follow-up to the successful year-end statements of 2014 / 2015, the bank’s branch network will now be expanded. A new branch is currently being setup in Tsirang in southern Bhutan. The film “Under the red umbrella” proved to be an extremely helpful tool to inform potential female customers about the objectives and the services rendered by Sparkassenstiftung and the RENEW Microfinance Bank. During the “initial meeting”, an introductory event which is organised shortly before a new branch is opened, interested persons are acquainted with the work of the microfinance bank and informed about the offered range of financial services.
The film “Under the red umbrella” is available on our website <link http: www.sparkassenstiftung.de>www.sparkassenstiftung.de and on <link https: www.youtube.com _blank>Sparkassenstiftung’s Youtube channel.
For more details about Sparkassenstiftung’s project to setup and strengthen a microfinance institution in Bhutan, please follow the <link http: www.sparkassenstiftung.de en projects projekt aufbau-eine-mikrofinanzinstitution _blank>link
An article about Sparkassenstiftung’s project in Bhutan, which was published in the latest edition of the German savings banks newspaper “Sparkassenzeitung”, can be accessed <link fileadmin user_upload pdf artikel _blank>here [German language only]
Contact partners:
Dr. Ilonka Rühle / Carina Lau
Sparkassenstiftung für internationale Kooperation
Simrockstraße 4
53113 Bonn / Germany
Phone: +49 228 9703-6624 /-6608
Fax: +49 228 9703-6613