Responsible Finance Forum

Equitable Growth through Financial Inclusion: Bhutan Economic Forum for Innovative Transformation

Bhutan’s approach to development has always been founded on participatory and inclusive principles, driven by the country’s unique development philosophy of “gross national happiness”. Following this tradition, the Bhutan Economic Forum for Innovative Transformation (BEFIT) — held in Thimphu, Bhutan from May 24-26, 2017 — was inspired by His Majesty, King Jigme Khesar Namgyel Wangchuck’s vision that Bhutan’s successful democratic transition must be accompanied by successful economic transformation. Financial inclusion was chosen as the theme for the inaugural event, based on the idea that the creation of an inclusive financial system can be the first step to reduce income inequality, alleviate poverty, and promote balanced economic growth.

According to a 2013 survey of the financial inclusion landscape in Bhutan, only 41 percent of Bhutanese adults utilize banking services. The usage is higher among urban adults (66 percent) than among rural adults (30 percent). Almost half of all adult males (49 percent) use banking services compared to 45 percent of adult females. In rural areas, 81 percent of banked adults require more than one hour to reach their bank, whereas in urban areas only 35 percent require more than an hour. Eight of ten Bhutanese adults tend to save money. However, the majority have informal savings with family or friends, at home, or with employee committees. The most important reported reasons for saving, both in urban and rural areas, include buying food and household goods, and meeting emergency expenditures.

Given these findings, several initiatives have been undertaken to advance financial inclusion and increase financial literacy in Bhutan — especially after the country became a member of the Alliance for Financial Inclusion (AFI) in 2010, as well as its subsequent commitments under the Maya Declaration on Financial Inclusion in 2014. In particular, the Royal Monetary Authority of Bhutan (RMA) has focused on putting in place the regulatory frameworks to enable increased access to financial services through microfinance institutions (MFIs) and agent banking, and the establishment of financial infrastructure such as the Central Registry, the Credit Information Bureau, and mobile payments platform (the Bhutan Immediate Payments Service).

Thus far these initiatives have been based on the broader acknowledgment of the importance of financial inclusion — but in the absence of an overall vision or roadmap. The National Financial Inclusion Strategy (NFIS) is being drafted and will articulate the country’s roadmap to enhance financial inclusion. As such, it will help to ensure coordinated and sustained efforts, while also enhancing efficiency through better planning, prioritization, and resource allocation.

Participants from the inaugural Bhutan Economic Forum for Innovative Transformation.

An important objective of the International Financial Inclusion Summit was to enable the Bhutanese authorities to further develop and institute Bhutan’s NFIS. In this context, the Summit provided shared experiences and expertise from around the world. It also included the participation of local stakeholders that will be key partners in implementing the strategy. The inaugural BEFIT event was held in Thimphu, Bhutan from May 24- 26, 2017, and was co-sponsored and organized by the Royal Monetary Authority of Bhutan (RMA), the Royal Institute for Governance and Strategic Studies (RIGSS) and the International Finance Corporation (IFC). This report outlines the proceedings and final recommendations from the BEFIT Summit, in order to inform the continued development of Bhutan’s NFIS.