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…green financing meets agricultural sector development
YK Poddle
Credit risk management, high cost of funds for financial institutions and access to public sector climate funds for agriculture are some of the key challenges facing Bhutan.
To mobilize agricultural finance in the country, the Royal Monetary Authority (RMA) has launched six key strategies for implementation until 2030, namely: sustainable macroeconomic policies, market confidence, institutional collaboration and cooperation, improved capital markets, public infrastructure and international collaboration to obtain funding.
Jurme Tenzin, Analyst at RMA’s Financial Regulation Unit, delivered a speech on “Innovation and Climate Finance in the Agricultural Trade Sector” at the Bhutan Agricultural Trade and Investment Forum, talking about achievements and future priority areas.
“The RMA prioritizes primary production, processing, packaging, marketing and sales in the cottage and small scale industries (CSI) sector and has so far provided $404.5 million to 406 borrowers,” said Jurme Tenzin.
He said that under the crowdfunding program launched in 2019, there were 16 registered projects and $36.2 million was raised for the project.
According to Jurme Tenzin, the Royal Stock Exchange of Bhutan Limited (RSEBL) has conducted transactions in 8,857 commodities worth Nu 67 million.
Likewise, Finance Ministry Secretary Leki Wangmo said that despite 11% of the budget allocation and investment in agriculture in each five-year plan, the main results did not result in improvements in labor productivity, mainly due to the practice of subsistence farming.
“Going forward, with the FDI policy in agriculture being announced as 100 per cent equity, attractive and right investments are timely,” she said. “The implementation of the 13th Five-Year Plan requires the joint efforts of different departments to achieve success.”
The RMA’s document titled “Druk Nguldrel Lamtoen 2030: A Progressive, Agile and Resilient Central Bank’s Roadmap to Transform the Bhutanese Economy” elaborates on its third pillar – Advancing Green Finance to Promote a Sustainable and Green Economy Green bonds, risk-sharing instruments and impact assessments are identified as three approaches to agricultural financing.
Through this roadmap, RMA will increase access to finance by exploring innovative financing channels to finance the country’s economic growth.
“One of the opportunities to mobilize funds is through promoting Green finance. Therefore, RMA will work with financial service providers to develop green finance to promote a sustainable green economy. ” the roadmap states.
To fulfill Bhutan’s commitment to environmental protection, the World Bank has been supporting efforts to improve the country’s ability to effectively navigate carbon markets and climate finance.
plan
To develop capital markets and innovative financial instruments to promote investment in green projects and enterprises, inter-agency cooperation and private sector participation are focused.
Jurme Tenzin said that a green bond market that the world believes has the potential to close the green investment gap and help countries achieve sustainable development goals is already in place.
“To develop the green bond market in Bhutan, the Ministry of Finance, RMA and RSEBL will work on developing green bond principles and guidelines, supported by a set of standards to identify and classify eligible green assets,” he said. “Accounting methods and reporting and disclosure guidance to quantify the environmental and climate benefits of green bonds are also being implemented.”
Additionally, he said risk-sharing tools and impact assessment frameworks are being prioritized to create an enabling environment to attract domestic and foreign investors to invest in green projects.
Jurme Tenzin said that with the creation of a green taxonomy, existing loans will be reviewed and new possibilities explored to create a green taxonomy framework.
“In order to increase channels for mobilizing capital to promote economic growth, promoting green capital markets will be one of the strategies to increase the attractiveness and activity of stock exchanges. RSEBL will promote green capital markets and innovate green financial instruments.”
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