Launch of CIB

On September 9, 2009, the Royal Monetary Authority (RMA), Central Bank of Bhutan celebrates the formal launch of the RMA's Central Banking Solution - the Integrated Central Banking System (ICBS) as well as Bhutan's first Credit Information Bureau. Since the RMA also enters its 27th year, the institution takes the opportunity to celebrate its Silver Jubilee which it was unable to do so in 2007 due to the numerous socio-political changes taking place in the country. This launch is therefore, in many ways, testimony to the visionary leadership and economic architecture of their Majesties, the Fourth and Fifth Druk Gyalpos, and their legacy that continues to guide and transform this nation.

Lyonpo's Speech

The Credit Information Bureau of Bhutan
Similarly, it is widely acknowledged that a dynamic and sound financial sector is a prerequisite for a strong and vibrant private sector. The increasing need for improved access to finance especially for micro, small and medium scale enterprises also remains a relevant and hugely debated issue today in Bhutan. One of the major responsibilities of the RMA is to ?promote credit and exchange conditions and a sound financial structure conducive to the balanced growth of the economy.? The establishment of the country's first Credit Information Bureau is one of many ways in which the RMA steps in to fill institutional gaps to strengthen the financial sector.

Research indicates that informal financing remains a common source of start-up finance for micro, small and medium scale entrepreneurs in the country. It also reveals that the lack of affordable finance in Bhutan is a serious constraint due to the high cost of borrowing, particularly stringent collateral requirements. This however is largely rooted in the information asymmetry between borrowers and lending agencies, lack of information which in turn hinders financial institutions from carefully assessing the credit risks of its potential borrowers. Information gaps raise the transaction costs associated with lending and are at the heart of Bhutan's collateral-based credit and uniform pricing approach.

From 2006 till date, the RMA and its partner financial institutions, with joint financing by the RMA, the Asian Development Bank, and technical expertise of Dun and Bradstreet, a leading global provider of risk assessment and credit bureau solutions, embarked on the challenging ground work for the Bureau. Bhutan's Credit Information Bureau is a service-driven automated information sharing mechanism that will replace the existing and cumbersome Loan Clearance Certificate system to create value for credit granting institutions by meeting their needs for comprehensive and expeditious credit information. The Bureau, a single point of inquiry, is now mandated to collect, collate and disseminate detailed credit information to member financial institutions on individual and commercial borrowers.

In that respect, the Bureau will empower financial institutions to make better informed credit decisions, reduce the time and costs associated with processing loan applications, and improve the quality of risk assessment and management practices.

This will ultimately help to improve the quality of financial sector assets, reduce non-performing loans and strengthen financial sector soundness. It will also promote the growth of underserviced market segments by facilitating credit expansion without compromising on the quality of credit.

The Bureau, will become fully operational in November this year, and will undergo several development phases. Until such time the Bureau's system and capacity is sustainable, it shall operate as a Unit of the RMA.