The Asian Bankers Association (ABA) and Bank of Bhutan held the webinar “Bank of Bhutan: National Economy and Banking Environment” on 8 August 2024.
The 60-minute webinar featured Dorji Kadin, CEO of Bank of Bhutan who presented the situation of Bank of Bhutan within the framework of demographics, culture, macroeconomics, financial conditions of the banking sector and finally the financial ratios of Bank of Bhutan in particular.
In general terms, the Kingdom of Bhutan benefits from a peaceful and stable society, vibrant culture and pristine environment, strategic regional location, competitively priced hydropower, good national character and a workforce educated in English language.
In terms of demographics, Bhutan has 763,248 inhabitants with over 60% of them with formal education. It sports a young population still raised on traditional values balancing spiritual well-being and the cultural needs of the individual and communities alike. Buddhism plays an important role in the life of the people.
The Bhutanese concern for tradition is also reflected in the way they dress, their architecture and the festivals celebrated nationally and locally throughout the year. Their national language is Dzonghka. However, there are 19 dialects spoken in the country as well.
Their valuation of spiritual well-being materializes in their commitment to protect the environment. 71% of the country remains forested. Bhutan is the only carbon negative country in the world.
With respect to macroeconomic conditions, per capita GDP stands at US$3,919.55, with 78% of GDP related to trade. The main export products are hydropower, dolomite and ferrosilicon while the major import items are fuel and lubricants, machinery and equipment. Bhutan’s major trading partners are India, Bangladesh, Italy, Nepal and China.
Currently FDI goals are focused on agro-based production, forest-based production and renewable energy. To entice foreign investors, foreigners can own up to 74% of the project.
Mr. Kadin said that currently there are 108 projects worth some US$590 million, of which 35% are related to the hotel business.
However, there are two areas of special interest to the country. The first is the energy sector because Bhutan’s vast hydropower capacity is undeniable. However, Bhutan also wants to develop solar power and wind power given its geographical conditions and its national desire to remain carbon negative.
Mr. Kadin said that the second project is Gelephu Mindfulness City (GMC) designed to create a sustainable and harmonious urban environment. This new city will feature a spiritual center and healthcare facilities blending Eastern and Western knowledge.
Bhutan counts on a complete yet small financial market composed of 6 banking institutions, 3 insurance companies and 1 pension fund and other 7 financial services providers. The Royal Stock Exchange of Bhutan (RSEB) lists 18 companies.
At the microeconomic level, Mr. Kadin explained that Bank of Bhutan is the oldest and leading bank in the country focused on 5 factors for growth: Innovation, Excellence, Customer centric, Accountability and Relationship. Furthermore, it has 38 branches, 253 BobConnect agents, 90 ATMS and 747 employees servicing 435,000 customers.
Bank of Bhutan offers full services from deposits, treasury to cards and mobile banking. One amazing operational feature of the bank is that 98.99% of transactions are done through mobile banking. In fact, 36% of all loans are generated by Bank of Bhutan while it holds 43% of all deposits.
Mr. Kadin said that the Covid pandemic affected Bhutan negatively, yet Bank of Bhutan’s critical performance ratios showed rapid regeneration after the pandemic such as 1.2% ROE in 2020 growing to 16.18% as of June 2024 and an anemic ROA in 2020 of 0.1% growing to 1.30% up to June 2024.
However, its Leverage Ratio has remained relatively stable at 7.8% in 2020 and 7.4% by the end of Q2 2024.
To conclude his presentation, Mr. Kadin emphasized the national interest to invite FDI into the energy sector to develop hydropower projects, solar and wind farms. Furthermore, Gelephu Mindfulness City is also a national priority particular to the national character and goals of the Kingdom of Bhutan.
A video recording of the webinar can be viewed at the ABA YouTube HERE.
