Arya News - As Bhutan looks beyond traditional bank lending and donor-driven grants, the piece examines whether local business founders now have the skills, structures and readiness to use new financing options like blended finance, catalytic capital and philanthropy.
THIMPHU – As Bhutan looks beyond traditional bank lending and donor-driven grants, new financing avenues, such as blended finance, catalytic capital, philanthropy, and patient capital, are emerging as potential lifelines for the private sector.
However, a critical question remains. Are Bhutanese entrepreneurs prepared to adopt these complex, impact-oriented financing tools?
Experts say Bhutan offers a strong foundation for impact investments due to its alignment with sustainability, social inclusion, benefit-sharing, biodiversity conservation, and community-based economics.
However, to fully leverage these opportunities, cottage and small industries (CSIs) need structured support in impact measurement, environmental, social, and governance (ESG) compliance, financial modelling, export readiness, and capacity development.
With blended finance and patient investors who understand Bhutan’s scale and sensitivities, the private sector, particularly small and medium enterprises, could play a transformative role in agriculture, green energy, fintech, logistics, nature-based solutions, renewable energy, and social enterprise development.
Readiness exists, but uneven
Economists with the UN in Bhutan say that while some readiness exists, it remains uneven and constrained by gaps in the financial ecosystem.
An economist at the UN Resident Coordinator’s Office, Olaf Jan De Groot, said that while some alternative instruments require sophisticated reporting or governance, many are not fundamentally complex.
“Some may require a slight change in mindset, but they can be as straightforward as commercial loans or private capital,” he said. “Certain Bhutanese entrepreneurs are not yet ready to absorb alternative financing, but others are definitely ready. We hope to support those entrepreneurs at this stage, when these instruments are still new to Bhutan.”
He added that the broader ecosystem is still “relatively undeveloped,” particularly legislation around modern finance, financial literacy, and internationally ready banking systems.
“Financial literacy needs improvement not just for alternative financing but even for traditional commercial financing, which remains out of reach for many Bhutanese entrepreneurs,” he said.
Few players, small-market constraints
The Head of Office of the UN Resident Coordinator in Bhutan, Timothy Wilson, pointed to structural limits that hinder Bhutan’s ability to attract investors.
“One of the key challenges is that there are very few players in the market who offer such tools,” he said. Domestic instruments are limited, and foreign investors often lack awareness of Bhutan’s potential. Even those familiar with Bhutan struggle with the “small-market problem” and the country’s limited capacity to absorb large funding.
Timothy Wilson said that initiatives under the Government Modernisation Committee (GMC) could open new doors, but stressed the urgency of updating the financial ecosystem, especially cross-border banking systems.
Young entrepreneurs, he said, frequently raise concerns about international payment restrictions. “More effective integration would reduce the administrative burden for these enterprises,” he added.
While compliance and reporting requirements are growing, Timothy Wilson believes they remain manageable for now. “For the current scale of opportunities, capacity is sufficient, though micro, small and medium enterprises would benefit from continued support,” he said.
Entrepreneurs see opportunity, but also risks
Entrepreneurs say they welcome alternative capital, provided the right support structures accompany it.
The President of the Association of Bhutanese Entrepreneurs, Sonam Chophel, said many established firms already have strong internal systems.
“Over the last decade, our company has built Enterprise Resource Planning (ERP) systems, accounting systems, compliance processes, and documentation for transparency,” he said. “But impact investments or blended finance require more advanced frameworks such as ESG reporting. These are new areas in Bhutan.”
He said technical guidance would help entrepreneurs meet expectations. The values, he said, align well with Bhutan.
“These instruments resonate with Bhutan’s focus on sustainability, youth employment, climate resilience, and Gross National Happiness,” he said. But he worries about administrative workload and the shortage of ESG experts. “Reporting and compliance should remain realistic for Bhutan’s small market size.”
The Founding CEO of Loden Tewa, Thinley Choden, believes Bhutan’s ecosystem is ready, but only for growth-stage capital.
“Companies that have survived three to five years and have products in the market now need larger ticket-size capital,” she said. “But the right kind of financing is missing. Our landscape is very grant-driven.”
Challenge funds help entrepreneurs get started, she said, but beyond that, only expensive, collateral-heavy bank loans remain.
“You can’t blame the banks, they have their own mandate,” she added. “This grey space is where Bhutan should engage impact investors.”
But she warned that Bhutan is not yet “speaking the right language” to attract the right investors. Entrepreneurs, she said, need support in governance, financial structuring, and investment readiness.
Her organisation works in this “missing middle” to prepare entrepreneurs for investor engagement.
“When an investor comes, the first impression is the entrepreneur. The next is the business, its financials, revenue, governance,” she said. “Entrepreneurs have to be ready to receive investments.”
Some entrepreneurs say they are ready and waiting for such opportunities. “We welcome reverse pitching and alternative financing. We are waiting for such opportunities,” said one participant.
“When the government organises such conferences, we worry, will this really impact us?” another entrepreneur asked. “In many cases, only the business tycoons take the opportunity.”
Alternative financing could unlock new pathways for Bhutan’s private sector, particularly green enterprises, CSIs, and growth-stage startups. But readiness remains uneven, and without targeted reforms and capacity building, Bhutan risks missing the moment to attract global impact investors.