August 29, 2024
THIMPHU – Bhutan’s start-up ecosystem is at a crossroads. In the past decade, the start-up landscape in the country has seen a number of innovative ventures – from e-commerce platforms and online delivery apps to streaming platforms. And in recent years, the focus has shifted to robotics and artificial intelligence, keeping up with the rapid pace of innovation and growth in these new areas of technology.
Yet, our start-up scene is anything but successful. Many of our start-ups are struggling to survive, let alone thrive. The dream of the first Bhutanese Unicorn is far-fetched. A question that begs an answer is: Why are these start-ups not flourishing into competitive businesses?
A range of complex challenges impedes the growth of the start-up sector in the country.
First, the start-ups are lumped into the same category as small and medium enterprises (SMEs) despite their distinct requirements and challenges. Let’s get this clear: Start-ups and small businesses are two totally different things.
While SMEs benefit from basic financial support and infrastructure, start-ups require a more nuanced ecosystem that nurtures innovation and provides scalable growth opportunities. Our current system, however, treats start-ups as SMEs, which limits their access to crucial resources and support, particularly scale-up funds.
Second, financing is a critical barrier. Financial institutions and government agencies operate with a risk-averse mindset that is ill-suited to the high-stakes nature of start-ups. Third, regulatory bottlenecks and bureaucratic red tape stifle growth.
What further compounds the challenges is the approach to solving these problems, which is usually diagnostic in nature. We identify problems and find quick fixes rather than adopting a holistic, ecosystem-wide strategy.
For instance, the National Credit Guarantee Scheme, initiated by the previous government to revitalise the economy during the Covid-19 pandemic, offered government guarantee, sharing risks between the government, the banks, and the entrepreneurs. As a temporary measure, it provided some relief, and helped launch some innovative start-ups.
Three years down the line, the government guarantee has expired, and financial institutions are pressing the start-ups and businesses against the wall, demanding guarantees and mortgages to fill the vacuum left by the withdrawal of government support. Most start-ups are back to square one. And the result – a high level of non-performing loans and a growing number of business closures.
Against this backdrop, it is extremely important how the government spends the Nu 15 billion Economic Stimulus plan, a part of which was recently rolled out. While the stimulus plan, through injection of capital into the economy, will help revitalise the economy and speed up post-pandemic recovery, it is crucial to ensure that investments are directed towards sustainable businesses and start-ups. A thorough review of project proposals and business plans is critical to ensure funds are allocated to ventures with promising growth potential.
Above all, for the start-up sector to flourish, a fundamental shift in approach is needed. The government and financial institutions must embrace a forward-looking strategy that supports start-ups not just in their early stages but throughout their growth journey. This involves building a robust ecosystem that includes access to growth capital and favourable regulations to drive the sector forward.
If Bhutan were to become a high-income country by 2034, it must leverage the private sector and the start-ups as key drivers of economic growth.
A transformative approach is the need of the hour—one that is bold, innovative, and aligned with the evolving needs of the start-up economy.