Dushanbe, May 27, 2004
—Tajikistan’s president signed the new Law on Microfinance Organizations to promote the growth of the microfinance sector in the country. The law was developed with support from the International Finance Corporation (IFC), the private sector development arm of the World Bank, and the United States Agency for International Development (USAID.) The legislation creates a progressive legal and regulatory framework to allow existing and new microfinance organizations in Tajikistan to expand their activities and, importantly, to attract additional capital from both donor organizations and private investors.
Throughout the world microfinance, broadly defined as financial services for low income and rural populations without access to formal financial markets, has proven an effective tool in reducing poverty, especially for women. Since the early 1990s microfinance organizations have been active in Tajikistan providing small loans to individual entrepreneurs and small businesses to help them expand their activities. "IFC has provided advisory help to individual microfinance institutions in Tajikistan through grants from Government of Canada and from IFC, through IFC's Technical Assistance Trust Funds program." However, the growth of the microfinance sector has been restricted by limited access to commercial funds and the inability to take deposits from the general population. The new law now opens the door to new, more sustainable sources of funds.
Further, the new law will allow microfinance institutions to operate within a clear legal framework and, over time, have the opportunity to transform into deposit-taking institutions. The law also provides for risk-based regulation by the National Bank of Tajikistan to promote safety for depositors and increased public confidence in the financial sector in Tajikistan.
The First Deputy Minister of the National Bank of Tajikistan, Mr. Sharinov, stated the position of the National Bank: “We hope that passage of the law will promote the development of microfinance institutions, helping Tajikistan broaden and diversify it’s financial sector, and meet the demand for financial services by a wider section of the population, especially in rural areas.”
Experts from IFC’s Microfinance Legislation Development Project in Dushanbe, Tajikistan with assistance from the Day, Berry Howard Foundation based in Connecticut, USA, worked closely with the National Bank of Tajikistan to draft the law and support it through the legislative process. The project will continue this successful collaboration in developing the detailed regulations under the new law.
"IFC believes the new law establishes an effective legislative environment that will help Tajikistan attract investment to the microfinance sector." said Elizabeth Clyma, IFC's Senior Operations Manager for Financial Markets. "As one of the leading investors in Central Asia, IFC is keen to support the microfinance sector. Both institutional investors and private investors will be happy to see that this new law has been adopted."
Michael Harvey, USAID Country Representative for Tajikistan, commented that, “Tajikistan should be congratulated on adoption of the new microfinance law. It is evidence of the high importance the Government and the National Bank place on the microfinance sector, which has done much to improve the lives of ordinary Tajik citizens. The new law sets the stage for additional growth in the sector and provides an effective balance of interest of practitioners and regulators.”
IFC's mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through 2002, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
The U.S. Agency for International Development (USAID) administers the U.S. foreign assistance program providing economic and humanitarian assistance in more than 80 countries worldwide. USAID funds and monitors contracts and grants with more than eighty implementing partner organizations that provide the training, technologies and expertise to achieve the objectives described and the overall U.S. foreign policy goal of pluralistic development of the new nations of Central Asia.. In Tajikistan, USAID has been active since 1992, and to date has provided assistance worth well in excess of $145 million in the areas of economic reform, healthcare, energy and water, and civil society.
The opinions expressed herein are those of the author(s) and do not necessarily reflect the views of the U.S. Agency for International Development.
