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.