MICROCAPITAL STORY: European Bank for Reconstruction and Development (EBRD) and Developing World Markets (DWM) Provide Tajik Farmers with Microfinance via Loans, New Facility

In an effort to boost Tajikistan’s economy, the European Bank for Reconstruction and Development (EBRD) will facilitate lending USD 7.2 million to two Tajik banks in order to extend microfinance loans to the agricultural sector. These will be the first syndicated loans in Tajikistan. The financing, provided under the new Tajik Agricultural Finance Framework (TAFF), will allow small farmers, many of whom have never received a loan before, to purchase farming equipment and other supplies.

Developing World Markets (DWM), a fund manager and investment bank, will provide USD 3 million of the USD 7.2 million. The EBRD will provide the remaining USD 4.2 million.

The two banks to receive the funds are Agroinvestbank and Bank Eskhata. Agroinvestbank, a commercial bank based in Dushanbe, will receive USD 6 million. The bank has over USD 105 million in total assets, a return on assets of 5.35 percent, 57 branches and approximately 7,000 active borrowers throughout Tajikistan. About 21 to 30 percent of its operations are comprised by microfinance. A USD 1.2 million loan will go to Bank Eskhata, a private bank based in Khujand. As of December 2006, it had USD 26.3 million in total assets, a return on assets of 9 percent and over 2,000 active borrowers. Between 51 and 60 percent of its operations constitute microfinance.

Agroinvestbank and Bank Eskhata have previously worked closely with the EBRD under the Tajik Micro and Small Enterprise Finance Framework. Through this framework, predecessor of the current Tajik Agricultural Finance Framework, the EBRD has provided credit lines in the country since late 2003. As of September 2007, four partner banks had disbursed over 27,000 loans worth a total of over USD 104 million to micro and small companies in Tajikistan.

Governor of the National Bank of Tajikistan, Murodali Alimardon, explained that the loans are important in large part because of the technical assistance the EBRD provides alongside the finance. Under the TAFF framework, training and education will be provided to farmers to avoid the use of harmful environmental practices, improve labor standards and help implement best farming practices.

The EBRD is also investing in Tajikistan’s agricultural sector via the Tajik Agricultural Finance Facility. The USD 35 million initiative, which is the first of its kind in the region, aims to diversify and restructure the agricultural sector by funding loans to small, private farms.

Through its micro and small enterprises programs the EBRD has supported over one million small enterprises throughout Eastern Europe, Russia, central Asia and the Caucasus. The EBRD is the largest single investor in this region and mobilizes significant foreign direct investment beyond its own contributions. Founded in 1991, the bank is owned by 61 countries and two intergovernmental institutions. As of December 2006, the EBRD had 112 active microfinance investments and EUR 493.5 million (USD 651.2 million) allocated to microfinance investments. 

Additional Resources:

European Bank for Reconstruction and Development (EBRD)

EBRD: December 12, 2007 Press Release

EBRD: About the EBRD

Developing World Markets

Agroinvestbank  

Bank Eskhata

Microfinance Information eXchange (MIX): Agroinvestbank (OJSC Agroinestbank)

MIX: Bank Eskhata (Bank Eskhata)

MIX: EBRD (European Bank for Reconstruction and Development (Group for Small Business))

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