Micro-Loan Schemes Need More Funding
Micro-Loan Schemes Need More Funding
Microcredit schemes have proved a successful way of helping people out of poverty in Tajikistan, but they will require substantial additional funding if they are to help everyone in need of a small loan.
On January 26, a round-table meeting in Dushanbe convened to discuss microfinance issues heard that things have improved in the last few years, from a position where new business development was constrained since few entrepreneurs had any chance of getting a loan. At that time, complex procedures made bank loans virtually impossible to obtain, while private lenders charged exorbitant interest rates.
Thanks both to financial-sector reforms and the emergence of microcredit, Tajikistan now has around 100 banks, microcredit organisations and government agencies that grant small loans worth 25 million US dollars a year.
One of the most widespread schemes allows people to take out a loan ranging from 100 to 2,500 dollars to start a small business. There is no collateral, but a collective guarantee is given by a number of people.
Experts say the demand for microcredit is much higher than current availability. Gulbahor Mahkamova, deputy director of the IMON microcredit fund, told NBCentralAsia that only seven per cent of the population – around half a million people – have taken out these small loans in Tajikistan, one of the world’s 25 poorest countries. In neighbouring Kazakstan and Kyrgyzstan the equivalent figure stands at 27 and 21 per cent, respectively.
Mahkamova believes there is still considerable unsatisfied demand for loans, especially in the agricultural sector.
“We are unable to meet the rising demand for credit as we do not have sufficient funds,” she said. “Local banks have recognised that the microfinance market is both substantial and profitable and are trying to attract foreign investors, but the interest rates they [the banks] charge are too high.”
Nurinisso Rustamova, a member of the Association of Microfinance Companies, would like to see lending made accessible to as many people as possible. “Both donor and government funding should be sought for a unified, powerful fund that would implement social programmes,” she told NBCentralAsia.
Economy professor Hojimahmad Umarov argues that microfinance companies should be allowed to raise capital in the open market.
“The main problem is that microfinance organisations have no legal right to accept deposits from members of the public, and that significantly reduces their [capital] resource base,” he said.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
On January 26, a round-table meeting in Dushanbe convened to discuss microfinance issues heard that things have improved in the last few years, from a position where new business development was constrained since few entrepreneurs had any chance of getting a loan. At that time, complex procedures made bank loans virtually impossible to obtain, while private lenders charged exorbitant interest rates.
Thanks both to financial-sector reforms and the emergence of microcredit, Tajikistan now has around 100 banks, microcredit organisations and government agencies that grant small loans worth 25 million US dollars a year.
One of the most widespread schemes allows people to take out a loan ranging from 100 to 2,500 dollars to start a small business. There is no collateral, but a collective guarantee is given by a number of people.
Experts say the demand for microcredit is much higher than current availability. Gulbahor Mahkamova, deputy director of the IMON microcredit fund, told NBCentralAsia that only seven per cent of the population – around half a million people – have taken out these small loans in Tajikistan, one of the world’s 25 poorest countries. In neighbouring Kazakstan and Kyrgyzstan the equivalent figure stands at 27 and 21 per cent, respectively.
Mahkamova believes there is still considerable unsatisfied demand for loans, especially in the agricultural sector.
“We are unable to meet the rising demand for credit as we do not have sufficient funds,” she said. “Local banks have recognised that the microfinance market is both substantial and profitable and are trying to attract foreign investors, but the interest rates they [the banks] charge are too high.”
Nurinisso Rustamova, a member of the Association of Microfinance Companies, would like to see lending made accessible to as many people as possible. “Both donor and government funding should be sought for a unified, powerful fund that would implement social programmes,” she told NBCentralAsia.
Economy professor Hojimahmad Umarov argues that microfinance companies should be allowed to raise capital in the open market.
“The main problem is that microfinance organisations have no legal right to accept deposits from members of the public, and that significantly reduces their [capital] resource base,” he said.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
