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Workshop on rural and agricultural finance in Tajikistan
A two-day workshop in the Tajik capital Dushanbe organised by the EBRD will
look into ways of expanding rural and agricultural finance in the central
Asian country. Given the importance of the agricultural sector for the Tajik
economy, improved access to loans and other financial services is crucial for
farmers, food processors and related businesses. Building on its efforts to
enhance micro, small and medium enterprise finance in urban areas, the EBRD is
looking into ways to expand rural and agricultural finance.
The Bank has requested the FAO to undertake a feasibility study assessing the
demand for and supply of rural and agricultural lending and to identify
options for enhancing such finance. The key findings of this study will be
presented and discussed during two workshops:
The first workshop, to be held on November 28, is targeted at senior
government officials, donors and senior management of financial institutions.
The workshop will also be used to share existing experiences in agricultural
lending and to discuss issues and options for expanding rural and agricultural
finance. Information on current and planned initiatives in rural/agricultural
finance and agricultural/agribusiness development will be shared in order to
foster synergies and identify gaps
The second workshop, to be held on November 29, will have be more technical,
targeting operational staff of banks and MFIs involved in agricultural
lending. Participants include branch managers, loan officers and staff charged
with practical lending, related market research and product design. The
purpose is to share experiences of different participants in rural and
agricultural lending, discuss key issues and challenges as well as ways of
addressing them.
The FAO study found a significant gap between supply and demand of rural and
agricultural finance, both in qualitative and quantitative terms. Bank lending
to the non-cotton agricultural sector is quite limited and mainly directed
towards medium and large state and collective farms. Most lending is short
term and thus not suitable for financing much-needed investments in productive
assets such as farm machinery, irrigation equipment, etc. Most MFIs target the
bottom end of the market using group lending approaches. These loans are
typically for by small amounts, have short repayment periods, frequent
instalments and entail high costs. Due to these product features, most MFI
loans finance activities with a quick turnover, such as cattle fattening,
small trade, etc. However, several MFIs have started introducing larger
individual loans for more progressive small-scale producers.
Although more than half of the country’s non-cotton agricultural output has
been produced on household plots, future production increases will mainly come
from small and medium sized farms. This market segment has currently least
access to loans. In order to meet this demand, banks have to downscale their
lending operations and redesign their products and procedures. Cash-flow based
loan appraisal, flexible collateral requirements and streamlined loan
application procedures should be key elements of loan products targeting the
small and medium farming market. MFIs should continue introducing more
flexible loan products with increased ceilings on amounts and more
personalised repayment schedules, the study says.
The sustained expansion of rural and agricultural finance requires continued
efforts by policy makers and donors to tackle structural constraints beyond
the financial sector: Outstanding issues include: i) the reform of the cotton
sector and restructuring of cotton debt; ii) further progress in land reform
in order to enhance the security and tradability of land rights and to
establish viable farm structures; iii) an enabling legal and institutional
framework for secured transactions including the mortgaging of rural land, iv)
better integration and coordination of different participants (producers,
traders, processors and exporters) in non-cotton value chains such as fruit
and vegetables, dairy, etc.
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