The EBRD is tackling rural poverty in Tajikistan through its agricultural financing facility. With access to EBRD funding, small farmers can diversify production and improve profitability.
Cotton dominates life in Tajikistan. Seventy per cent of the population live in rural areas and rely on agriculture for their livelihoods. Cotton is also a vital source of export earnings and tax revenue for the country.
However, debt has virtually paralysed the Tajik cotton industry and resolving it has become the focus of international financial institutions operating in the country. The uncertainty of crop yields and quality from one season to another, the price volatility and the varying management capabilities of farmers means that lending to individual farmers is a high-risk activity for banks.
Resolving the debt problem
To help relieve the situation, in 2007 the EBRD set up the Tajik Agricultural Finance Framework (TAFF) with €25 million that would be made available to small farmers through local banks.
Giving farmers access to finance allows them the freedom to plant the crop of their choice, and so diversify production and increase profitability. Since the 1990s farmers have depended mainly on local investors for financing and were not free to choose their sources of seeds, fertilisers and crops.
EBRD donor countries are covering the cost of training financial and agricultural advisers, and farmers will be taught more about harmful environmental practices and how to use best farming methods.
Many of the farmers have never received a loan before and a large number are women who look after household plots and small farms while the men have sought employment in other countries.
Breaking the poverty cycle
TAFF is a groundbreaking initiative that is helping to decrease rural poverty and, in time, change the structural economic circumstances that can lead to child labour. According to the International Office for Migration (IMO), children harvest up to 40 per cent of cotton in Tajikistan. This contributes to the continuing cycle of poverty.