Eradicating poverty in the field

Agriculture plays a vital role in Tajikistan’s economy and society. More than half the population spends its days in the fields, picking or harvesting fruit, wheat, cotton and other crops, or directly depends on relatives who do.

Farming, however, does not only support families in the countryside: it also plays an important part in the overall economy. Agriculture still accounts for about a quarter of Tajikistan’s GDP and farming products feature among the country’s main exports.

Through its Tajik Agricultural Finance Framework (TAFF), the EBRD provides a credit line to local banks and microfinance institutions for onlending to farmers to fund their seasonal working capital requirements. The average loan size is currently under US$3,500, meaning small farms also have access to finance.  

No strings attached - untied financing

“Prior to TAFF, farmers were largely forced by local authorities to plant cotton,” says TAFF team leader Christophe Cordonnier. “Finance was provided in-kind by intermediaries that were buying out the harvest at very low prices. This led to huge losses in the sector and the accumulation of cotton debts of more than US$ 500 million or more than 50 per cent of the loans provided.”

Mr Cordonnier adds: “Before the TAFF programme started, most Tajik farmers could not repay their loans, but this has changed now. TAFF provides a more stable and transparent environment to operate in, generally translating into better prices paid to farmers. This puts farmers in a much stronger position to service their loans and means that TAFF has been a real success in financial terms.”

Sound banking, sound farming

TAFF does not merely provide untied finance to small and medium farmers. Donor grants from the US Treasury, Luxembourg, the EU and the EBRD’s Early Transition Countries Fund have financed TAFF technical assistance activities to ensure the project has a long-lasting impact. For example, donor funding paid for more than 164 loan officers and agricultural advisers in partner financial institutions to be trained in sound agricultural lending.

Furthermore, the EBRD has been widening the scope of these activities since the second phase of TAFF got underway in 2010. Two new components support farmers directly on the ground and promote environmentally and socially sound agricultural practices, as well as the marketing of their products.

This support provides farmers with training and advice, for example, on different irrigation techniques, eliminating toxic pesticides, adequate crop rotations and other farming-related topics. This helps improve their yields for cotton and other major crops. With the increased returns, farmers can upgrade outdated irrigation and drainage systems and buy more modern farming equipment.

A partnership for better cotton

“The EBRD also fostered change in the agriculture sector through innovative finance mechanisms,” Mr Cordonnier explains. “In Yavan, for example, we used a combination of standard microfinance with finance involving Swiss company Ecom as a reputable off-taker.”

“This helps farmers not only to have access to good finance,” he adds, “but also to sell their products under better conditions and improve substantially their yields.”

“Ecom rented a gin in Yavan last year and now buys the farmers’ seed cotton directly,” says Boris Spassky, director of Ecom Tajikistan. “Farmers simply bring their cotton in a little trailer to the factory and are paid cash in the Agroinvestbank branch of Yavan as soon as the cotton is delivered.”

In the past, the circumstances were rather difficult for farmers, as they depended on local investors for financing and were often overcharged for poor quality seeds, fertiliser and diesel, Mr Spassky adds. “The farmers delivered their cotton and very often never received any payment but instead a statement that they owed the local investor money! Now, TAFF finances the farmers on one hand, while Ecom buys the production straight away and pays them cash on delivery, some of which is used to repay the bank loan.”

One farmer, Nurali Bekmirzoev, recalls how he benefited from the programme in Yavan. His farm received a loan as well as training and advice on what fertiliser, seeds and techniques to use. “It used to be very difficult for us in the past to give cotton to processing plants because their prices were very low,” says Mr Bekmirzoev. “We are therefore very thankful to TAFF and Ecom for their cooperation with us.”  

Sustainable change

The project therefore benefits all the partners involved in the programme: farmers have access to affordable finance and the chance to improve their working conditions; Ecom can buy more and higher quality cotton from farmers; while the EBRD helps develop sustainable farming and a sound banking sector at the same time.

Last but not least, TAFF and its partners address issues such as child labour or the environment by changing the structural conditions in the agricultural sector and providing training through its technical assistance activities.

“We are proud to see that in Tajikistan, which is considered one of the toughest countries in the EBRD region, good work can yield good results,” Mr Cordonnier concludes.

“TAFF started life as a lending programme but has grown to be much more,” says TAFF Operation Leader Sabina Dziurman. “It continues to support fundamental change as well as building an extensive skill base in the Tajik agricultural sector.”

“It remains a challenge and continues to be very time-consuming,” Ms Dziurman adds, “but it is one of the most rewarding projects I have worked on at the EBRD.”

TAFF website

Information about Tajikistan 

More about Agribusiness 

Press releases about Tajikistan 

Last updated 28 February 2011