Supporting small business entrepreneurs in Tajikistan

Eighty years ago,Tajikistan’s capital Dushanbe was a small market town in Central Asia, sheltered by mountain ranges from the freezing Siberian winds. Today, the city’s name still bears the traces of this past: “Dushanbe” means “Monday” in Persian, the day when the market used to take place.

While this aspect of the city’s history has faded, small business trading remains crucial to the economic future of the capital and the rest of Tajikistan, which is the poorest country in the EBRD region.

Improved access to finance

However, obtaining the necessary finance to start or expand a small enterprise is not easy, especially for entrepreneurs who have never previously had access to credit. That is why the EBRD supports them with micro and small credit lines accessed via selected Tajik partner banks and microfinance institutions.

“Our Tajik partner banks have given out more than 95,000 loans to small entrepreneurs and businesses since the start of operations in 2003,” says Firouza Iskhakova, Principal Banker in the EBRD’s Financial Institutions team. “Overall, they have disbursed over US$ 478 million through the EBRD’s credit lines, with an average loan amount of approximately US$ 5,000.”

The success of the EBRD programme is similarly impressive when it comes to non-banking microfinance institutions. Since the Bank started providing them with credit lines, they have been highly successful in attracting further commercial lenders. As a result, the number of loans to micro-businesses and small entrepreneurs has surged. In total, more than 338,610 loans have given a much-needed boost to small businesses in the country.

The programme has enabled even the smallest entrepreneurs to expand their operations. These include many female traders who earn a living by buying goods in other Central Asian countries, China or Dubai and reselling them at home. A further example is businessmen and women who have set up their own small production facilities.

Better biscuits

Qurbonov Rakhimjon is a private entrepreneur who produces a popular range of biscuits and cakes under the brand name “Basri” in his small bakery on the outskirts of Dushanbe.

“Before I obtained a loan, a representative of the EBRD’s partner bank analysed my existing business and my future plans,” Mr Rakhimjon recalls. “My application was approved and since then I have obtained an additional four loans to purchase new equipment, modernise my baking facilities and expand my production.”

Mr Rakhimjon used to produce only one type of biscuit before the first loan. “Now I have increased my range to include 15 different varieties,” he adds. “My customers like my biscuits so it isn’t difficult for me to sell and distribute my merchandise.”

Building knowledge in banks

Providing finance to micro and small businesses is only one part of the EBRD project. It also aims to help develop the country’s financial sector and create a sustainable basis for continued lending to micro and small enterprises.

With the aid of technical cooperation grants from the Japanese, UK and US governments and the European Commission, the EBRD helped its Tajik partner institutions to develop the necessary skills to support creditworthy clients.

The grants served to employ experts to advise local bankers on how to set up specialised lending departments and to train them in the techniques of micro-lending. 

The technical cooperation funds helped to improve corporate governance, strengthen internal controls and boost risk management in the partner institutions. Finally, grants from the Swiss government provided a risk-sharing scheme to support EBRD loans to local commercial banks.

A boost to the Tajik economy

“The EBRD’s programme was instrumental in building trust into Tajikistan’s banking sector – both for entrepreneurs who wanted to take out loans and for commercial lenders who wanted to invest,” Ms Iskhakova stresses.

The development of micro and small businesses plays an important role in creating jobs and alleviating poverty in Tajikistan, according to Ulf Hindstrom, Head of the EBRD’s Dushanbe Resident Office.

He adds: “The programme helped to open up new opportunities to entrepreneurs who run their own businesses but have found it hard in the past to obtain loans.”

By Volker Ahlemeyer

Last updated 12 October 2011