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EBRD, EU launch US$ 46.5 million programme for farmers in Tajikistan

By Svitlana  Pyrkalo

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EBRD, EU launch US$ 46.5 million programme for farmers in Tajikistan

First stage to help replace obsolete machinery in primary agriculture as MFI Arvand becomes first partner in the programme

The EBRD and the EU have launched a new €42 million (US$ 46.5 million) programme to support farmers in Tajikistan. The first tranche has been provided to a leading microfinance deposit-taking organisation, Arvand.

In Tajikistan, agriculture accounts for the majority of employment but suffers from very low productivity. The new Enhanced Competitiveness of Tajik Agribusiness Programme (ECTAP) is designed to boost it. 

The EBRD will lend up to €20 million in total, and the EU will provide €9 million in investment grants and a risk-sharing facility, with a further €800,000 in technical assistance.  Another development bank is expected to join the EBRD in the near future in financing and implementing the programme, and will contribute the balance of the financing.

The first stage of the programme includes €15 million of funds from the EBRD for on-lending and €3 million of investment grants from the EU. This stage will focus on helping micro, small and medium-sized enterprises (MSMEs) in primary agriculture to upgrade and replace machinery and equipment that are either unproductive or obsolete (most agricultural equipment in the country dates back to the Soviet era).

The funds will be provided to selected microfinance institutions and commercial banks in Tajikistan for on-lending to micro, small and medium-sized enterprises (MSMEs) in the agribusiness sector across the country, with 80 per cent of financing distributed outside of the capital, Dushanbe.

Director and Head of EBRD operations in Tajikistan, Richard Jones, said: “With the right investments in processing, packaging and quality standards, Tajikistan’s agricultural production has significant potential to expand, securing livelihoods and boosting exports. The new financing programme is the latest instrument the EBRD is deploying to support this potential, following on from a previous lending programme via local financial partners, business advisory services and direct financing to local entrepreneurs.”

Agriculture employs over 50 per cent of the workforce in Tajikistan, but accounts for only a quarter of GDP. The sector depends heavily on just a few crops – wheat, barley, onions and garlic. The new programme will also aim to help diversify agriculture in the country to include other fruit and vegetables, honey production, and the expansion of animal husbandry and dairy farming. Specific sub-sectors have been identified by the project consultants, Frankfurt School for Finance and Management, contracted by the EU under the ECTAP programme.

The first microfinance institution to receive a tranche under the new programme is Arvand. It will receive the equivalent of US$ 2 million in the local currency, Tajik somoni. At present, farmers borrow almost exclusively in foreign currency, even though their income is in local currency, because affordable medium-term local currency financing is seldom available in the market.

Arvand, which has a large national network of dozens of branches and service outlets with a focus on the northern regions, is already focusing on agribusiness MSEs, which constitute over a third of their portfolio.

Shoira Sadykova, Arvand’s General Director, said: “In Arvand, we strongly believe that even in difficult times for our country’s economy we should continue to disburse loans and focus on agriculture to support its post-crisis development. Arvand has been the first to participate in many new initiatives in the sector. This programme will be another chance for us to address our clients’ needs with a new approach. I am sure that our experience and our strong, long-term partnerships with clients, as well as the fact that 60 per cent of our offices are in rural areas, will be key to the successful implementation of this programme.”

ECTAP is the latest in a series of projects supporting agribusiness in Tajikistan.

The EBRD has successfully implemented a Tajik Agriculture Financing Framework, where US$ 72 million was channelled to farmers via local partner financial institutions, with donor funds from the US, the EU, Luxembourg, and the EBRD’s Early Transition Countries Fund.

A large percentage of EBRD credit lines aimed at SME lending in Tajikistan also goes to companies in the agribusiness sector.  

In addition, the EBRD’s Advice for Agribusiness team provides consultants and business advice for agribusiness companies, and works on developing value chains. In one recent example the EBRD became a minority shareholder in Auchan Tajikistan, which has just opened the first hypermarket of the country and has identified over 200 local suppliers who are now beginning to work with the hypermarket.

To date, the EBRD has invested over US$ 670 million in various sectors of Tajikistan’s economy.

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