Strengthening the grassroots of Tajikistan’s economy
London, United Kingdom, December, 12 2007 -
Micro enterprises and farmers to benefit from new EBRD loans
The EBRD is stepping up its commitment to the development of Tajikistan’s economy with new loans to two local banks aimed at supporting the agricultural sector.
The financing, provided under the new Tajik Agricultural Finance Framework (TAFF), will be on-lent to small farmers for the purchase of farming supplies, such as equipment and seeds. Many of the farmers will never have received a loan before and many of them will be women.
The funding comprises a USD 6 million loan to Agroinvestbank. Bank Eskhata will be provided with USD 1.2 million.
These are the first syndicated loans in Tajikistan. USD 3 million will be provided under a A/B loan structure by Developing World Markets (DWM) and the EBRD will provide the remaining amount. DWM is a fund manager and investment bank whose goal is to use the capital markets for sustainable development.
The USD 35 million-Tajik Agricultural Finance Facility, the first of its kind in the EBRD region, is a new initiative by the Bank to support the restructuring and diversification of the Tajik agricultural sector, including the cotton sector, by funding loans to small, family and individual private farms.
Agroinvestbank and Bank Eskhata, the two first partners under the new facility, have already worked closely with the EBRD under the Tajik Micro and Small Enterprise Finance Framework launched in late 2003. Agroinvestbank is also receiving a USD 10 million loan under the latter for on-lending to micro, small and medium sized enterprises, many of which are likely to be located in rural areas.
Masaru Honma, EBRD Director for Central Asia, said that “affordable finance and advice are still needed in Tajikistan and the EBRD can provide both. The first signings under the new facility will encourage smaller farmers to grow the crop of their choice rather than tying themselves to unfavourable deals that have led them into debt in the past.”
Murodali Alimardon, Governor of the National Bank of Tajikistan, said “this is a very significant moment for Tajikistan, because not only are these the first syndicated loans in the country but the technical assistance provided alongside this finance will help our commercial banks to provide a real alternative to Tajik farmers and will support our Government’s new Freedom to Farm policy”.
“TAFF’s goals in providing alternative finance to small farmers matches the DWM’s goal to create innovative financial solutions to address poverty alleviation, sustainability and the financial needs at the bottom of the pyramid” said Peter Johnson, CEO of Developing World Markets.
Under the framework EBRD donor countries will cover the costs of training participating banks and agricultural advisers. Training and education will be provided to farmers to avoid the use of harmful environmental practices and inputs (such as banned or toxic pesticides), improving labour standards, and working towards the implementation of best farming practices (such as integrated pest management).
Donor funds will also be raised to establish a warehouse receipt program that will enhance farmers’ access to finance after harvest. Warehouse receipts are an effective and low risk financing mechanism that can be applied to agricultural commodities.
The Tajik Agricultural Finance Facility builds on the successful Tajik Micro and Small Enterprise Finance Framework through which the EBRD has provided credit lines since late 2003. As of end-September 2007, four partner banks had disbursed over 27,000 loans for a total value of over $104 million to micro and small companies in Tajikistan.