Tajikistan: Microfinance targets the rural poor

In 2003, Zuhrobonu Nazarova opened a small snack bar in a market in rural Tajikistan. The income she and her husband earned barely supported their six children. Then her husband—a migrant worker—died. To prevent her children from going hungry, Nazarova needed money to expand her business.

A microloan provided the life-line she needed. The equivalent of $200 at 1.5 percent interest per month, it allowed her to turn her snack bar into a larger canteen. Now she earns about $130 per day and supports her children, but also employs five people—including two women.

The microfinance programme that helped her is supported by the Government together with international donors and UNDP. Some 120,000 vulnerable people who previously had no access to banking services received microloans, forty percent of them women.

Beneficiaries who invested in their businesses and created jobs reported that the loans had boosted food security and enabled them to better clothe and educate their children. Some loan recipients were able to buy land and build a home.

UNDP’s niche: Poor, remote clients

The UNDP-implemented microfinance programme works differently than traditional commercial schemes. Loan application procedures are kept simple and portfolios are managed by community members. Loan periods average between 6 and 12 months, with interest rates between 1.5 percent and 3.0 percent per month.

Money is disbursed in local branch offices, which makes it easier and faster for beneficiaries to get their loans a few days after approval. Relatively low administration costs and close loan supervision keep defaults to a minimum.

Smaller initiatives scaled up

UNDP began with smaller efforts. In 2000, it established a number of ‘revolving funds’ aimed at providing vulnerable groups and farmers with short-term loans.

In 2005, more than 100 funds were consolidated into seven large regional microfinance institutions. This expanded the reach, scope and professionalism of microfinance institutions. Since then, they have more than doubled their portfolio—from $3 million to $6.5 million.

UNDP also supported improvements in microfinance legislation, culminating in a critical new national law on microfinance in 2005, and helped microfinance institutions develop new financial products, increase transparency, and learn how to tap commercial sources of credit.

Rushdi Vodii Zarafshan, one of the largest regional microfinance institutions, built up a loan portfolio of over $1.5 million with UNDP’s assistance in raising capital. Focusing on one of the country’s poorest regions, the institution’s microfinance programme helped increase the average monthly income in the region from $120 to $200, and create some 943 new jobs, more of a quarter of which are held by women.

Read the full story in our publication "Empowering Lives, Building Resilience"