EBRD will give $1million for small businesses development in Tajikistan
By Abdul Kerimkhanov
The European Bank for Reconstruction and Development (EBRD) will provide a $1 million for the development of small businesses in Tajikistan, the press service of the EBRD reports.
The funds will be directed to the regions where there is a shortage of banking services.
"We are pleased to start the year with a project to support both the financial sector and small and medium enterprises, equally important for the economic growth and development of the country. I hope that during the year we will develop many useful and interesting projects in various sectors of the economy," said the head of EBRD representative office in Tajikistan Aytan Rustamova.
The EBRD added that, to date, the Bank has invested in over 120 economic projects in Tajikistan.
In total, Tajikistan received from the EBRD 600 million euros. At the same time, 32 percent of the allocated funds were used to support the financial sector and entrepreneurship.
EBRD in Tajikistan focuses on stabilising and rebuilding trust in the banking sector so as to increase the sector’s capacity for financial intermediation as a means to facilitate access to finance and lower the high real interest rates. This is an immediate priority.
To this end, the discontinuation of state-directed lending practices is a first necessary step to help address existing weaknesses. Conditional on creating a positive reform momentum, the Bank will be able to increase its operations in the banking sector including through further equity investments in banks and MFIs and through increased local currency lending, which will help reduce foreign exchange risk for local businesses.
Developing private enterprises and agribusiness
This requires improving the business environment by cutting red tape and lowering other formal and informal barriers to doing business.
Simplifying tax policies and improving tax administration are of paramount importance to incentivise firms operating in the real economy to become more transparent. Progress with reforms in this area will create more bankable private enterprises that will be able to benefit from EBRD and local commercial bank financing.
Given that 70 percent of the population gets its livelihood from agriculture, developing agribusiness enterprises is particularly crucial for ensuring inclusive growth. Establishing value chains and increasing diversification and productivity is needed to make farmers less vulnerable to international price shocks and to improve food security. The Bank’s ability to provide agricultural financing will also strongly depend on progress made with reforms in the banking sector.
Improving the availability, reliability and quality of municipal services such as water supply, solid waste, and urban transport as a necessary precondition for commercialisation of these utilities.
Once the quality of municipal services improves, the willingness to pay for them will increase as well, in turn generating resources that will allow for further improvements in quality. Progress towards commercialisation and improvements in quality therefore go hand in hand.
However, to address the affordability constraints of the Tajik population and the debt capacity constraints of the government, a high level of grant co-financing will be required.
Improving the quality of energy supply, regulation and energy efficiency is vital for all sectors of the economy as well as for the quality of life of Tajik citizens.
The first priorities are to rehabilitate the existing infrastructure and restructure the state power utility company Barki Tojik. Progress with reforms in these areas will allow for the commercialisation of the sector and opening it up for private sector investment. Improving energy efficiency and reducing energy losses could also contribute to improving energy security. Conditional on the government’s commitment to progress with energy sector reform, the Bank will selectively finance the rehabilitation of the energy sector infrastructure and will support energy efficiency measures at Barki Tojik.
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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94
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