DUSHANBE, December 9, 2013, Asia-Plus — World Bank”s
Tajikistan Partnership Program Snapshot
published in October this year notes that Tajikistan’s banking sector remained weak in the first half of 2013, limiting the role that financial intermediation can play in supporting economic growth. Nonperforming loans (NPLs) were reportedly at 18 percent at end-June 2013, up from 17 percent in September 2012. Several factors contributed to the deterioration in asset quality beginning in 2009 and 2010, including prior rapid credit growth until 2008; the inability of banks’ risk management systems to adapt to the rapid credit growth and leveraging; the global economic crisis, resulting in an economic slowdown; deficiencies in the regulatory and supervisory framework and its enforcement by the National Bank of Tajikistan (NBT); and weaknesses in the financial infrastructure. Most important, however, was renewed Government-directed lending in 2009–11, which has contributed to the deterioration of the loan portfolio by adversely impacting the risk management systems of banks and their financial positions, undermining the NBT’s independence as bank regulator and supervisor, and weakening the credit culture.
Financial intermediation in Tajikistan remains limited. Tajikistan ranks low in credit and deposit penetration compared to other countries in the region.
The capitalization and profitability of the banking sector may be overstated, and banks face liquidity constraints, the report says. Profitability remains poor despite the sharp increase in net income, which reached US$21.2 million in the first six months of 2013, compared to a net loss of US$6.3 million in 2011. The return on assets (ROA) increased to 2.07 percent at end-June 2013 from 1.45 percent in the same period of 2012. After decreasing to 0.7 percent at the end of 2012, the return on equity (ROE) improved to 10 percent at end-June 2013. Capitalization remains weak and the reported capital adequacy ratio (CAR) decreased to 23 percent at end-June 2013 from 27 percent at the end of September 2012. Although this level of capital adequacy may seem adequate, the misclassification and under-provisioning of NPLs suggest that capital is overstated. Banks also face liquidity pressures due to maturity mismatches, and they have been increasingly dependent on the NBT for liquidity loans to meet their funding needs. The financial system remains vulnerable to future shocks. Stress tests show that capital positions should be strengthened; risk management, governance, and accounting practices improved; and dependence on liquidity support from the NBT eliminated.
Tajikistan’s banking system now consists of 16 banks, one non-banking financial institution, 37 microdeposit organizations, 42 microloan organizations, and 39 microloan funds.
