International expert, Dr. Bertram Sonntag, has analyzed the formation of interest rate on loans in Tajikistan’s banking system and suggested that Tajik banks should use international practice while setting interest rates on loans.
International expert has conducted his survey within the frameworks of technical assistance provided by Open Society Institute – Assistance Foundation (OSI-AF) in Tajikistan, according o the press center of the National Bank of Tajikistan (NBT).
Dr. Bertram Sonntag, in particular, suggested that Tajik commercial banks should use international practice while setting interest rates on loans.
It should be noted that many local entrepreneurs complain of too high interest rates set by Tajik commercial banks on loans.
Moreover, the loans are offered only for short or medium-sized period. Some expert consider that some entrepreneurs become bankrupt because of high interest rates set on loans offered by local commercial banks.
“Only large commercial enterprises or wholesale imports of goods can afford such loans as working capital for the purpose of expanding their business. It is impossible to create new business on such conditions,” Tajik economist Nour Rajabov noted.
Meanwhile, Tajikistan is seeking ways to reduce loan interest rates. A special working group was set up in the country last year. The working reportedly carried out a certain work to date, and as a result, weighted average interest rate fell from 28.2 percent in 2017 to 26 percent in 2018 and the volume of the provided loans increased from 7.7 billion somoni to 8.2 billion somoni respectively.
According to data from Tajik central bank, the current weighted average interest rate for loans provided in the national currency amounts to 26.03 percent and the current weighted average interest rate for loans provided in the foreign currencies amounts to 17.22 percent.
The weighted average interest rate is the aggregate rate of interest paid on all debt. The calculation for this percentage is to aggregate all interest payments in the measurement period, and divide by the total amount of debt.
