The leadership of Tajikistan annually addresses relevant departments and organizations about the inaccessibility of affordable loans for entrepreneurs, instructing them to solve this problem.
In his latest address to the parliament, President Emomali Rahmon once again emphasized the need to take measures to reduce interest rates on loans while increasing the volume of loans provided.
He noted that over the past five years, banks have issued loans totaling more than 80 billion somonis, and in his opinion, this figure should be increased to more than 100 billion somonis by 2027.
It should be noted that the president virtually every year, in his messages to representatives of the financial and banking sector, speaks about the necessity of reducing loan interest rates.
According to the National Bank of Tajikistan (NBT), the average interest rate on loans in the national currency in January this year was 22.88%, compared to 26% in 2018.
Meanwhile, the volume of loans issued in 2024 amounted to 24.6 billion somonis, which is nearly 30% more than the previous year.
Of the total volume of loans issued, 47.1% are consumer loans, 14.6% are for foreign trade, 12.7% for agriculture, 12.4% for industry, 6.9% for services, 3.9% for construction, and 2.3% for other sectors.
The total outstanding loan portfolio of credit organizations at the end of 2024 amounted to 21.4 billion somonis, showing an almost 20% increase compared to the same period in 2023.
Barriers
The inaccessibility of financing on acceptable terms remains one of the main barriers to the development of entrepreneurship.
Business representatives often face a lack of working capital, which forces them to turn to banks. Many understand that repaying the loans with interest at the proposed rates will be extremely difficult, but they still take the risk, hoping for favorable circumstances.
In recent years, four banks in the country have gone bankrupt, two of which were systemically important, holding almost half of the country’s financial intermediary market.
The main reason for the bankruptcy was the high level of non-performing loans. The share of non-performing loans reached a third of the total loan portfolio of the entire banking system.
Another problem related to bank lending is that most banks offer funds for short-term loans and, in rare cases, for medium-term periods. However, entrepreneurs require long-term loans, which are currently not available.
Trends
The NBT leadership states that, together with credit organizations, they are making efforts to fulfill the president's directive. "In general, loan interest rates have a tendency to decrease," said the head of the national financial regulator, Firdavs Tolibzoda, at a news conference in February this year.
According to him, the average interest rate decreased by 1.1 percentage points over the past year.
Furthermore, banks can individually reduce interest rates for specific clients based on the level of risk. The lower the risk, the lower the rate.
Alijon Salimzoda, Chairman of Amonatbonk (Tajikistan’s savings bank), claims that following the president’s instructions, the rates in the national currency have been reduced by 2 to 4 percentage points over the past year. He explained that to achieve this, deposit rates had to be lowered, as customer deposits are the primary source of lending for the bank.
It should be noted that Amonatbonk is the largest commercial bank in the country, accounting for almost a quarter of the banking sector.
Meanwhile, a specialist from one of the banks, who wished to remain anonymous, opposed government intervention in the financial intermediary market. He stated that banks, like any other business, are commercial entities, and banking rates, in his opinion, should be determined by the market based on supply and demand, not by top-down instructions.
The specialist believes that such misconceptions led to the bankruptcy of two of the country’s former leading banks (Agroinvestbonk and Tojiksodirotbonk), which were once seen as cash cows.
He claims that the difference between deposit and loan rates should be at least 10-15 percentage points for a bank to ensure its continued existence. According to NBT data, the average deposit rate in the national currency in January this year was 10.53%, while the rate for loans was 22.88%.
What do experts recommend?
Independent experts believe that some entrepreneurs go bankrupt precisely due to the high cost of bank loans, which also need to be repaid in the shortest possible time.
Other experts note that business profitability in Tajikistan is at a very low level, and only subsidized loans with an interest rate of no more than 2% per annum can attract entrepreneurs.
International experts advised several years ago that to reduce loan interest rates in Tajikistan, trust in banks should be restored and strengthened.
"High interest rates will decrease when more businesses and their employees deposit their earnings in the banking sector, and financial institutions share the confidence of businesses in future success," said former World Bank representative to Tajikistan, Jan-Peter Olters.
International banking consultant Bertram Sonntag, in an interview with Asia-Plus, recommended creating a structure where people would want to invest in their national currency and trust banks.
