Tajikistan has taken great strides in reducing poverty levels and boosting economic growth over the last decades., Ms. Cassandra Colbert, IFC Senior Manager, Central Asia, notes.
Between 2000 and 2021, the poverty rate, measured by the national poverty line, fell from more than four-fifths of the population to just over a quarter, while the economy grew at an average of 7 percent a year.
But, like most countries in Central Asia, Tajikistan has had limited economic diversification. Its heavy reliance on mining exports and remittances has made it vulnerable to external shocks. In the last two years alone, the country has borne the impact of the COVID-19 pandemic, the conflict in Afghanistan, and the war in Ukraine.
All that has led to sizeable drops in economic activity, currency fluctuations, and financial sector instability. The labor market remains weak and food security is also lower than pre-pandemic levels.
These external shocks have impacted both households, and micro and small businesses. At home, many have experienced a double hit – from increasing expenses because of rising daily commodity prices, and diminishing incomes from a drop in employment and remittances. At firm level, Tajik companies have been reporting increased production costs and mounting difficulties in accessing credit, due to high interest rates or nonexistent collateral and guarantees.
ИЗОБРАЖЕНИЕ
What the situation has highlighted is the importance of a strong and inclusive financial system – one that can empower both individuals and small businesses to invest in their growth and well-being, capitalize on business opportunities, and weather such economic shocks.
While Tajikistan has made significant progress in boosting financial inclusion for its people, much more needs to be done. Account ownership increased from 3 percent in 2011 to 47 percent in 2017, for example, but dropped to 39 percent in 2021. Credit card ownership is still low, at 2 percent – a drop from 6 percent in 2017. Debit card ownership is slightly higher at 15 percent, according to the Findex 2021 data.
The use of digital payments, meanwhile, dropped from 44 percent in 2017 to 33 percent in 2021 – despite the fact that more than 80 percent of the unbanked population owns a mobile phone. That presents a huge opportunity for policymakers and the private sector to close the gap – for example, by moving wages and pension payments to accounts, or using mobile wallets to provide loans.
ИЗОБРАЖЕНИЕ
The good news is that Tajikistan has been taking steps towards a more inclusive society – most recently, with the launch of its National Financial Inclusion Strategy for 2022-2026. This multi-stakeholder effort, spearheaded by the National Bank of Tajikistan and supported by IFC, provides a roadmap to address longstanding roadblocks – from insufficient financial infrastructure, inadequate legal and regulatory norms, to poor support for digital financial services and financial institutions development.
It outlines the steps the government can take towards an inclusive financial system – delivering essential infrastructure, ensuring a conducive regulatory environment, incentivizing the private sector, reducing
gender gaps, and improving financial literacy.
While investments in digitalization and financial technologies are vital to promote entrepreneurship and enhance the resilience of households and small businesses, building trust by protecting consumers and optimizing their experience – to ensure affordance, effective, and safe financial services – is also essential. With the challenges Tajikistan is currently facing, the launch of the strategy comes at a critical time, and it is a significant milestone towards its goal of financial inclusion for all. Implementing the strategy’s action plan will ensure a more resilient economy – and even more progress for the country in the years ahead.
