1. Reducing Borrower and Lender Risk in Tajikistan
International Conference on Rural Finance Research
FAO, Rome, March
Linda Jones
Technical Director
MEDA

2. Long Title for Paper
Reducing borrow and lender risk through context sensitive product and portfolio design: the case of integrating microfinance with agricultural development in Tajikistan.

3. MEDA Approach to RAF
Partnerships
Local ownership and management
Capacity building
Long-term commitment
Flexible, context-sensitive programming

4. Objectives: Rural loan fund
To create a context-sensitive rural loan fund
To develop products that meet the needs of lender and borrower
To build a healthy and balanced portfolio

5. Program Description Partner – NABWT/IMON
CIDA - CDN $5.3 million contribution
4 years, ca. 35 staff (04/04 – 03/08)
Subsector development
Rural credit ($1m loan fund)
Agricultural extension
Association / group formation
SME development – business, marketing, technology / facilities, loan fund ($550k), matching grants ($300k)
Linkages between farmers and SMEs
Cross-cutting issues – especially gender

6. Program Challenges / Questions
Local partner and capacity?
Clients and context?
Complementary programming?

7. Local partner and capacity?
Experience
Willingness to adapt
Knowledge of regions
Reputation in communities
Technical knowledge

8. Clients and context? Attitudes to credit
Population density / physical access
Literacies
Repayment ‘culture’
Risks and risk mitigation

9. Complementary programming?
Integration into broader program
Feedback loop
Connection to agricultural extension and market development activities
Linkages between staff of different program components

10. Methodology - General Group and individual loans
Interest set at market rates
Non-traditional forms of collateral
Streamlined application procedures
Short loan terms with frequent repayments
Training of borrowers

11. Portfolio Balance Agricultural loans
Strong focus on horticulture (80%)
Agribusiness and support services included
Only one loan per household
Few individual loans performance based

12. Product Specifics 3 to 12 month terms Biweekly or monthly payments
Longer grace period
Declining balance interest
$300 - $1500

13. Application Process Extensive application process
Participation of entire group in each application
Training includes management of repayment
Credit committees reviewed all applications with loan officer present to start

14. Results – October 2006 3557 rural loans disbursed $1.4 million total
Average outstanding loan $1055
Portfolio at risk > 1 day 0.10%
Operating expense ratio 15.23%
Creation of microfinance foundation ($7 m under management)
Expansion to other regions

15. Major Findings & Conclusions
Overall capacity of institution
Upfront investment
Understanding of clients / context
Integration into larger program or linkages
Slow growth recommended
Diversification of portfolio
Issues of commodity markets
Supply and value chain finance

16. DISCUSSION