BUILDING SUSTAINABLE MICROFINANCE

1. BUILDING SUSTAINABLE MICROFINANCE UNDP Tajikistan 9-11 November 2005 Almaty, Kazakhstan

2. Transforming Livelihoods: Objectives • Reduction of extreme poverty; • Development of private sector; • Sustainable local capital; • Capacity for micro-finance;

3. Transforming livelihoods: Activities • Establishment and legalization of the Revolving Funds (retail institutions) with initial grant portfolio; • Institutional capacity building and technical assistance; • Preparation of relevant documentation (business plans, contracts, etc); • Distribution of micro-loans among vulnerable groups of population (credit line funding); • Monitoring & Evaluation (including external).

4. Transforming livelihoods: Current projects • Poverty Alleviation in Rasht Valley (SIDA and WB, $1,000,000); • Poverty Reduction through Social Safety Net in Northern Tajikistan (TACIS, $200,000); • Cross Border Project in Northern Tajikistan (SIDA, UNDP, GCPP, $100,000); • Zeravshan Regional Development Initiative (DFID, $50,000); • Safe Borders through Enabled Communities (BOMCA, $120,000)

5. Transforming Livelihoods: Results • Improved access to rural finance for vulnerable groups; • 47% of all micro-loans in Tajikistan provided by UNDP covering almost 40,000 individuals; • The volume of UNDP microfinance capital has grown from $ 2,0 mln in 2002 to $ 2,5 mln in 2005, which amounts to 28% of total microfinance portfolio available in Tajikistan; • 160,000 people - members of households indirectly benefited from microfinance activities;

6. Total number of borrowers served

7. Distribution of loan by activities

8. Transforming Livelihoods: Lessons Learned • Weak capacity in accounting and loan policy (requires continuing training and capacity building); • Legislation constraints the development of new micro-finance products (requires amendment with less prudential control of saving activity); • Women are marginalized (requires efforts to involve them in the project activities); • There is a need in an individual borrowing (requires works with beneficiaries on guaranteeing the loan);

9. Success factors and indicators • The lending activities are organized in a transparent way through Loan Management Committee; • The loan application and selection procedures are appropriate for rural people; • Yield on portfolio totals to 17%; • Operational and Financial sustainability ratio is 223%; • Payback is 99.9% and delinquency is 18,5%;

10. Operational and Financial sustainability

11. Monitoring and reporting system • Internal and external regulation of Revolving Funds; • Monthly reporting of disbursed loan to beneficiaries; • Transparent structure and good accountability through Loan Management Committee; • Semi-Annual reporting based on MIX indicators and benchmarking.

12. Further Challenges • Only 27% of borrowers are women; UNDP goal to increase up to 35%; • Proper monitoring system for tracking of repayments should be introduced - software; • The overall impact is modest because of relatively small amount of loans – average amount is 160$ per borrower; • Professional standards of accounting should be applied for registering RFs as an MLO; • An umbrella organization – apex structure covering newly established MLOs for easier control and attracting new funding should be organized for future exit strategy;