Building sustainable microfinance
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BUILDING SUSTAINABLE MICROFINANCE. UNDP Tajikistan 9-11 November 2005 Almaty, Kazakhstan. Transforming Livelihoods: Objectives. Reduction of extreme poverty; Development of private sector; Sustainable local capital; Capacity for micro-finance;. Transforming livelihoods: Activities.

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BUILDING SUSTAINABLE MICROFINANCE

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Building sustainable microfinance

BUILDING SUSTAINABLE MICROFINANCE

UNDP Tajikistan

9-11 November 2005

Almaty, Kazakhstan


Transforming livelihoods objectives

Transforming Livelihoods: Objectives

  • Reduction of extreme poverty;

  • Development of private sector;

  • Sustainable local capital;

  • Capacity for micro-finance;


Transforming livelihoods activities

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).


Transforming livelihoods current projects

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)


Transforming livelihoods results

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;


Total number of borrowers served

Total number of borrowers served


Distribution of loan by activities

Distribution of loan by activities


Transforming livelihoods lessons learned

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);


Success factors and indicators

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%;


Operational and financial sustainability

Operational and Financial sustainability


Monitoring and reporting system

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.


Further challenges

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;


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