AKIPRESS.COM - The Asian Development Bank (ADB) has approved its first private investment in Tajikistan, a package of equity and loans for Access Bank Tajikistan (ABT) to support ABT’s business growth and boost financing for micro, small and medium-sized enterprises (MSMEs), and services in the regions outside Dushanbe.

The approved ADB financing of up to $11 million equivalent includes an equity investment of up to $3 million equivalent and loans of up to $8 million. The loan comprises a $5 million direct loan and a $3 million B- loan with ADB acting as the lender of record.

“We are pleased to acquire 10% of share capital in AccessBank Tajikistan and look forward to supporting the bank’s expansion to support Tajikistan’s MSMEs especially in rural areas where many enterprises are still unbanked,” said Rainer Hartel, Principal Investment Specialist at ADB’s Private Sector Operations Department. “We are looking for other opportunities to support financial inclusion in Tajikistan.”

Four large banks dominate Tajikistan’s financial landscape but their performance has been undermined by their targeting of state-owned enterprises and implementing government-induced credit programs—resulting in low asset quality.

Entrepreneurs and smaller businesses increasingly rely on second-tier banks and microfinance companies, whose lending ability is constrained by small market share, limited deposit mobilization, constrained and costly overseas borrowing due to Tajikistan’s perceived high country risk, a dearth of qualified staff, and governance issues.

Just 16% of households have access to formal financial services and small businesses lack financing especially in rural Tajikistan, where agriculture provides jobs for two-thirds of the labor force. Private investment is therefore critical to stimulate farm and related services investments and employment.

ABT was set up in 2010 as a greenfield bank to serve low-income and MSME customers. ABT’s current shareholders include Access Microfinance Holding Aktiengesellschaft, European Bank for Reconstruction and Development, International Finance Corporation, and KfW, the German development bank.

Access Microfinance Holding, the majority shareholder, has a strong track record in establishing and managing greenfield banks that target MSMEs in eight low and lower middle-income economies in the Caucasus, Central Asia and Africa. LFS, one of the shareholders of Access Microfinance Holding, is providing management and capacity development services to ABT to boost services to MSMEs and farmers in Tajikistan by widening its regional branch outreach.

As well as providing long-term funds to support ABT’s growth, ADB’s investment package is expected to encourage mobilization of private financing in the finance sector and to stimulate public confidence in the banking system.

A related ADB technical assistance grant of $500,000 will allow ABT to strengthen its outreach to rural areas and boost staff skills, including in risk management.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2013, ADB assistance totaled $21.0 billion, including co-financing of $6.6 billion.