Recommendations on Microfinance Legislation for Tajikistan

This paper argues that the development of appropriate legislation is necessary for responsible growth of the microfinance services market in Tajikistan. It considers:

• Alternative legal vehicles for this process;
• Important steps to ensure the implementation of such legislation.

Discussing the financial market in Tajikistan, the paper states that:

• It is young and unsophisticated; innovation and growth can be fostered by appropriate statutes and normative acts;
• The microfinance sector is unique in a number of aspects;
• The National Bank of Tajikistan, as financial markets regulator, has limited resources;
• Eight microfinance institutions (MFIs) already exist;
• Stakeholders are afraid of unfair taxation, complex registration and licensing requirements, and unclear relationships with the banks.

The paper argues that the implementation of legal reform in the microfinance sphere depends on the interactions and political dialogue between lawmakers, corresponding ministries and MFIs. It then analyzes:

• The options for creating a legal framework for microfinance;
• The reasons why a new law on MFIs was deemed the most appropriate vehicle.

Further, the paper:

• Discusses important issues to be considered in the microfinance drafting process;
• Offers commentaries on existing legislation such as the tax code, civil code, the Law on Banks and Banking Activities, Law for the National Bank of the Republic of Tajikistan;
• Lists specific articles requiring amendment.

It concludes by listing the statutes and normative acts that need to be reviewed before the MFI Bill is finalized.