The International Finance Corporation (IFC), a member of the World Bank Group, says it is providing a $2.5 million loan in local currency to LLC MDO Arvand, one of Tajikistan’s leading microfinance institutions, as part of an effort to support home ownership and drive economic growth in the Central Asian country.
The financing will be provided through cross-currency swaps with the International Development Association’s (IDA) Private Sector Window Local Currency Facility. This long-term financing will allow Arvand to significantly increase microloans to low-income families across rural Tajikistan, helping them to build new homes and renovate their existing dwellings. The loan will also help Arvand ramp up its lending to individual entrepreneurs, and micro and small enterprises (MSEs), groups that often have trouble accessing the finance they need to expand their businesses.
“The availability of housing in Tajikistan’s rural areas is extremely important as many families live in overcrowded homes,” said Shoira Sodiqova, CEO of Arvand. “In addition, there is a lack of access to affordable housing finance. Our partnership with IFC aims to help change that. Also, micro enterprises are a key part of Tajikistan’s economy. This financing from IFC will make it possible for more of them to access credit, and, over the long run, help them to expand and create jobs.”
Along with financing, IFC will advise Arvand, the third-largest microfinance institution in Tajikistan, on how to develop new lending products, including home loans tailored to women and loans designed to finance disaster resilience.
“In Tajikistan, private companies still play a relatively minor role in the economy,” said Cassandra Colbert, IFC’s Regional Manager for Central Asia. “But with the right support, they can be an engine of economic growth and job creation. IFC’s financing is expected to support those companies and will also help many homeowners in rural areas, where houses are in poor condition, given people’s low incomes and lack of access to affordable finance.”
In Tajikistan, a low-income country, over 70 percent of the population lives in rural areas. There is pressing need to improve living conditions as housing space per capita is the lowest in Europe and Central Asia. Only about a third of houses are built with bricks, and the poor condition of homes leaves people exposed to hazards and natural disasters. Access to financial services and mortgage financing is also extremely limited. To help address the challenges, IFC has partnered by Arvand, that has a large client base, strong regional presence, and expertise in housing microfinance and MSE lending.
The loan to Arvand marks the first use of the IDA Private Sector Window in Tajikistan and without its use, the local currency loan would not have been viable on commercial terms due to high costs. IFC has worked with the National Bank of Tajikistan to secure local currency for this transaction.
