Small Loans, Big Results: Village Banking in Tajikistan

by Raisa Mukhutdinova & photo by Chuck Tampio Fall 1996

An agricultural technician in charge of a pump station in Tajikistan was recently asked: "When was the last time all your pumps were working?" His answer: "Up to the end of communism." Indeed, the demise of the USSR has had a ripple effect on every aspect of life in all of the former Soviet Republics. Everything from the vast social safety network of the past era to the maintenance of industrial and agricultural structures has been seriously affected.

The post-communist era has been especially traumatic for Tajikistan, which declared its independence in September 1991, the last republic of the former Soviet Union to do so. Soon after, political feuds, later turning to all-out civil war, erupted among old communists, democrats and Muslim forces. By the time the violence subsided at the end of 1992, an estimated 35,000 were dead. The war has also left as many as 25,000 widows, 55,000 orphans and thousands with permanent physical and psychological wounds. Much of the bloodshed occurred in the villages of the Khatlon province in the south of the country where an estimated one-third of the population lives.

The Tajik Economy

As a consequence of the end of the USSR and the civil conflict in Tajikistan, the country's economy has been severely damaged. During the Soviet days, while there was not the wide availability and variety in consumer products as in the West, the population's standard of living was fairly high. Education and medical care were provided free of charge, and incomes were sufficient to enjoy a comfortable lifestyle. In the early to mid-1980s a 50 kg (110 pound) bag of flour cost four percent of a household's monthly income. That same bag of flour now requires 70% of the average monthly income. A recent UNHCR survey of 400 households throughout Tajikistan found the average family size is eight, and the monthly household income is the equivalent of $41. In 1995, inflation for basic food items was nearly 1000 percent. Wages have been devalued to the point of worthlessness. The very old and the very young are of the hardest hit. More than one-half million pensioners receive an average of 340 Tajik rubles, or $1.15, per month, and many elderly have no choice but to sell their meager possessions or beg in the streets. And due to inadequate diets and shortage of medicines, infant mortality is on the rise-now an estimated 60 per 1,000 live births.

NGO Response

As many as 30 international NGOs and development agencies operate in Tajikistan. Much of their work is relief oriented. The Aga Khan Foundation, for example, delivers tens of thousands of metric tons of critically needed wheat flour and other food commodities to the remote and mountainous province of Badakhshan, the area known as the roof of the world. Others, such as Save the Children-US, the largest international NGO operating in Tajikistan, work in the war-affected districts of the Khatlon province. The 1992 civil war left thousands of homes in the villages of Khatlon destroyed, their owners having fled south to Afghanistan or north to the capital city, Dushanbe.

Since mid-1994, Save the Children, with funding from UNHCR and USAID, has helped in the repatriation of such refugees and internally displaced people by providing building material to rebuild more than 26,000 houses and kitchens. A Food for Work program using commodities provided by the US Department of Agriculture distributed goods to village brigades who rebuilt their own homes in teams. Nearly 8,000 metric tons of wheat flour, cooking oil, rice and powdered milk have been distributed among work brigades in 270 villages. Furthermore, Save the Children has been providing more than 70,000 students in 321 Khatlon schools with one meal per day. As a result of this program, school enrollment has nearly doubled.

Group Guaranteed Lending

Moving toward development as opposed to relief programs, Save the Children, with funding from the Soros Foundations, has begun a micro-credit/village banking scheme known as Group Guaranteed Lending (GGL). This program involves more than 525 women scattered in 28 groups in western Khatlon. According to project consultant Aminur Muhit Rashid, GGL is about "implementing a micro-credit loan program without any [financial] collateral through a group guarantee system." Its main goals are to enable group members to reestablish or expand their assets, and sustainably provide for their families, especially for their children, and generate additional income.

The program began by giving out loans as small as the equivalent of 21 dollars to be repaid with 10 percent quarterly interest in six bi-weekly installments. Now loans have increased to 15,000 Tajik rubles per member, equivalent to 50 dollars. Each group helps its members fulfill their full repayment requirement. In the case of unsolved overdue payments or default, the group will lose the right to obtain a repeat loan. So far, however, the success rate in loan repayments has been 100 percent.

Each group elects a chairperson, vice chair, secretary and cashier. In each group meeting, various issues related to loans, savings, economic activity, group function and social issues are discussed. Compared to other developing countries, a high proportion of women in Tajikistan are literate, many with higher education. This enables a quick understanding and mastery of group management.

According to Khaironnesa, a group leader, many of the women who are involved in the GGL program have no husbands. "And the ones who are married don't sit at home and wait for the men or the State to bring them food and other goods," she says. "We work in the kolkhoz [collective farm] for as much as 20 hours or more a week, yet most of the time we are not paid. We work there to get some minimal benefits such as small amounts of fuel or harvest and not to be kicked out of our houses since they're on collective lands," Khaironnesa says. "Women know that now they have to rely on themselves for securing their families' well-being. The GGL program helps them in that goal."

Members use their loans for buying and selling a variety of goods in their local markets: 57 percent of the members are involved in making, buying and selling of dresses and related material, 12 percent deal with vegetables and 11 percent with cattle. The remainder deal with other food items such as sour cream, fruits, eggs, bread, nuts and home-made vegetable oil. Kholbibi from the Bokhtar region of Khatlon uses her loans to buy yogurt from her village and sell it at a 20 percent profit at the nearest market.

"I go to the bazaar three times a week to sell yogurt, and I buy soap, sugar and candy from the market to sell back in my village," she says. "In my family there are nine mouths to feed. I'm very grateful for Save the Children's GGL program because it helped me in the worst of times-when I didn't have a single ruble to buy bread. Now I've even saved a little money that I want to use to buy a cow jointly with other members. We plan to sell it for a profit," says Kholbibi. Her group is also preparing to arrange a community kindergarten to help the many working mothers.

Another group in the vicinity of Qurghon-Teppa, the capital of Khatlon, imports consumer goods from neighboring Uzbekistan. Each trip requires a minimum of two million Russian rubles, around $400. "We pool our resources together, and send one of our members who buys and imports the goods and distributes them among 20 participating women," says Zarina, a GGL member. "We plan to import more goods that are in demand in our local market in the next trip."

According to Rashid, one of the most encouraging aspects of this credit program has been the reconciliation of formerly warring ethnic groups. The members are ethnically diverse: 34 percent Garmi, 18 percent Kulobi, 16 percent Uzbek, 12 percent from the Fergana Valley and the rest Leninobodi, Urguti, Samarqandi, Tatar and Kazak. Some of the groups are a mixture of different ethnicities. The project managers have begun encouraging the sharing of information and business skills among groups, regardless of their ethnic composition. Groups have been more than willing to share their knowledge.

Gulnisoro is a 52-year-old mother of 12 children. "We have to work very hard but we are happy to do it since we can see the results of our work," she says. "Our lives are now in our own hands."

Raisa Mukhutdinova is a writer residing in Dushanbe, Tajikistan. She has worked on a recent UNHCR-sponsored study of household and market economies of Tajikistan.

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