Micro-enterprises comprise a large share of businesses in Azerbaijan and Central Asia. They play a key role in creating jobs, which in turn help the overall economies in the region to grow. In addition to conventional banks, microfinance increasingly plays an important role in providing finance to micro and small entrpreneurs. Despite the yet unmet substantial financing needs of the poorer population, there are alarming signs of borrowers increasingly being over-indebted, through taking up multiple loans. To improve the access to financial services which are provided in a responsible and diligent manner is thus key.

The overall goal of the project is to render the delivery of microfinance services more responsible through sector transformation. The microfinance sector portfolio at risk, the loan to income ratios for microfinance clients and the over-indebtedness should be reduced thanks to the project interventions. An important indication for having less over-indebtedness in a country will be the Credit Bureau figures showing little percentage rates of multiple loans.

Improved sector regulations in Azerbaijan and Central Asia stimulate consolidation of the microfinance sector.

For the countries strategically relevant microfinance institutions have improved governance, more transparent structures and have successfuly undergone SMART-certification process.

Financial literacy is being promoted by microfinance institutons for their clients.

Expected results:  

Financial regulators in Azerbaijan, Tajikistan and Kyrgyzstan recieved advice to improve the microfinance sector regulations.

Microfinance institutions receive advice on improving transparency of operations.

Public awareness campaigns on financial literacy are launched.

Key microfinance institutions in the countries receive support for transformation.

Results from previous phases:  

The project is a continuation of a first phase (which was supported by other donors) which closed in June 2013. Following results could be achieved in the first phase:

Institutional level: Seven MFIs have been assisted in the first phase. Over USD 60’000 of financing could be facilitated, about 4’600 deposit accounts opened and USD 450’000 of loans disbursed. Two out of these MFIs have transformed into microfinance deposit taking organizations, being able to apply for a banking- and/or foreign exchange and money transfer license.

Legal and regulatory level: Professional advice through the project was given in relation to the interest rate cap issue (Kyrgyzstan), the revision of the microfinance law in Kyrgyzstan and the revision of the draft microfinance law in Tajikistan.

Phase 1 01.07.2013 - 31.03.2019   (Completed)