Case Study

Although Tajikistan’s civil war ended in 1997, the consequences were grave and long-lasting. The re-establishment of the business sector, deeply wounded during the war, proved difficult. Those who previously farmed or had mining jobs have found it difficult to find employment as their industries have collapsed. With limited opportunities at home, husbands often migrate to countries like Russia to find work. Initially, they faithfully send remittances, but these funds soon dwindle when expatriate husbands take on new wives in their foreign country. This leaves single mothers in Tajikistan financially burdened to care for their children without support from their husbands.

To alleviate these issues with migration, the founders of Millennium Development Partners (MDP) began offering potential migrants with small loans to help them start new businesses without needing to leave their families and country. Over $4 million in microloans have been given to 3,300 entrepreneurs and small business owners, of which the majority are farmers and a third are women. It also carefully selects its loan recipients and has achieved a remarkable repayment rate of 99.3%. Rather than use giving circles to manage its loan portfolio, MDP has found that individual loans are more effective for promoting business growth.

As of 2006, MDP converted the non-profit microfinance organisation, Furuz, into a commercial for-profit entity. With its new status, it has expanded its product lines, now offering consumer loans in addition to business loans. In the future, it plans to offer more services and products such as savings accounts and currency exchange to eventually become a “one-stop shop” for financial services. “Our big dream”, says Country Director Hans Jaeckle, “is one day to provide clients with loans to purchase homes”.

Fighting Poverty in Tajikistan Through Microloans

In 2006, Legatum, along with another partner, gave MDP US$50,000 to offer more loans to farmers and trade workers wishing to start or improve their businesses, such as growing vegetables or raising livestock. Over 100 loan recipients and 900 family members were positively impacted by these microloans, which averaged US$700. More importantly, by carefully investing these loans in profitable businesses, these recipients experienced an increase in their household income from between 17% to 75%.

Leadership

As the Country Director for MDP, Hans is using the organisation’s core values of honesty and quality to transform Furuz into a leading and well-respected for-profit microfinance institution serving the needs of the Tajikistan community.