Reducing Borrower and Lender Risk Through Context Sensitive Product and Portfolio Design: The Case of 'Integrated' Agricultural Development in Tajikistan

This paper describes MEDAs organizational approach to the development of sustainable financial services for rural households in Tajikistan. The paper provides the following information about the Canadian International Development Agency (CIDA)-funded agricultural development program that MEDA implemented:

• It focused on the horticulture sub-sector;
• A key component of the project was to partner with, and develop the capacity of, a local microfinance institution (MFI) to expand its loan portfolio from mainly urban clients to small-holder farmers;
• It made available a $1 million loan for this purpose, along with technical assistance and temporary operational support;
• Technical challenges included accurately assessing the local context and assisting the MFI in design appropriate products.

The paper states that:

• The disbursement and prepayment of the $1 million loan portfolio was successful and the program reached operational sustainability within 18 months;
• Farmers in the program continue to take loans, raise their incomes, and seek out additional loan products.

The paper concludes that:

• The context-sensitive design of products and portfolio enabled the MFI to successfully expand into rural lending;
• Building on this success, the MFI has gone from a capitalization of $2 million to $6 million with increased agricultural lending, to become the leader in rural finance in Tajikistan over the past three years.