Good Practices: Banking Sector

1^ This kind of restriction is usually imposed by a competition law only on dominant economic entities, but Tajikistan’s law applies the restriction across the board.

2^ At least one bank, however, indicated that it had a policy of cancelling debts where a head of household borrower became disabled or died before payment could be made, rather than executing on any security for the loan. This would suggest that security in property would not substitute for insurance in such cases.

3^ One bank did indicate that a slight discount on loan rates would be made for an individual holding a deposit account in the bank.

4^ The law was reviewed in the Russian language. It is possible that this is a translation issue.

5^ There are some areas in which the provisions of those laws differ from the law “On Banking Activity.” For example, Article 15 of the Law on Mortgage, which specifies that a contract may never deprive the owner of the right to use the mortgaged property for its intended purposes and that the owner is presumed to retain the right to the use of the fruits or income from the property unless otherwise agreed by contract.

6^ The fine is calculated by the use of an “accounting figure” that is set each year by the law on the budget. The use of such a figure is a device that has been employed by a number of countries to allow fines to be adjusted regularly to account for high inflation rates or other circumstances without requiring many individual amendments to the laws or codes in which they appear. In 2012, the “accounting figure” is 40 somoni, and the fine referenced is from 250 to 547 times that figure.

7^ The range is from 250 to 360 times the accounting figure.

8^ Article 48 does allow the NBT to impose a variety of other measures, but many of these are designed to address problems with a bank’s financial position (e.g. restrictions on issuance of credit, demand for additional reserves, or prevention of dividend payments). NBT does have the power to impose a fine of up to 1% of the minimum authorized capital of the bank, and to demand removal or dismissal of some bank executives or board members and the law does not specify the kinds of bank violations that would justify these measures. Other kinds of penalty sanctions against bank officials can be applied only where they are separately envisioned by law.

9^ The existing interpretation also provides some inappropriate incentives to banks to skew their reporting and accounting practices in a manner that minimizes their obligatory contribution to the Fund by maximizing the number of deposits subject to exceptions. This could result, for example, in delayed release of security interests registered against deposit accounts or other similar problems.

10^ The number of credit societies (including credit unions) has decreased from eight in 2007 to one as of September 2012.

11^ The Smart Campaign is a coalition of microfinance institutions, networks, associations, and other professionals working within the microfinance industry. The Smart Campaign is asking microfinance institutions, their networks and associations, to endorse the Campaign and implement a set of seven core Client Protection Principles, which represent minimum standards that clients should expect to receive when engaging with a microfinance institution.

12^ http://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resources/Financial_Ombudsmen_Vol1_Fundamentals.pdf

13^ The Microfinance Centre, headquartered in Poland with a regional office in Bishkek, is an international network of over 100 microfinance institutions in Eastern Europe and Central Asia.

14^ The project was funded by the Inter Church Organization for Development Cooperation (ICCO).

15^ For further information, see http://www.amfot.tj/bitrix/images/socialservices/Financial_education_Tajikistan_ENG.pdf

16^ Source: National Bank of Tajikistan, “Questionnaire for the Central Bank: Application of CPSS-World Bank General Principles for International Remittance Services,” February 2011.

17^ The NBT conducts periodic interviews with remittance recipients and publishes the results. These data are sourced from the most recently published report, NBT, Report No. 14 on Money Transfer Analysis in Tajikistan, August 2010.

18^ World Bank, Remittance Prices Worldwide database, First quarter 2012.

19^ AMFOT, Analysis of statistical data of AMFOT members, Fourth quarter 2011.

20^ Meeting with AMFOT, 4 March 2011.

21^ According to data compiled by the NBT, 4.2mn payment card transactions were recorded in the year ending January 1, 2012 by payment cards issued by banks in Tajikistan, up 109% from the previous one-year period, and the number of ATM, POS and other electronic terminals in Tajikistan for payment cards increased 59% over the same period, although infrastructure and usage outside Dushanbe is still limited. See NBT, “Market review of payment cards” available on the internet at http://www.nbt.tj/en/pl_sys/cards.php.

22^ NBT, Payment System of the Republic of Tajikistan, available on the Internet at http://www.nbt.tj/en/pl_sys/.

23^Article 55, “Protecting bank clients’ interests,” of the NBT “Law on banks and bank activities” (May 2009) requires banks to inform their customers about the requirements associated with a transaction prior to the “credit service,” including service charges, interest rates, and other additional costs to the client.” It is unclear whether Article 55 would apply to remittance transfer services, however, as it specifies only “credit service[s]” and includes no specific mention of remittance transfer transactions. See also the Good Practice C.7 document for Tajikistan.

24^ This is also a recommendation in ADB, Tajikistan: Microfinance Systems Development Program report, November 2010.

25^ http://remittanceprices.worldbank.org/

26^ NBT, Report No. 14 on Money Transfer Analysis in Tajikistan, August 2010.

27^ This section draws partly on information in the First Initiative Project Proposal, Tajikistan: Payment System Modernization, January 2011.