Uzbekistan and Tajikistan faced enormous economic challenges as isolated former Soviet satellites in Central Asia whose transitions from a command to a market economy had been slow. The populations of both countries continued to be heavily rural and dependent on farming for a livelihood, and unemployment and underemployment were growing problems. To ensure that small-business owners had a way to obtain needed loans, ACDI/VOCA launched the four-year Ferghana Valley Regional Microfinance program (FVRM) in Uzbekistan and Tajikistan in late 2001. The valley, which is shared by Tajikistan, Uzbekistan, and Kyrgyzstan, is fertile and populous and still retains its importance from when it was a stop along the ancient Silk Road. As part of USAID’s Stability and Food Security Program, FVRM supported the broader objectives of generating income and employment opportunities while helping entrepreneurs grow their businesses.
Through FVRM, ACDI/VOCA established the MicroInvest Microlending Fund in Tajikistan and the Uzbekistan Microentrepreneur Population Development Institute (FV-MARD). Through these two institutions, FVRM served more than 9,000 active clients and disbursed over 51,897 loans. As evidence of FVRM’s successful implementationMicroInvest had a low portfolio-at-risk (PAR) of only .56 percent at the project's end, and FV-MARD also had an extremely low PAR of .49 percent. The loan portfolio was outstanding, being over $2.8 million and disbursing over $13.9 million.
The capital stimulated the economies of Tajikistan and Uzbekistan. FVRM proved itself to develop in a responsible and sustainable manner: its financial self-sustainability rate was about 95 percent, while its operational self-sufficiency rate was 150 percent. ACDI/VOCA’s FVRM program also earned the trust of its clients and had a retention rate of over 80 percent.
To ensure FVRM’s success, ACDI/VOCA adapted proven lending methodologies to create sustainable microfinance institutions in the Ferghana Valley that foster economic development and regional stability. MicroInvest and FV-MARD extended credit by means of a peer-group lending methodology. In this system, clients receive loans as groups of four to seven individuals who guarantee each others repayment. Peer-group lending helps secure loan repayment through peer pressure despite a lack of personal collateral.
Typical loans varied from $50 to $1,000, with the average being approximately $270. Recipients borrowed for terms of one to six months, and, after repayment, were eligible to borrow larger amounts. The peer-group lending methodology promoted the notion that individuals can work together for their mutual advantage. This was critical in an area rife with ethnic tension, economic uncertainty, and stirrings of religious extremism.
FVRM had six suboffices in Uzbekistan and 10 suboffices in Tajikistan to reach out to its clients in rural areas. The program created a sense of ownership by identifying, training, and working with highly talented local staff to develop credit policies and procedures that were both effective and consistent with each country’s microfinance laws.