|                                                                                                                                                                                     |  | Banking in Tajikistan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsCustomsCornerPublicationsSourcesof FinanceFinanceLinkLeadsand EventsExchangeRatesState ExportsOtherSources** |  | January 1999by Eleonora Yunusova and Philip H. de LeonWhile banks in Tajikistan have not been rated by the major rating agencies and it is not as easy to
transfer money in and out of the country as it may be in other NIS countries, there are signs that
the banking sector is improving.  In the past year, the National Bank of Tajikistan (NBT) has
instituted measures to reform and improve the sector.  These measures include raising capital
requirements and signing reorganization agreements with larger banks.  In addition, international
technical assistance is aimed at improving the regulation of the sector and increasing working
capital available from banks to businesses.Capital Requirements
As in most NIS countries, many Tajikistani "banks" started operating with little capital. The
NBT has taken an active role in closing down such banks by gradually raising the minimum
capital requirements in order to establish a more sound and reliable banking system.  The board
of the NBT set the present minimum capital requirement for existing banks on April 17, 1998 (in
its instruction No. 79).  The minimum capital requirement will be raised gradually to:
US$500,000 as of January 1, 1999; US$750,000 as of July 1, 1999; and US$1 million as of
January 1, 2000. Banks created in 1998 have been required to meet the US$1 million statutory
minimum from the time of their establishment.The NBT declared bankrupt and closed certain banks that have failed to meet the 1998
requirements.  These banks included Bahtovar, Toribank, and Ziroat. Two others, Ilhom and
Rishta, were transformed into branches of Agroinvestbank. In addition, as a result of the more
stringent requirements, the NBT has not been receiving any applications for banking activity
licenses or the establishment of new banks.Reorganization Agreements
The NBT signed reorganization agreements with four large commercial banks: Agroinvestbank,
Tajikbankbusiness, Sberbank, and Vnesheconombank.  According to the guidelines set out in the
agreements, these four banks had until November 30, 1998, to increase their statutory capital,
reduce expenditures, try harder to collect earlier-issued loans, pay back overdue debts and loans,
and liquidate unprofitable branches.Another important requirement of the agreements (with these banks) is the transition to
International Accounting Standards (IAS).  All other banks in Tajikistan have until December 31,
1998, to convert to IAS.  The transition has been facilitated by the requirement, as of November
1, 1996, that all banks prepare parallel financial statements in accordance with IAS.Correspondent Relationships and Money Transfer
Almost all Tajikistani banks have correspondent relationships with Western banks, with the three
largest banks having the most relationships of this type.  For instance, Orienbank has
relationships with around 50 foreign banks, including one with a U.S. bank (Citibank in New
York).  Vnesheconombank has correspondent relationships with 35 Western banks, but no direct
relationships with U.S. banks.  Sberbank's corresponding relationships are limited to Russian
banks.An ordinary money transfer usually takes two to three days, while an urgent transfer can take up
to one and a half days.  Usually, a bank charges a commission of 0.1 percent.  Vnesheconombank
charges US$50 for a transfer plus a 0.1 percent commission; Orienbank's commissions range
from US$40 to US$150.Regional branches of banks usually do not perform money transfers themselves; instead they
send transfer instructions to their headquarters in Dushanbe.  This procedure can add one to three
days to the transfer process.  However, some banks have authorized their branches to make
transfers themselves.  Tajikbankbusiness granted such a right to its branch in Khojand.There are no monetary amount restrictions for currency transfers by individuals or legal entities. 
However, the transfer must be justified: for individuals, the client must have written confirmation
from the local tax authorities that the individual is a law-abiding taxpayer; for legal entities,
proof of existence of a contract or another legal document is required.Outside Assistance
Financial assistance by multilateral institutions, such as the World Bank, the International
Monetary Fund, and the European Bank for Reconstruction and Development (EBRD), kicked
off the reform of the banking system in Tajikistan in 1994.  Recently, the EBRD has granted
lines of credit totaling US$4 million to Orienbank, enabling it to lend to private sector small and
medium-sized enterprises or to privatizing state-owned companies. Loans range in size from
US$10,000 to US$250,000.Choosing a Bank
Investors and depositors should exercise caution when choosing a bank in Tajikistan, especially
considering that the major rating agencies have not rated any banks in Tajikistan.  Currently, all
banks in Tajikistan that have been issued a license by NBT to carry out banking operations and
that have met and can meet the minimum capital requirements could be considered reliable. 
However, the existence of a correspondent account with a foreign bank should not be considered
a sure sign of a bank's reliability.  As a guideline, one should first consider those banks already
using IAS and meeting the future US$1 million minimum capital requirement.  A potential client
can utilize financial statements prepared in accordance with IAS to assess the future viability of
the bank considered.For more information on doing business in Tajikistan and a list of banks in Tajikistan, visit
BISNIS Online at www.mac.doc.gov/bisnis/country/cntasia.htm#Tajikistan.Eleonora Yunusova represents BISNIS in Dushanbe.  
Philip H.  de Leon is the BISNIS Banking / Finance Specialist in Washington, D.C.This report is provided courtesy of the Business Information Service for the
Newly Independent States (BISNIS)