TURKMENISTAN: MICROFINANCE APPEARS INCREASINGLY POSSIBLE

UNCLAS SECTION 01 OF 02 ASHGABAT 000335

SENSITIVE

SIPDIS

STATE FOR SCA/CEN, EUR/ACE, EEB
AID/W FOR EE/EA

E.O. 12958: N/A
TAGS: PGOV PREL EAID TX
SUBJECT: TURKMENISTAN: MICROFINANCE APPEARS INCREASINGLY POSSIBLE


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: On February 27, Turkmenistan's first-ever
conference on microfinance was organized in Ashgabat by the UN
Development Program (UNDP). Titled "Microfinance - A Tool to
Enhance Private Sector Development in Turkmenistan: International
Experience, " the conference came in response to a request by
Tuwakmamed Japarov, Turkmenistan's Deputy Prime Minister responsible
for the economic sector. Workshop participants included
representatives from the Ministry of Finance, Ministry of Economy
and Development, Central Bank, local banks, entrepreneurs and
international donor organizations. As follow up, UNDP sent a letter
endorsed by participating donor agencies to Japarov asking that he
designate a focal point for this issue and organize a working group
of relevant stakeholder. Following President Berdimuhamedov's March
6 speech to the Council of Elders, in which he announced a desire
"to improve the banking system in the villages and to establish the
provision of micro-credits for purposes of the stimulation of the
construction of the rural objects of different designation," it
appears that the elusive goal of microcredit in Turkmenistan appears
increasingly possible. END SUMMARY

DONORS INTRODUCED VARIOUS FORMS OF MICROCREDIT


3. (SBU) During a February 27 conference on microfinance, organized
by UNDP, the Country Representative of the European Bank for
Reconstruction and Development (EBRD) presented its programs
implemented in Eastern Europe and NIS, including specific examples
of how bank-based micro-credits can contribute to the growth of
small businesses. Titled "Microfinance - A Tool to Enhance Private
Sector Development in Turkmenistan: International Experience, " the
conference came in response to a request by Tuwakmamed Japarov,
Turkmenistan's Deputy Prime Minister responsible for the economic
sector. The Deputy Resident Representative of UNDP/Turkmenistan
provided an overview of its recent program for rural women in
Turkmenistan improved economic conditions for poor families through
small grants. A visiting EU-TACIS microfinance specialist presented
different types of community-based savings and credit unions, while
an EU-TACIS agriculture specialist described his experience in
developing a community-based credit union in North Cornwell in the
United Kingdom.


4. (SBU) The Bishkek-based Chief of Party for USAID's Central Asian
Micro-Finance Alliance (CAMFA II Project) provided an overview of
the types and structure of micro-finance institutions in Central
Asia. Through the presentation, it became clear that all Central
Asian countries except Turkmenistan have significantly improved the
legal environment for microfinance, which has increased
opportunities to promote economic activity in even the most
disadvantaged groups of society. USAID/Turkmenistan's Economic
Growth Program Management Specialist introduced the savings and
credit union development program implemented in Uzbekistan with
USAID's support by the U.S.-based NGO World Council for Credit
Unions (WOCCU). The presentation highlighted the growing number of
non-banking credit unions in Uzbekistan.

AFTER ACTION RESULTS IN LETTER TO DEPUTY PRIME MINISTER


5. (SBU) After the presentations, participants discussed in small
groups possible paths forward to start microfinance activity in
Turkmenistan. Key recommendations identified by the groups were to
amend existing legislation to allow microfinance, to build the
capacity of state agencies and banking sector in dealing with
microfinance, as well as to launch pilot project with interested
stakeholders.


6. (SBU) In the week after the conference, participating entities
collected legislative examples, case studies and general
microfinance information. A joint letter drafted by participating
donors, along with the assembled materials and workshop
recommendations, was sent by UNDP Resident Representative to
Japarov. EBRD indicated that it is willing to provide technical
assistance to improve the legal, regulatory and institutional
framework for microfinance. The letter also asked that Japarov
designate a focal point for microfinance issues and organize a
working group of relevant stakeholder.


7. (SBU) COMMENT: Separate from the conference, USAID's Program
Management Specialist learned from local NGO Union of Economists

ASHGABAT 00000335 002 OF 002


that Turkmenistan's parliament has included plans to draft a law on
microfinance as part of its the five-year work plan and have
requested assistance in drafting it. Following President
Berdimuhamedov's March 6 speech to the Elders' Council, in which he
announced a desire "to improve the banking system in the villages
and to establish the provision of micro-credits for purposes of the
stimulation of the construction of the rural objects of different
designation," it appears that the elusive goal of microcredit in
Turkmenistan appears increasingly attainable. END COMMENT.

MILES