The Rigidity Of Tajikistan’s Banking System

Tajikistan Weighted Average Deposit and Lending Rates
Tajikistan Weighted Average Deposit and Lending Rates

CEIC Macro Watch: The banking system in Tajikistan experiences an enormous spread between credit and deposit rates. In March 2013 the spread between the weighted-average deposit and lending rates in domestic and foreign currency stood at 26.3%. With lending rates increasing to almost 30% and the return on deposits falling slightly below 3%, the spread in March 2013 was one of the highest recorded for the Tajik banking system. Such an enormous margin is a sign of the poor financial intermediation role of the banking sector. Constrained capital markets, heavily reliant on foreign funds, limit funding alternatives to banks, which results in a rigid capital structure and high risk premium. Government interference in the form of direct lending also puts pressure on the proper functioning of the financial markets and restrains commercial lending. In general, the Tajik economy is cash-based and the banking sector operates below its full potential. The silver lining comes in terms of non-performing loans which is not seen as a major problem in the Tajik banking system, since overdue loans were at the reasonable level of 6.5% of the total loans portfolio in March 2013 and down from a recent peak of 8.4% in October 2012. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Petar Chavdarov in Bulgaria - CEIC Analyst Back to Blog

4th June 2013 The Rigidity Of Tajikistan’s Banking System

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