Tajikistan: sustainable banking for people and economy
John Smith Fellow Suhayli Abdulvahhobov explains how building a strong and sustainable banking system in Tajikistan can grow the economy, mitigate climate change and improve people’s lives.
Suhayli works for the National Bank of Tajikistan (NBT), heading the banking analysis division in the banking supervision department, where he is involved in off-site supervision and the development of banking regulations. He is passionate about the social and economic benefits this can deliver.
He says: “When I joined NBT, I was struck by how the field is closely linked to economic growth and plays a critical role in improving people’s lives in tangible ways. This new experience fascinated me and sparked my interest in banking supervision.”
Suhayli, who participated in our 2023/24 Wider Europe and Central Asia fellowship programme, explains how the team at NBT is working hard to build a sustainable, resilient and inclusive banking system. Reforms include enhancing regulatory frameworks, promoting financial inclusion, and developing digital banking services.
Financial inclusion
Suhayli believes these reforms are starting to pay off. “The banking sector is on a steady growth trajectory,” he says. “Both credits and deposits are increasing, and key financial stability indicators exceed minimum standards. Financial inclusion is on the rise and, as a result, public trust in the system continues to grow. The share of non-cash payments has grown significantly. A few years ago, it was just over 10% and today it is 26.2%.”
He adds: “Lending has also increased. The loan portfolio of the banking system on 31 December 2024 amounted to 21.4 billion somoni (1.56 billion pounds), up from 11.2 billion somoni (817 million pounds) in 2015. Microloans have also seen substantial growth, accounting for 72.4% of the total issued loans volume in 2024, compared to 43.2% in 2015.”
Financial services are becoming more accessible as providers expand their network of branches, banking service centres and cash points. Innovations such as digital wallets and mobile banking are also improving financial inclusion.
Suhayli’s action plan for his John Smith Trust fellowship builds on this work. He says: “By enhancing the banking system’s resilience to internal and external shocks, we hope to provide the private sector and the population with greater access to affordable financial services. This will, in turn, support the overall development of the economy.”
Basel Framework
One aspect of this is introducing the Basel Framework, a set of internationally recognised banking regulations. These are designed to promote financial stability, ensure adequate capital buffers, and manage risk in banking systems.
During the residential part of his John Smith Trust fellowship in the UK, Suhayli met with the Scottish National Investment Bank, the Centre for Central Banking Studies at the Bank of England, and Standard Chartered Bank. He says: “These meetings were incredibly insightful and gave me a deeper understanding of how different banking systems, including those in the UK, approach regulatory standards like the Basel Framework.
“It was interesting to observe how the UK introduced new procedures and laws incrementally, to avoid overwhelming the banking system with excessive regulation. This approach will be useful as we implement the Basel standards in Tajikistan, ensuring a balanced and sustainable regulatory environment.
“These meetings helped me refine my understanding of what is realistically achievable within the context of Tajikistan. The programme also helped me reassess the timeline of my goals, identifying which are achievable in the short term and which may need to be adjusted.”
Climate risks in Tajikistan
A recent update to the Basel Framework encourages banks to incorporate climate-related risks into their risk management frameworks. The Basel Committee on Banking Standards (BCBS) acknowledges the growing importance of sustainable finance and encourages banks to consider environmental, social, and governance factors in their lending and investment decisions.
Climate change poses significant risks to every country’s financial systems and Tajikistan is no exception. Rising temperatures, more frequent natural disasters and changing weather patterns can significantly affect businesses, economies and financial markets. Suhayli says: “In Tajikistan, one of the main risks is increased credit risk from sectors vulnerable to climate impacts, such as agriculture. Companies in these sectors may struggle to repay loans if they are hit by climate-related events.
“Identifying the specific types and levels of climate risks requires robust data and analysis. NBT and its partners have initiated a comprehensive study on the effects of climate change on the banking sector. Based on the findings, we’ll consider developing new regulations or adjusting existing ones to manage the risk effectively.”
Opportunities for green finance
Alongside mitigating climate risks, Suhayli sees opportunities for Tajikistan to adopt green finance initiatives. He says: “Tajikistan is home to vast hydropower potential and solar energy. Green finance could play a key role in developing projects that use renewable resources to meet domestic and external energy needs, like exporting to neighbouring countries.”
There are also opportunities to invest in green transport, such as electric vehicles, charging stations and public transportation.
“Along with that, agriculture is one of the key sectors in Tajikistan’s economy,” Suhayli adds. “This sector faces higher risks from climate change, including floods and changing weather patterns. Green finance can help fund climate-smart farming technologies, efficient irrigation systems, organic farming and soil conservation projects.”
Challenges for green finance
According to Suhayli, Tajikistan’s financial sector is focusing on specific challenges to adopting green finance. These include filling regulatory gaps, developing green financial products, building local capacity, and private sector involvement.
“While our present regulatory system doesn’t restrain providing green funds, we are starting to set up the framework needed for this type of financing,” he says. “Some of our credit financial institutions have already started to provide financial products to the population, such as loans to purchase electric vehicles. Also, one of our banks issued green bonds recently which have been bought by an international development partner.
He calls on other international partners to follow this example, saying: “Tajikistan needs continuous support from our international and bilateral partners in accessing cheap green funds and technical assistance to support climate adaptation and mitigation projects.”
Solidarity and motivation
Reflecting on his John Smith Trust fellowship, Suhayli is enthusiastic about the connections he has made and believes this will add value to his work. “One of the greatest strengths of the fellowship programme is its diversity,” he says. “It brought together people from a variety of backgrounds, and through the residential programme, formed us into a cohesive team.
“Being part of the John Smith Trust Fellows network is incredibly valuable to my ongoing work. It provides a sense of belonging to a vibrant community of individuals who are committed to making a positive impact in their communities. This collective purpose creates a strong feeling of solidarity and motivation.”
Find out more about our fellowship programmes