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Credit Access in Montenegro

As with many countries in the region, the real estate bubble that burst in 2008 exposed longstanding weaknesses in the Montenegrin financial sector and left a laundry list of obstacles for the country to overcome in its wake. These obstacles have become major inhibitors of credit access in Montenegro.

As is often the case, small and medium-sized enterprises have been hit particularly hard by this credit squeeze. Fortunately, the international community has stepped in to improve short-term credit access in Montenegro in the short term while the Montenegrin financial sector modernizes for the long term.

Prior to 2008, the Montenegrin financial sector was plagued by poor governance, little oversight and inadequate and outdated financial infrastructure. In the wake of the crisis, key stakeholders have been working to rectify these problems against a backdrop of ongoing deleveraging. While these changes were needed, this restructuring has left Montenegrin banks incapable of meeting the demand for credit.

Business owners who can secure loans from Montenegrin banks complain of high interest rates, extensive collateral requirements and overall a very risk-averse lending policy. For many business owners, securing a loan from a Montenegrin bank is simply not an option. This gap between supply and demand is being filled in two different ways: by the informal economy and by international actors.

Many would-be business owners (and individuals) have turned to the informal economy to meet their financing needs. This often entails borrowing under the table from loan sharks. Not only does this open borrowers up to unnecessary risk, but it also presents an obstacle to modernizing the financial sector.

The other option is to secure financing from international actors. Many organizations are working to provide improved credit access in Montenegro while the country’s financial sector gets back on its feet. These include the EBRD, the Investment-Development Fund of Montenegro, internationally-backed microfinancing institutions and other international organizations that have stepped in in a microfinance capacity.

There are signs that positive change is coming. In late 2017, the government passed a law aimed at comprehensively reforming the financial sector and improving credit access in Montenegro. The law creates new financial instruments available to business owners and opens up new opportunities for those struggling to secure a loan to avail themselves of financing and guarantees from the government.

The law also updates the regulations that govern the Montenegrin financial industry and help to bring Montenegro into line with international best practices. It is hoped that these laws will help to prevent another disaster like 2008 and ensure that credit access in Montenegro will not be affected by the next economic downturn. This legislation serves to prove that developing economies often need just a little bit of international support while they work to modernize their financial infrastructure, and that this support enables them to create improved frameworks that provide greater confidence moving forward.

– Michaela Downey

Photo: Flickr

How to Help People in TajikistanTajikistan is hardly at the forefront of many Westerners minds when it comes to global poverty. This landlocked and mountainous nation, nestled in the heart of Central Asia, is often forgotten about, but it requires assistance just as much as many other developing nations around the globe. For those interested in how to help people in Tajikistan, opportunities do indeed exist, largely in the form of NGOs working on the ground.

32 percent of Tajiks live below the poverty line, a rate significantly higher than its Central Asian neighbors. The nation is by far the most economically deprived in the Central Asian region, and its problems are frequently compounded by its unstable economy and geopolitical situation. More than one million Tajiks work in Russia and other ex-Soviet republics, leading 50 percent of the country’s GDP to be reliant on remittances. Additionally, its rarely-policed border with Afghanistan has led to pressure from Al-Qaeda extremists in its most remote corners.

How to help people in Tajikistan is reliant on the NGOs and aid organizations that operate there. Save the Children (STC) has had a presence in Tajikistan since 1992. Around 10 percent of school age children are currently absent from the education system. STC works to ensure Tajik children are in full-time education, especially girls. They have also made strides to protect the large homeless child population in the capital, Dushanbe, and have paid special attention to orphans. Consider donating or volunteering for STC to join them in their efforts.

The U.S. government has also joined the fight against poverty in Tajikistan. USAID has implemented the Feed the Future initiative, which assists farmers in achieving the crop development they need to sustain their families and communities. Thousands have achieved a more secure and sustainable relationship with their land as a result. USAID has multiple opportunities for American citizens to join them in their work. Volunteers are accepted on various projects both at home and abroad, and they are also eager to build partnerships with businesses and organizations to further their mission.

Rural Tajiks in the nation’s remote areas also receive support from groups such as the European Bank for Reconstruction and Development (EBRD). Its agricultural financing facility is helping alleviate the crushing debt faced by many agricultural communities due to uncertain crop yields. A 25 million euro investment through the Tajik Agricultural Finance Framework (TAFF), set up by EBRD, has allowed farmers access to purchasing the crop of their choice, diversifying production and allowing for more economic stability. The EBRD also accepts volunteers, as well as businesses interested in partnering with non-profits that work in the Central Asia region.

These organizations offer the most salient answer for how to help people in Tajikistan. Through participating with these organizations, those interested in alleviating the crushing poverty experienced by many Tajiks can make a tangible difference.

Jonathan Riddick

Photo: Flickr