Recapitalized Tajik Banks Struggling

Since the start of the month, Agroinvestbank, Tajikistan’s largest lender, began telling its clients that as of May 4 they will only be able to withdraw 500 somoni ($58) daily on their cards. Since February, the bank had been allowing account-holders to withdraw double that amount.

Things have not quite yet got as bad as they were in 2016, when Agroinvestbank stopped paying out money altogether for around half a year. Many state employees had salaries paid directly to them, but anybody with money piled up in the bank had no way to access it, Eurasianet.org reported.

But then on December 21, parliament approved a government decree to issue bonds worth around half a billion dollars with which to recapitalize four distressed banks, namely Agroinvestbank, Tojiksodirotbank, Fononank and Tojprombank. The bonds were converted into liquid cash by the National Bank, making the entire affair look like a major exercise in money printing.

Tojiksodirotbank reportedly got 2.25 billion somoni ($285 million at end of 2016 exchange rates) and Agroinvestbank 1.7 billion somoni ($215 million). Tojprombank was promised 450 million somoni ($56 million) and Fononbank a relatively meager 80 million somoni ($10 million).

Matters are still tight at Tojiksodirotbank, whose customers are still able to withdraw or spend only 200 somoni daily. They also have only limited access to the money on their savings accounts, which the bank is very slowly transferring onto card accounts. At the current rate, anybody with around $20,000 on a Tojiksodirotbank savings account should expect to take about eight years to get all their money out.

On February 24, the National Bank announced it was pulling the licenses of Tojprombank and Fononbank, despite claiming it was taking exhaustive efforts to keep them going.

Customers at those banks have been paid out 17,500 somoni (around $2,000) out of the state’s Individuals Deposits Insurance Fund. Anybody with more than that amount of money in the bank is still waiting to see how much they will get in the end.

In April, it emerged that the government decided unilaterally to allocate the $66 million it had set aside as bailout funds for Tojprombank and Fononbank to construction work on the Roghun hydropower dam.

It is not known quite how much the two defunct lenders are having to raise from the sale of assets to repay outstanding liabilities to former clients.

On May 3, the National Bank announced yet another six lenders were being liquidated. That leaves around 96 lenders, of which 16 are full-fledged banks. That is down from the 120 lenders that existed before the onset of the current crisis.