Tajikistan: Post-FSAP Financial Sector Legal and Regulatory Reforms and Strategy Development

Tajikistan: Post-FSAP Financial Sector Legal and Regulatory Reforms and Strategy Development

A 2007 Financial Sector Assessment Program (FSAP) report prepared jointly by the World Bank and the International Monetary Fund (IMF), diagnosed and recommended solutions for a number of weaknesses in the financial sector, and in particular identified a need to amend and rewrite several laws and regulations to strengthen the legal and regulatory framework and to harmonize conflicting laws and regulations. These included laws and regulations regarding National Bank of Tajikistan (NBT) governance, bank governance, banking secrecy, licensing, consolidated supervision, remedial action, loan classification, payment system, secured lending, and deposit insurance. 

FIRST project, approved in July 2008 with total contribution of $598,950, was designed to (1) amend existing and/or prepare new financial sector laws and regulations (and simultaneously provide training to regulatory staff, lawyers, judges, market participants, and other key stakeholders on the updated legal and regulatory framework) and (2) prepare a medium-term financial sector development strategy and time-bound action plan to implement other FSAP recommendations.


(1) Financial Sector Legal and Regulatory Reform

  •  FIRST Technical Assistance (TA) resulted in (i) amended central bank (NBT) law, (ii) new banking law, (iii) new deposit insurance law, (iv) new bank liquidation law. All were approved by parliament and signed into law, and all included the key improvements recommended by the FSAP and promoted by the TA.
  • The TA also resulted in a draft payment system law, which has not yet been submitted to parliament. A new FIRST TA on the payment system will encourage NBT to finalize and submit this law.
  • The TA's review of the legal and institutional framework for secured transactions has created the momentum for a comprehensive reform of this sector, specifically to create a modern online collateral registry. This is the subject of a new FIRST TA application.
  • The TA contributed to revision of 9 key banking regulations.
  • Regulatory staff was formally trained; other stakeholders (except judges) trained through participatory process that included several workshops with the central bank and banks to discuss possible amendments.

(2) Financial Sector Strategy Development

  • The TA resulted in a financial sector development strategy and time-bound action plan (with 69 actions) that was issued by the government as an official government resolution. It was prepared in a participatory process with the central bank, other government officials, market participants, and donors.
  • As part of the process, various donors committed to supporting various actions (48 actions are fully supported, while 21 are either partially supported or unsupported by donor TA).

(3) Additional/catalytic results

  • Potential World Bank (IDA) project to finance an upgrade of the real time gross settlement (RTGS) system and the collateral registry.
  • Follow-up FIRST TAs - a payment system TA has already been approved, and two new TAs have been submitted to (i) strengthen banking sector regulation and supervision, and (ii) reform the secured transactions laws.
  • Follow-up TAs by other donors.

Project is a good model for FSAP follow-up. Moreover, it has the potential to be replicated in other countries with similar reform-minded environments, and, if possible, it should be combined with World Bank-financed operations in financial sector development to leverage additional resources to implement concrete actions and maximize the impact.