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May 17, 2004 №38

Unofficial translation

The law of the Republic of Tajikistan
On Microfinance Organizations

This law regulates the legal and organizational grounds for th e activity of microfinance
organizations in order to form and develop the market of microfinance services and
entrepreneurship in the Republic of Tajikistan.

Chapter 1. General Provisions

Article 1. Basic Definitions

In the present law the following general terms are used:

Deposit – funds placed with a microcredit deposit organization by individuals and legal
entities that may be withdrawn on demand or wh en such deposits are due, with or without
interest accrued thereon;

Microcredit – funds provided by a microcredit deposit organization to its borrowers for a
fixed period of time subject to repayment and pa yment of interest in an amount not to exceed
the maximum microcredit size;

Micro-loans – funds or fungible things provided by a microlending organization to its
borrowers for a fixed period of time subject to repayment and, if provided by the agreement,
payment of interest, in an amount not to exceed the maximum microloan size;

Microfinance organization – a microcredit – deposit organization, a microlending
organization and a microlending fund;

Microcredit – deposit organization – a commercial microfinance organization that takes
deposits, extends micro-credits and conducts othe r operations as set forth in this law on the
basis of a license issued by the National Bank of Tajikistan;

Microlending organization – a commercial microfinance organization licensed by the
National Bank of Tajikistan and engaged in providing micro-loans and other services;

Microlending fund – a non-commercial microfinance organization operating with a
certificate issued by the National Bank of Tajikistan and engaged in providing micro-loans and
other services;

Affiliated persons – any individual or legal entity capable of exerting influence on individuals
or legal entities realizing entrepreneur activit y (except for state bodies, exercising control over
activities of such entity within authorities delegated thereto).

Article 2. Legislation of the Republic of Tajikistan on Microfinance
Organizations

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The legislation of the Republic of Tajikistan on microfinance organizations is based on the
Constitution of the Republic of Tajikistan and consists of this law, other normative acts of the
Republic of Tajikistan as well as international legal acts recognized by the Republic of
Tajikistan.

Article 3. Scope of this law

This law shall apply only to micro-finance or ganizations and shall not apply to banks and
other financial organizations.

Provisions of this law shall no t prevent individuals or legal entities from issuing loans
(including microloans) pursuant to the Civ il Code of the Republic of Tajikistan.

The law of the Republic of Tajikistan “On Banks and Banking Activities” and the normative
acts of the National Bank of the Republic of Tajikistan pursuant thereto shall not apply to
micro-finance organizations except the cases eventually provided by this law.

Article 4. Relations of Microfinance or ganizations with the State and the
National Bank of Tajikistan

Microfinance organizations independently or ganize and conduct their activities within the
jurisdiction provided by this law, the normative acts of the National Bank of Tajikistan
adopted pursuant to this Law as well as ot her laws of the Republic of Tajikistan.

State bodies and their officials shall not interf ere in microfinance organizations activities ,
carry out audits and inspections except as provided by other laws.

Microfinance organizations are not responsible fo r liabilities of the Republic of Tajikistan and
the Tajik Republic is not respons ible for liabilities of microfinance organizations, except for
cases when parties voluntarily accept such liabilities.

Microfinance organizations ar e not responsible for liabiliti es of the National Bank of
Tajikistan and the National Bank of Tajikistan is not responsible for liabilities of microfinance
organizations.

Chapter II. Formation of Microfinance Organizations

Article 5. Formation of Microfinance Organizations

A microcredit – deposit organization and a micr olending organization shall be formed as a
closed type joint stock compa ny or a limited liability compa ny and a microlending fund as a
social fund.

A microfinance organization can be founded by individuals and legal entities, residents and
non-residents of the Republic of Tajikistan.

The National Bank of Tajikistan sets out in its normative acts the maximum size of the
microcredit and microloan .

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The National Bank of the Republic of Tajikistan may issue normative acts to limit the
maximum size of a share package that may be owned by founders of a microcredit deposit
organization.

Article 6. Constitutive Documents of a Microfinance Organization

The constitutive documents of micro-finance or ganization are its founding agreement and its
charter approved by the founders, or thei r charter in cases provided by law.

The constitutive documents of a microfinance organization shall set out kinds of activities,
which in accordance with Article 20 can opera te as microcredit deposit organization and in
accordance with Article 36 of the present Law, microle nding organization or microlending
fund.

Changes, made to the constitutive documents of a microfinance organization must be
registered in the manner esta blished by the legislation of the Republic of Tajikistan.

Article 7. Name of a microfinance organization

A microfinance organization may use only the name (or the abbreviation) set forth in its
constitutive documents.

The term of “microcredit – depos it organization” or the abbreviation “MDO” may be used in a
firm’s name and for advertising purposes only by the microcredit deposit organizations
holding a license under this law. The terms “microlending organization” or the abbreviation
“MLO” and “Microlending fund” or “MLF” may be used in a firm’s name and for advertising
purposes only by microlending or ganizations and microlending funds operating with a license
or a certificate as provided by this law.

Microcredit deposit organizati on and microlending organization may not use the following
words in any language in its name: “national”, “state”, “Republic of Taji kistan”, “Tajikistan”,
“bank” or any other word in any other language that may deceive the public while describing
its activity that would suggest that it has a permission of the National Bank of Tajikistan .

A microfinance organization must send a prior notification to the National Bank of Tajikistan
on any change in its name or location. Following any such change the microfinance
organization must publish that information in the mass media within three days.

Article 8. Executive Bodies of a Microfinance Organization

Executive bodies of a microfinance organization are:

– the General Assembly (e xcept microlending fund);
– Executive bodies of the microfinance or ganization that consist of a single
(individual) and a collective body.

The charter of a microfinance or ganization may provide for the es tablishment of the Board of
Directors (Supervisory Board) and the Revision Commission.

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Authorities of the above mentioned bodies of the microfinance organization as well as
procedures for making decision or presenting itto the microfinance organization shall be
specified by the constitutive documents of microfinance organization.

The Board of Directors of a microcredit – deposit organization and a microlending
organization must have at leas t five members and the presidiu m of a microlending fund – at
least three members.

Article 9. Branches of a microfinance organization

A branch of the microfinance organization is a special division of the microfinance
organization, which is not a separate legal entity. A branch has its permanent location and acts
on the basis of regulations approved by the founding microfinance organization.

The actions of a branch shall be considered as actions of the microfinance organization. All
branches must be set forth in the charter of the MFO that shall bear full liability for the actions
of each Branch.

The branch and the MFO shall have the same name but the branch may add words indicating
its location and the fact that it is a branch.

No separate statutory capital requirements are applied to the branch as well as no additional
capital requirements shall be applied to th e microfinance organization opening a branch.

An MFO may open its branches an ywhere in the territory of the Republic of Tajikistan by
indicating the name and location and sendi ng a notification to the National Bank of
Tajikistan.

Article 10. Associations of microfinance organizations

Micro-finance organizations, in the manner esta blished by law, may create associations
(unions) to protect and represen t common interests of their members, coordinate activities and
satisfy informational and pr ofessional interests.

Association (societies, unions) may not engage in the activities permitt ed for microfinance
organizations by Articles 20 and 35 of this law.

Micro-finance organizations shall be prohibited from using associations (societies, unions) for
establishing interest rates or commission fees.

The extent the disclosure of information, which is considered to be confidential under Article
39 of this law or any other law of the Republic of Tajikistanfor the associations (societies,
unions) created under this Article shall be established by the legislation of the Republic of
Tajikistan.

Article 11. Reorganization and liquidati on of a microfinance organization

An MFO shall be reorganized or liquidated in the manner established by legislation of the
Republic of Tajikistan. Voluntary reorganiza tion and liquidation of a microcredit deposit
organization shall be performed in the manner es tablished for banks by the legislation of the
Republic of Tajikistan.

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Article 12. State registration of microfinance organizations

Microfinance organizations shall be subject to state registration in the manner established by
the law of the Republic of Tajikistan “On State Registration of Legal Entities”.

Chapter III. Statutory capital and property of a microfinance organization

Article 13. Statutory capital of a microfinance organization

The statutory capital of a MDO shall consist of fully paid capital contributed by the founders.
The monetary portion may be contributed in the national currency or a foreign currency. The
share of capital contribu ted by founder of the MDO in foreign currency shall not be subject to
the foreign currency quota applicable to banks.

The non-monetary portion of the statutory capit al for a newly established MDO shall not
exceed 20% of the minimum capital requirement and shall not include intangible assets. The
non-monetary portion for any increases in the stat utory capital shall not exceed that percentage
specified in normative acts of the National Bank of Tajikistan.

Funds borrowed, pledged or alloca ted from the budget may not be used to form the statutory
fund.

The National Bank of Tajikistan according to the le gislation of the Republic of Tajikistan shall
establish the minimum initial capital requiremen t for microcredit deposit organizations and
microlending organizations and its part formed in aforeign currency. This provision shall not
apply to microlending funds.

Article 14. Property of a Microfinance Organization

An MFO may acquire, own, use, lease, sell or otherwise alienate any of the following
property, subject to the limitati ons set forth in this Law and in its constituent documents:
− movable and immovable property used onl y to carry out the MFO’s business;
− property, including immovable and movable propert y referred to in clause 1 part 1 of
this Article, acquired pursuant to the exercise of its rights under a mortgage, a pledge
or other security agreement or by means of purchase, transfer or alienation in order to
satisfy (partially or in full) previously issued microcredits and microloans of the MFO,
provided that the MFO shall, in a period not to exceed five years of any such
acquisition, dispose of the assets in return for cash or other permitted assets.
An MFO may invest in the following to the extent permitted by normative acts adopted by the
National Bank of Tajikistan pursuant to this Law:
– investments to the share equity of orga nizations (including securities, stock and
convertible debentures) located in or outside the Republic of Tajikistan;
– debt securities and other debt obligations of third parties.
The National Bank of Tajikistan shall establish the procedure for keeping records of MDO’s
property.

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Article 15. Interest Rates on Microcredits and Microloans

Interest rates on microcredits, microloans and commission fees on transactions and services
shall be established by the MFO pursuan t to its agreement with the client.
An MFO may not unilaterally change interest rates on microloans or commission fees and
terms of these agreements with clients, excep t as provided by its agreement with the client.
The National Bank of Tajikistan may adopt norma tive acts setting forth requirements to MFOs
to submit information in a standard format on their interest rates and commission fees to allow
clients and prospective clients to compare the cost of borrowing.

Article 16. Relations between Microfinance organization and clients

Relations between an MFO and a client shall be carried out on the basis of an agreement.
The agreement may include provisions regard ing the interest rate on a microcredit and
microloan, the cost of services and terms of their execution, in cluding the terms of processing
the payment documents and liability of the partie s for infringement of the agreement as well as
other important terms of an agreement.
Chapter IV. Licensing of microcredit de posit organizations and microlending
organizations

Article 17. Procedures for issuing licenses to microcreditdeposit organization and microlending organization

Microcredit deposit organizations and microlending organizations shall operate on the basis of
a license. The license to microcreditdeposit or ganizations and microlending organization shall
be issued in the manner established by the legislation of the Republic of Tajikistan.

Founders of the MDO and MLO must pay 100% of the minimal statutory capital (its monetary
portion) by the date of issuing the license onto the correspondent account at the National Bank
of the Republic of Tajikistan. Information on the account shall be provided in a notice of the
National Bank of the Republic of Tajikistan.

The license shall have unlimited validity and be effective anywhere in the territory of the
Republic of Tajikistan.

The National Bank of the Republic of Tajikistan shall maintain a register of licensed
microcreditdeposit organizations and microlending organizations and shall ensure accessibility
of the public to this register. Informati on on microcredit deposit organizations and
microlending organizations contained in the regi ster shall be published annually in the official
publication of the National Bank of Tajikistan. Cha nges and additions in the register shall be
published in such publication with in one month following the date of entry of any such change
in the register.

Deposit and other operations under Article 20 of th is law carried out without a license shall
entail liability established by the legi slation of the Republic of Tajikistan.

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The National Bank of Tajikistan may request the appropriate court to liquidate the legal entity
engaged in deposit taking or othe r operations specified in Article 20 of this law without a
license of the Nationa l Bank of Tajikistan.

Article 18. Conditions for issuing a license

A license for the operations under Article 20 of th is law shall be issued to an (appropriate)
entity that meets the requirem ents set forth in this law.

Issuance of a license, denial to issue a license, its revocation shall be carried out according to
the law of the Republic of Tajikistan “On Licen sing of Individual Types of Activities” taking
in consideration requirements set forth in this law.

In addition to the documents required by th e law “On licensing of individual types of
activities” for obtaining a license to conduct an activity set forth in Article 20 of this law, the
applicant shall submit income declarations of founders – individuals approved by the tax
authority and indicate on the source of funds contributed to the statutory capital.

Article 19. Grounds for denial, revocation and suspension of a license

The National Bank of the Republic of Tajikista n may deny issuing a license on the following
grounds:

– noncompliance of the documents attached to the application with the requirements of
this Law and normative acts of the Nationa l Bank of Tajikistan adopted pursuant
thereto;
– failure of candidate for senior executiv e and other positions to satisfy “fit and
proper” qualification requirements as set forth in this law;
– inadequate financial standing of the founde r of a microcredit deposit organization
and microlending organization or failure to fulfill their liabilities to the budget.

A license of the National Bank of Tajikistan issued to an MDO and an MLO may be revoked
for any of the following reasons:

– violation of the laws and normative acts of the NBT adopted pursuant to this law;
– discovery of false or misleading informa tion provided in the license application;
– failure by the MDO or the MLO to start operating within more than one year from
the date of issuance of the license;
– systematic discovery by the National Bank of Tajikistan of false or incomplete
information or reporting data to the National Bank of Tajikistan;
– carrying out by the MDO or MLO of any activity not permitted by this Law;
– a violation by the MDO or the MLO of this Law, other applicable legislation of the
Tajik Republic or normative acts of the National Bank of Tajikistan if punitive
measures authorized by the Law of the Re public of Tajikistan “on the National Bank
of Tajikistan” were applied to the MDO several times within the preceding 12
months;
– failure of the MDO and MLO to perform its obligations to its depositors or creditors
that is the basis for the application of punitive measures authorized by Article 48 of
the Law of the Republic of Tajikistan “On the National Bank of Tajikistan”.

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An notification concerning revocation of a license for carrying out microfinance activities
shall be sent by the National Bank of Tajikistan within 3 days to the MDO and the MLO (that
shall confirm the receipt of such notice) and shall be published in the official publication of
the National Bank of Tajikistan within a week from the date of such decision.
Upon expiration of 30 days after the publication of such announcement the NBT must request
the appropriate court to li quidate the MDO and MLO.

The National Bank of Tajikistan may suspend a licen se for the term of not more than 6 months
until the violations that have become r easons for such suspension are eliminated.

Chapter V. Operations of microcreditdeposit organization

Article 20. Activities of microcredit deposit organization

A microcredit deposit organization may engage in any of the following activities if it has an
appropriate license:

– to take deposits from indi viduals and legal entities;
– to extend microcredits (secured and unsecured);
– to carry out cash operations: rece ipt and acceptance, counting, changing,
toexchange, packing and storag e of bank notes and coins;
– to issue guarantees, provided that th e maximum outstanding amount for any one
client shall not exceed the size limitati ons applicable to microcredits;
– to issue and accept payment cards;
– to open and service accounts of individual and legal entities;
– to perform settlement operations according to the client’s order.
– to perform accounting operations.

In addition to the activities set forth in point 1 of this Article, an MDO may engage in the
following activities:
– to provide consultancy and information servic es to its clients and prospective clients;
– to engage in financial leasing, provided that the maximum amount involved in a
lease to any one client (less the imputed in terest) shall not exceed the size limitations
applicable to microcredits.
– to borrow money (whether secured by its assets or otherwise);
– to acquire claims with respect to pa yment obligations of a third party;
– to sell property acquired pursuan t to the terms of a pledge.

An MDO may borrow in the national currency or in foreign currency. An MDO may engage
in the other activities listed in point 1 of the pr esent Article in a foreign currency after one
year of operations and provided that the M DO obtains a supplemental license from the
National Bank of Tajikistan specifying the activitie s that may be conducted in foreign
currency. Additional license is granted if MDO has appropriate experts and modern
communication equipment as well as having no-loss operations and complying with the
prudential norms specified in Article 25 of this law.

An MDO shall only be permitted to engage in the activities described in this Article and its
license. An MDO may not, in any event, engage in any of the following activities: trade,
production or insurance.

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In respect to the security of funds attracted from the individuals to the microcredit
depositorganizations the requirements set out in the Law of the Republic of Tajikistan “On
security the deposits of individuals” are applied.
Microcredit deposit organizati ons may not issue securities.

Article 21. Senior executives of a mi crocredit deposit organization and
qualification requirements

The chief of the executive body of an MDO are the chief executive offi cer and his deputies,
the chief accountant and his deputie s and chiefs of its branches.
“Fit and proper” qualification requirements to senior executives of an MDO shall be
established by the National Bank of Tajikistan and shall be related only to education, working
experience and absence of prev ious convictions for committing an acquisitive intended crime.

An MDO shall send a notice to the National Bank of Tajikistan on any change in its executive
personnel within two days after the decision on any such change was made.

Article 22. Avoidance of Conflict of Interest

To avoid a conflict of interest no senior executive officer of an MDO shall:

– simultaneously be a member of the Board of directors, a senior executive or other
employee of any other unaffiliated MDO operating in the Republic of Tajikistan;
– simultaneously hold a position as an offici al or employee of any organ of state
authority, including any state authority organ on place;
– participate in the discussions and voting on issues in which such member has a
personal interest.

Article 23. Shareholders and procedures for share transfer

Any individual or legal entity hol ding less than 5% of shares of an MDO that, as a result of
acquisition of additional shares of the MDO, owns 5% or more of the shares shall submit a
written notification to the National Bank of Taji kistan within ten days following the date of
such acquisition. Any individual or legal entity owning less than 5% of shares of an MDO
who intends to enter into a shareholder agreement with one or more other shareholders of such
MDO pursuant to which such shareholders will control 5% or more of shares of such MDO
must also submit a written notification to the National Bank of Tajikistan at least ten days
following the date of acquisition.
Any individual, legal entity or any group of indi viduals and legal entities acting in concert
intending to enter into a trans action that would result in such individual, legal entity or group
controlling more than 20% of shares of an MDO, shall submit a written application for
approval to the National Bank of Tajikistan at le ast 30 days prior to the intended acquisition
date.
The National Bank of Tajikistan shall notify the applicant in writing regarding its decision on
the application submitted pursuant to point 2 of th is Article, within 30 days from the date of
receiving the application. If the National Bank of Tajikistan fails to inform the applicant
regarding its decision within the specified pe riod, the shares acquisition shall be deemed
approved.

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The National Bank of Tajikistan may refuse to grant an application submitted pursuant to
point 2 of this Article only if:
– financial condition of the acquiri ng parties is not satisfactory;
– the acquisition of shares would result in a violation of the antimonopoly rules;
– the acquiring parties failed to provide in fu ll the information required by the National
Bank of Tajikistan or provided false or misleading information.
The National Bank of Tajikistan shall set forth the procedure for submission and consideration
of the applications for the acquisition of shares of the MDO, including the requirements to the
financial condition of th e parties acquiring shares (applicants).

Chapter VI. Regulation and Supervision of Microcredit Deposit Organizations

Article 24. The National Bank of Tajikistan as the Supervisory and Regulating
Body

In order to help assure the financial stability of MDOs, protect their depositors’ interests and
sustain stability of the monetary system of the Republic of Tajikistan, the National Bank of
Tajikistan, within its jurisdiction, shall re gulate and supervise the MDO activity by
establishing normative and other requirement s provided by the normative acts adopted
pursuant to this Law.

Article 25.Prudential Norms of the National Bank of Tajikistan

Prudential norms set by the National Bank of Tajikistan requiring adherence by MDOs shall
include the following:

− minimum statutory capital requirements;
− a requirement that the non-monetary por tion of the initial statutory capital not
exceed 20%;
− liquidity requirements;
− capital adequacy ratio;
− size of foreign exchange, in terest and other risks;
− ratio of the MDO’s capital to its equity investments in other legal entities;
− requirements to transactions with affiliated persons;
− maximum ratio of MDO’s deposits to its capital;
− minimal size of total capital.

Article 26. Examination of MDO’s activities

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The National Bank of Tajikistan shall supervise the activities of MDOs based on both off-site
examinations and on-site examinations. The procedures for both off-site and on-site of MDO
examinations shall be set forth in normative acts adopted by the National Bank of Tajikistan
pursuant to this Law.
Article 27. Information and documents

In order to perform its supervisory and regula ting functions in accordance with this Law, the
National Bank of Tajikistan shall have the right to request and obtain any information at the
disposal of the MDO or any affiliated persons. The NBT may request and obtain in the manner
established by laws of the Republ ic of Tajikistan any information about clients of the MDO
and the source of their funds, that may be requi red to counteract legalization (laundering) of
illegal revenues.
Confidential information obtained in the exer cise of any power of the National Bank of
Tajikistan under this Law shall not be disclose d or transferred to third parties except as
otherwise provided by legislation of the Republic of Tajikistan.
Article 28. Funds of a microcredit deposit organization

An MDO shall create a reserve fund against losse s in the manner established by normative acts
adopted by the National Bank of Tajikistan.

An MDO may establish, maintain and account for capital reserves.

An MDO may create other funds not contrary to law.

Chapter VII. Accounting and reporting

Article 29. Accounting

The methodology and rules of accounting, lists, forms and terms of accounting reporting for
MDOs as well as liability for infringements of them shall be established by the National Bank
of Tajikistan.

All principles of accounting and charts of accounts of MDOs as well as their financial reports,
shall be established by the National Bank of Tajikistan in accordance with the international
standards of accounting.

Article 30. Submission and publication of reports

Each MDO shall submit the following to the Na tional Bank of Tajikistan at the end of a
financial year but no later than the date provided by the NBT:

– a financial report approved by the auditors;
– information on its activities and operations in the past year.

After approval by the auditors and confirmation at the annual general shareholders’ meeting,
each MDO shall publish its audited annual report , including its balance sheet and profit and
loss statement, in accordance with the forms a nd by the date established by the National Bank
of Tajikistan.

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Chapter VIII. Certification of a microlending fund

Article 31. Procedure for issuing a cert ificate to a microlending fund

In order to conduct its operations an MLF mu st obtain a registration certificate from the
National Bank of Tajikistan. A certificate shal l be granted to a microlending fund in the
manner established by this law.
Applications for a certificate shall be submitte d in the state language and shall contain the
address of the applicant. An application fee in the amount of two minimal wages shall be paid
at the time of submitti ng the application.
Certificates issued by the Nati onal Bank of Tajikistan in accordan ce with the present law shall
have unlimited term and be effective throughout th e territory of the Republic of Tajikistan. In
the event of a consolida tion of two or more MLF, the cert ificates of the consolidated MLF
shall be voided and the new organization shall apply for a certificate under this Law to the
National Bank of Tajikistan.
The data on certified microlending funds are put by the in a special register. The
National Bank shall maintain a separate regist er for microlending funds. The information on
microlending fund contained in the registers shall be published once a year in the official
publication of the National Bank of Tajikistan. Changes and additions to each register
(including any revoked certificates) shall be pu blished in such publication within one month
from the date of entry of any such change.

Article 32. Documents submitted for obtaining a certificate

To receive a certificate required to operate as a microlending fund, the applicant must submit
the following documents to the National Bank of Tajikistan:

– an application for a certificate, completed in compliance with the form prescribed
by the National Bank of Tajikistan;
– its charter (original or a notarized copy);
– a notarized copy of its state registration certificate;
– a notarized or otherwise legalized doc ument confirming the authority of the
applicant to submit the application on behalf of the founders;
– evidence of the legal source of own capital and funds borrowed from the founders
to counteract legalization (la undering) of illegal revenues.
Article 33. Terms for issuing a certificate

The National Bank of Tajikistan must issue a certi ficate or deny an application for a certificate
within one month after receiving the application and all required documents listed in Article
32 of this Law.
If the documents received by the National Bank of Tajikistan do not comply with requirements
of this law, the calculation of the period of consideration for application and required
documents shall start from the date of receipt of satisfactory documents.

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Article 34. Grounds for Refusal to Issue or Revoke of Certificate

The National Bank of Tajikistan may refuse to i ssue a certificate or may revoke the certificate
for the following reasons:
– noncompliance of the documents attached to the application with the requirements
of this Law;
– provision of false information in the docum ents attached to the application;
– failure to meet the requireme nts set forth in this Law.
The National Bank of Tajikistan must provide the applicant with written notice setting forth
the grounds on which it has refused to issue a certificate.

Chapter IX. Operations of microlending organizations and microlending funds

Article 35. Permitted activities to a microlending organization and a
microlending fund

MLOs and MLFs may engage, dire ctly or indirectly, only in the following activities on the
basis of a certificate issued under this Law:
– making microloans (secured and unsecured);
– carrying out financial leasi ng transactions, provided that the amount involved in a
lease (less the imputed interest) for one cl ient shall not exceed the size limitations
applicable to microloans;
– providing consulting and informati onal services to its clients.
An MLO and an MLF may engage in other activities not otherwise contrary to the laws of the
Republic of Tajikistan and as are necessary and proper the carry out the activities identified in
part 1 of this Article including:
– borrowing money (whether secured by its asse ts or otherwise) from legal entities
operating outside of the Republic of Tajikistan;
– borrowing money (whether secured by its asse ts or otherwise) from organizations
licensed by the National Bank of Tajikistan;
– acquiring claims with respect to paym ent obligations of a third party;
– selling property acquired pursuan t to the terms of a pledge.
Borrowings made in accordance with clause 1, part 2 of the present Article shall not constitute
deposit-taking and shall not require a National Bank of Tajikistan’s license.

Article 36. Provision of microloans

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Within the limits established by this law, a microlending organization and a microlending fund
may issue microloans in accordance with the internal lending policy.

Microloans of a microlending organizati on and a microlending foundation may be both
secured and unsecured.

Article 37. Accounting and reporting

The methodology and rules of accounting for MLOs and MLFs, and the responsibility for its
violation, as well as principles of accoun ting are established by the National Bank of
Tajikistan.
Each MLO and MLF shall provide its annual repor t, including its balance sheet and profit and
loss statement, with the National Bank of Tajikistan.

Chapter X. Closing provisions

Article 38. Audit of a microfinance organization

An MFO shall, through its intern al service (audit commission), carry out an internal audit in
accordance with the legislation of the Republic of Tajikistan.
An MDO and MLO shall be subject to an annual audit by external auditors appointe
d by the
organization and licensed by the National Bank of Tajikistan for that type of audit. An MLF
may, when necessary, have its activity audited on an annual basis by external auditors.
An annual external audit of an MFO shall involve the following:
– a verification of the availability of the capital and financial condition of the MFO;
– a review of reports and the re cords of transactions to ensure that they are timely,
complete and accurate;
– an examination of the conformity of execute d transactions with the requirements of
the laws of the Republic of Tajikistan and normative acts of the National Bank of
Tajikistan;
– an examination of the conformity of execute d transactions with the general forms of
their execution, and conformity of the manne r of execution of transactions with the
internal rules of the microfinance organization.
The external auditor shall explain the results of the audit and conclusions in a report to the
MFO. The report shall contain information on th e reliability of the MFO’s financial reports.
The report to the MDO shall include information related to compliance with requirements of
the National Bank of Tajikistan, the internal control procedures and other provisions
determined by the MDO constituent documents and normative acts of the National Bank of
Tajikistan.

Article 39. Confidentiality

A microfinance organization, its founders, shareholders, members of the board of directors,
executive officers, employees and agents shall be prohibited from disclosing to third parties or

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from wrongfully using any confidential information to which they had access due to the
performance of their duties.
The prohibition against disclosure of information shall include:
– not allowing the use of information receive d from any client for the benefit of the
microfinance organization or any other pers on, except with the permission or upon the
instruction of the client;
– not disclosing available information to third pa rties, except as otherwise provided in the
legislation of the Republic of Tajikistan.
Exceptions to the duty of secrecy include cases provided in Article 11 of this law and other
exceptions provided in the legislati on of the Republic of Tajikistan.
Provisions on banking secrecy as set forth in the Law of the Republic of
Tajikistan “On banks
and banking activity” related to the secrecy of clients accounts, transactions on such accounts
and information about account owners shall also apply to MDOs and MLOs.

Article 40. Settlement of disputes

Any action or inaction of the National Bank of Tajikistan in the area of microfinance may be
appealed by MFO or individual and le gal entity to the Economic Court.

Disputes between MFOs and their clients (individuals and legal entities) shall be settled in the
manner established by the legislation of the Republic of Tajikistan.

Article 41. Responsibility for violating this Law

Individuals and legal entities that have violated provisions of this law shall bear liability
according to the legislation of the Republic of Tajikistan.

Article 42. Procedure of enacting this Law

Existing MFOs shall bring their activity into compliance with the requirements of this law
within 6 months after its validation.

This law shall come into force e ffect after the official publication.

President of the Republic of Tajikistan E. Rakhmonov