Mortgage lending in Tajikistan grew by 20%. Amendments to the law helped

They concern the sale by banks of pledged property without court proceedings.

The volume of mortgage lending in Tajikistan’s banking system in 2020, after amendments were made to the legislation, grew by almost 20%.

In the past year the total volume of mortgage loans issued in the country amounted to 102.9 million somoni, the National Bank of Tajikistan told «Asia-Plus».

The regulator noted that in 2019 credit institutions provided mortgages totaling 85.8 million somoni.

Thus, the cumulative size of the mortgage portfolio (the balance of active mortgage loans) at the beginning of this year amounted to about 400 million somoni. This is only slightly more than 3.6% of the total balance of all loans at the beginning of 2021 (11 billion somoni).

The NBT explains the low volumes of mortgage lending by a shortage of long-term and relatively cheap financial resources attracted by banks.

The weighted average mortgage rate in the national currency currently stands at 22%, while the average deposit rate equals 9.93%.

What does the law say now?

The law «On Mortgage» in Tajikistan was adopted in 2008, and until the beginning of 2019 banks had issued loans for the purchase of housing totaling only about 210 million somoni.

Banks said they did not want to take the risk of issuing such long-term loans amid a shortage of free funds, and that possible court proceedings would consume additional time, effort and money.

As a result, at the end of 2019 amendments were made to the law «On Mortgage», which came into legal force at the start of 2020.

The changes, among other things, provide for putting the mortgaged property up for sale out of court for non-payment or untimely payment of the loan.

Only those agreements concluded before the amendments to the law came into force may be considered in court.

However, the pledgor has the right to challenge in court the grounds for foreclosure on the mortgaged property or to demand that the notary’s writ of execution be declared invalid.

Simply put, previously the law required any dispute between a bank and a mortgage borrower to be resolved exclusively in court; now the bank can put the client’s collateral up for auction in case of non-payment of the loan without a court. But this does not mean that the borrower has no right to apply to the court if they believe that the creditor is infringing their rights.

At present, a mortgage can be obtained from the «First Microfinance Bank», «Spitamen Bank», «Eskhata Bank», «Alif Bank», «Arvand Bank», «Bonki Osiyo», as well as from several microfinance organizations, including «Humo» and «Imon».

In total, 69 credit institutions operate in the country’s banking system -  18 traditional banks, 1 Islamic bank, 18 microcredit deposit organizations, 5 microcredit organizations and 27 microcredit funds.

Source: Asia-Plus