Tajik savings bank does not yet dare to issue mortgage loans

In a statement released at a news conference in Dushanbe, Amonatbonk head Sirojiddin Ikromi noted on February 4 that amendments made to the country’s law on mortgage allow developing mortgage lending in the country. 

“These amendments provide for transferring ownership of mortgaged property to a bank without trial, but it must be taken into account that mortgage loans are long-term loans and they are usually provided for the period of more than 10 years,” said Ikromi.  “But where do banks get 10-year loans, if they do not get deposits of the same period?”

According to him, sources of long-term loans are needed to issue mortgage loans.  

“Despite these difficulties, we are seeking opportunities to start mortgage lending,” Amonatbonk top manager added.  

Recall, the mentioned amendments were made to the country’s law on mortgage in December last year.  

The National bank of Tajikistan considers that simplification of the mortgage legislation will promote development of the mortgage lending in the country.  

Tajikistan adopted the law on mortgage in 2008, and lending agencies have reportedly provided a total of around 210 million somoni in mortgage loans since that time.

A mortgage loan or, simply, mortgage is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged.  The loan is "secured" on the borrower's property through a process known as mortgage origination.  This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property ("foreclosure" or "repossession") to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms.

Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property (for example, their own business premises, residential property let to tenants, or an investment portfolio). The lender will typically be a financial institution, such as a bank, credit union or building society.

In many jurisdictions, it is normal for home purchases to be funded by a mortgage loan.  Few individuals have enough savings or liquid funds to enable them to purchase property outright.  In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed. Mortgages can either be funded through the banking sector (that is, through short-term deposits) or through the capital markets through a process called "securitization", which converts pools of mortgages into fungible bonds that can be sold to investors in small denominations.

Amonatbonk is the only state-owned bank in the country.  It is one of the oldest in Tajikistan (established in 1925) and one of the largest based upon various criteria - including the number of branches and the number of served clients.  The institution is unique in its orientation towards implementing social, pension and other state programs.  Amonatbonk has 5 regional centers, 69 branches and nearly 500 agencies.  This gives the institution a presence in the most remote mountainous parts of the country.