Improvement of Sustainable Employment Through Increasing Access of Enterprises to Financial Resources in Developing Countries: The Case of Tajikistan

Improvement of Sustainable Employment Through Increasing Access of Enterprises to Financial Resources in Developing Countries: The Case of Tajikistan

Shokirjon Mahmadov (Russian-Tajik Slavonic University, Tajikistan)
DOI: 10.4018/978-1-7998-2551-7.ch003

Abstract

Enterprises have traditionally played a vital role in providing sustainable employment, thus contributing to overall social and economic growth of countries. However, many developing countries such as Tajikistan face unemployment because enterprises are not fully functioning there. Evidence from this study shows that enterprises, especially SMEs, could help improve sustainable employment if not faced with obstacles to flourish. The main challenges causing enterprises in developing countries to fail include lack of skills, access to bank credits, access to markets, high tax burdens, insufficient state support, inability to compete, etc. This study looks at the role enterprises, especially SMEs, could play in improving sustainable employment through increasing their access to financial resources in Tajikistan.
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Introduction

Enterprises play a crucial role in the development of economy, especially when negative effects of recent economic downturns in many countries around the world cause obstacles to their overall social and economic development. The development of enterprises is becoming important in Tajikistan, a country with growing population, due to the economic recession in Russia that is hosting more than 1 million labor migrants (guest workers) from Tajikistan. There is no doubt that healthy enterprises contribute to the development of economy in the form of new products, new jobs, greater exports and taxation revenues. It is necessary that small, medium and large enterprises enhance their job creation abilities to respond to negative effects of recent economic downturns (Kongolo, 2010). However, Tajikistan enterprises have not yet been able to respond to the needs of the country to tackle unemployment, have more taxation revenues, and help the country overcome the dependence on imported products. Enterprises have historically faced failures in creating sustainable jobs. As a result, thousands of people among whom the majority is youth (aged 18-39) go to Russia or other countries to seek jobs, usually seasonal ones. There are many reasons behind enterprise failures, including, but not limited to, lack of skills of both managers and employees, access to financial resources and credits, access to markets, high tax burdens, insufficient state support, inability to compete, etc.

There is no a doubt that along with enterprises, banks contribute to the social and economic development of the country, especially to the development and expansion of activities of enterprises, thus, increasing of export, creation of jobs, as well as other income generating activities. The role of banks, especially commercial ones, is essential in providing financial resources for enterprises in need of funds to cover their investment activities. However, banks, as financial institutions to accumulate financial resources and direct them to potential clients such as enterprises, among others, have not been sufficiently able to perform their main function.

Although the Government of Tajikistan and its development partners have undertaken necessary measures to address the said barriers, the issue of access of enterprises to both internal and external financial resources remain crucial. Therefore, this study aims to look at the role that enterprises, especially SMEs, could play in improving sustainable employment through increasing their access to financial resources. It will look at factors, especially the lack of access to financial resources, causing enterprise’s failure in Tajikistan, thus, failing to ensure sustainable employment. This will help to have a good understanding of stagnate economic development in Tajikistan, including its dependence on remittances, huge migration, budget deficiency, import dependence, social instability, etc. Viable solutions to solve the said problem are necessary. The paper tries to come up with some recommendations that are expected to open up some discussions among both scholars and practitioners.

The main objective of the chapter is to determine main causes of the lack of access of enterprises to financial resources which will help to improve their survival and development. To determine the said causes and to broadly understand the relationship between unemployment and enterprises problems, as well as to see the extent of importance of financial resources issues, the following questions need to be answered:

  • 1.

    What are the main causes of the failure of enterprises to create jobs in Tajikistan?

  • 2.

    What are the causes of the lack of access of Tajik enterprises to finance?

In making an attempt to answer the above questions, it is worth mentioning that while the chapter admits that there are several causes of the failure of enterprises, it will look at the lack of enterprises’ access to financial resources as the main reason of their failure. In addition, the chapter looks at the reasons of the lack of access to funds, with a special focus on access to bank credit.

Key Terms in this Chapter

Credit Organizations: Legal persons (banks, non-bank credit organizations and microfinance organizations) carrying out all or some of the banking activities after obtaining the license issued by the National bank of Tajikistan (Law on Banking Activities, 2009 AU21: The in-text citation "Banking Activities, 2009" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

Microcredit Deposit Organization: A legal entity created in order to attract deposits, savings and the provision of microcredits in accordance with the Law of the Republic of Tajikistan on microfinance organizations (2012).

Banking System of the Republic of Tajikistan: The National bank of Tajikistan and credit organizations functioning on the territory of Tajikistan (Law on Banking Activities, 2009 AU20: The in-text citation "Banking Activities, 2009" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

Microcredit Fund: A non-profit legal entity created in accordance with the Law of the Republic of Tajikistan on microfinance organizations (2012) to provide microcredits.

Sustainable Employment: Created jobs throughout an extended period.

Tajikistan National Development Strategy (2016-2030): A strategic document of the Government of Tajikistan reflecting its development vision, mission and goals up to 2030.

Microcredit Organization: A legal entity created in order to provide microcredits in accordance with the Law of the Republic of Tajikistan on microfinance organizations (2012).

Tajik Somoni: Tajikistan’s national currency.

Entrepreneurship Development Fund: A fund established by the Government of Tajikistan to support entrepreneurs mainly through providing start-up funds.

Bank: A credit organization the main purpose of which is to make profit, has its equity registered capital established by the National bank of Tajikistan, as well as a right to fulfill at least three of the following operations: attracting deposits, issuing credits, opening and managing bank accounts (Law on Banking Activities, 2009 AU19: The in-text citation "Banking Activities, 2009" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

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