16
Karakalpak Republican Business Incubator
equipment
for food industry
44%
manufacturing
16%
computers, office equipment
12%
agricultural machinery
11%
others
17%
Source: Annual report by IFC
“Leasing in Central Asia – 2005”.
The government encourages NGO-MFOs activities:
they are exempt from
income(profit) tax until January 1, 2006, provided they use those funds to cover operational
costs, develop their own logistical infrastructure, and fund further microfinancing.
The problems related to the functioning of NGO-MFOs:
•
Lack of formal legal status. It is impossible to attract the population’s
deposits and
bank credits without such a status. Therefore, despite the fact that cost of loan funds is equal
to zero or nearly zero, interest from income and donor grants are
the main sources of loan
capital. It is also a reason for high interest rate.
In the meantime, despite the semi-legality of their existence, microcredits
on the part
of international organizations and donors have already involved more than 40,000 clients,
thus demonstrating the significant potential of this process, were it to gain full legitimacy.
•
Registration procedure. Lack of transparency in registration procedures hinders the
growth in a number of NGO-MFOs and also the overall development
of a competitive
environment in this segment.
Registration in the form of NGOs is not appropriate as it creates
many legal contradictions. The notification form of registration is preferable, particularly for
those MFOs which do not accept individual deposits. It is
also essential to develop
legislative framework which defines procedures for the registration of branches and local
offices of MFOs, which should also be made on notification basis.
•
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