The World Bank article titled “Credit guarantees can boost business resilience in Central Asia”, published in November 2024, discusses the financial challenges of small and medium enterprises (SMEs) in Central Asia concerning the disaster resilience. The article does not include information on Turkmenistan. It is important to note that due to a lack of reliable data of adequate quality the World Bank stopped publishing economic output, income, or growth data for Turkmenistan in 2020.
Credit Guarantee Schemes (CGSs) are crucial for improving small and medium-sized enterprises resilience to disasters in Central Asia. While the article excludes data and information on Turkmenistan, it emphasizes strategies to mitigate disaster impacts and enhance regional economic stability.
Natural disasters such as flood, earthquake, landslide, drought, and storm disproportionately impact SMEs in the region, with over 75% of small firms reporting monetary losses from extreme climate events. A major barrier to resilience is the reluctance of banks to lend to SMEs in disaster-prone areas due to perceived high risks related to their inability to pay back. Loans often have high interest rates, making them unaffordable for many businesses. This makes SMEs vulnerable to business closures, job losses, and slower economic recovery.
Total cost of natural disasters in Central Asia in 2000-2023:
- Kazakhstan: 344.5 million USD;
- Kyrgyz Republic: 22.3 million USD;
- Tajikistan: 647.5 million USD;
- Uzbekistan: 88.5 million USD;
- Turkmenistan: No information available.
What solutions are recommended to make the SMEs more resilient?
Credit Guarantee Schemes (CGSs) have been proposed as a solution to help SMEs access funding for disaster preparedness and recovery. CGSs reduce lenders’ risks through government guarantees, enabling:
- Mitigation and Preparedness: supporting firms in disaster-prone areas by investing in infrastructure upgrades, adopting climate-friendly technologies, and developing Business Continuity Plans for better preparedness.
- Response and Recovery: providing a quick access to capital post-disaster to restore operations and maintain market presence, facilitating faster recovery and long-term resilience.
In Central Asia, several countries have established CGSs to support SMEs. Kazakhstan’s Damu Fund, the Kyrgyz Republic’s Guarantee Fund, and Uzbekistan’s Entrepreneurship Development Company all provide CGSs tailored to local needs. With support from the World Bank, Tajikistan is also in the process of establishing its own CGS. The article does not provide any information on the existence or plans to create CGS in Turkmenistan. It is also worth noting that Turkmenistan does not publicly report about the occurrence of natural disasters and their impact in the country.
