Experts believe that the main obstacles for startups in Tajikistan are poor internet connection speeds, heavy taxes and complex legislation.
The Ilmhona Training School is an example of a successful startup in Tajikistan.
This training centre provides programming and design courses and organises events for the development of the tech community.
Farrukh Umarov, an Oxford University graduate and one of the centre’s co-founders, told CABAR.asia that the idea for Ilmhona came after an internship in Israel.
“At the time, Israel faced a shortage of 13,000 specialists, even though the country is as small as Tajikistan. I thought, why is there no such demand for specialists in our country?
It might not be the case now, but demand for skilled professionals will definitely emerge eventually,” says Umarov.
After returning to Tajikistan, meeting like-minded people, and future co-founders, Shukhrat Sharipov and Firdavs Abdunazarov, they founded the Ilmhona.
The company enjoys financial support from international partners such as UNICEF, USAID and others.
“We asked for support at the early stages. They finance the company through different projects and programmes,” says Farrukh Umarov.
“We have both a commercial organisation that develops websites and applications and an IT company which is already self-financed, meaning that we exist at the expense of the project itself,” notes Umarov.
After creating Ilmhona at the time of the pandemic, it became more difficult to get funding from donors, he said. Then they launched “Beehive design and development” to create design and build digital websites and mobile applications.
Farrukh Umarov added that the main problems in establishing Ilmhona were high taxes, expensive and low-quality internet, and a lack of good personnel to develop the “startup ecosystem”.
“We have no legislation on venture capital financing. And this is one of the most important elements in the startup ecosystem. That is, when a person has a good idea and wants to implement it, he needs finance. In developed countries venture capital funds provide investments for various startup projects,” Umarov added.
At the same time, there are startups in the country that stopped operating after their financing was terminated and are still waiting for investors. In particular, Asia-Plus reported a few months ago that three new startups in Tajikistan were looking for investors.
A route from a small startup to a major bank
Abdullo Kurbanov, the founder of Alif Bank, cited high taxation as the main obstacle to launching startups.
“Alif was established in 2014 as a microfinance organisation. In 2020, the National Bank of Tajikistan raised its status to that of a full-fledged bank.
Having started operations in 2014 with just three employees, the bank now has more than 800 employees in Tajikistan and Uzbekistan. In 2021, Fintech finance news estimated the total value of Alif Bank in the market at USD 100 million.
Kurbanov compared Uzbekistan’s tax rates to Tajikistan’s and noted that if Alif pays $100 to a software engineer, then about $8 goes to taxes in Uzbekistan and around $60 to taxes in Tajikistan.
According to him, there was some reduction in tax rates last year after the adoption of amendments to the Tax Code of Tajikistan. However, according to Abdullo Kurbanov, this reduction was not significant and the total tax decreased by only 10%.
“In three years, Alif has gone the same way in Uzbekistan as it took eight years in Tajikistan. The market is bigger there, but also the operating rules are simpler and allow startups to grow faster,” Kurbanov added.
Fozil Fatkhulloev, an economic observer who monitors the state of startups in the country, told CABAR.asia that most of the startups that exist now are created outside Tajikistan. Even if these projects have been launched in the country, the process has been extremely difficult.
“I personally witnessed how dozens of startups were pushed to bankruptcy by state authorities due to needless inspections, bribery and extortion. In the end, all the founders of these startups either left and succeeded abroad or sold the startup”, Fatkhulloev expresses his concern.
The poor state of the economy, shortage of personnel, monopolism and lack of suitable conditions for startups are also factors hindering their development.
Zaytuna Saydullaeva, director of outsourcing company Beehive Design and Development, told CABAR.asia that Tajikistan is making slow but steady progress toward the development of startups. However, government assistance is essential for business development.
“Government support for startups is always about creating a favourable ecosystem for nurturing startups. Creation of tax breaks on all expenses, a favourable and safe ecosystem for investing in the country, benefits for banks that allocate funds to startups, and so on,” Saydullaeva said.
She believes that opening IT parks will be a major boost for emerging startups.
“Opening an IT park means giving full carte blanche to startups and the freedom to create and build a digital economy. The digital economy is critical for Tajikistan, as it will form a new layer in the country’s budget, in addition to other sources of income,” Saydullaeva said.
She believes that opening IT parks will be a major boost for emerging startups.
“Opening an IT park means giving full carte blanche to startups and the freedom to create and build a digital economy. The digital economy is critical for Tajikistan, as it will form a new layer in the country’s budget, in addition to other sources of income,” Saydullaeva believes.
“We are still in a maturing stage, some technological base has been formed, there is an understanding and logic of startups, and most importantly, the population has a mindset that there is a place for new technologies and we do need it,” Saydullaeva added.
What kind of startups does Tajikistan need?
Nowadays, international organizations are more engaged in startup development in the country, by providing financial support to young entrepreneurs. These include the United Nations Development Programme in Tajikistan, Peak Tajikistan, Startup Go, Accelerate Prosperity and others.
For instance, Peak Tajikistan alone has supported about 100 startups during its operation. The largest amount of funding for startups by Accelerate Prosperity amounts to USD 50,000.
At the government level, startups are only aided by the state agency “Formation and Development of Entrepreneurship in Tajikistan”.
In Tajikistan, Alif is a good example of a successful startup,” said Masrur Ishanov, FIFTYFIVE GROUP’s deputy general director for innovation.
The Alif team “changed people’s minds about non-cash payments” and made it easier for people to access the banking system and credit in particular.
“I think they chose a difficult path of development, but in the end, thanks to a strong team, they got the job done,” Ishanov added.
In addition, there are the Startup Choikhona, Start-up Weekend Tajikistan, Start-up Weekend Women Tajikistan and other communities, where entrepreneurs come together and exchange ideas and experiences.
According to Sabohat Dustova, Director of PEAK Tajikistan, the supported startups show positive dynamics. On average, their revenues are growing by 83%, 81 companies have implemented innovations in their business, and 80% of the startups have achieved sustainable growth. In addition, 801 jobs have been created.
“Among such startups, we can proudly name pharmtech Yalla, logistics company Mavsim & K, alternative energy Green Technologies, Pavlovnia project, Rushdie Dier Public Association and so on,” Dustova added.
According to Zaytuna Saydulloeva, startups are most often presented in the service sector, edtech (educational technology), fintech (financial technology), medtech (medical technology) and agribusiness. There is also a small percentage of projects in robotics processes and manufacturing.
At the same time, industry experts say that Tajikistan urgently needs startups focused on education, healthcare, information technology and agrotechnology.
Abdullo Kurbanov considers startups in the field of “education technology” (educational technology), especially “health education technology” and technology startups in the field of healthcare to be particularly important for Tajikistan. In his opinion, launching such startups can solve many problems, including the drain of medical personnel.
At the same time, Fozil Fatkhulloev said the population now needs startups for medicine delivery and animation schools for computer game and film enthusiasts.
He said most of the successful startups currently providing services in Tajikistan have been created abroad, including in Uzbekistan, the US and European countries.
Among them are online shops www.alibobo.tj, and www.dastaras.tj, which are now operating successfully in the country.
In the early days, they mainly traded in quality gadgets, but recently they have expanded their range.
“Just as humans need oxygen, so Tajikistan needs startups in the area of digital economy. If an IT specialist creates at least one startup with revenues of 10 million somonis (about US $980,000), it can give a momentum to the industry,” Fatkhulloev added.