Impact of Interest Rate Fluctuation on Commercial Banks in Tajikistan

This dissertation focuses on analyzing the impact of interest rate fluctuation on commercial banks in Tajikistan after accession to the WTO. It examines the relationship between interest rate and commercial banks, analyzes the impact of interest rate liberalization in the financial system of Tajikistan, and compares Tajikistan's interest rate with its neighboring countries. The research aims to fill the research gap in understanding the fluctuation of interest rates and its effects on the banking industry in Tajikistan.

Dissertation (Chapter 1,2, 3
Modification)

Table of Contents
CHAPTER 1 - INTRODUCTION...................................................................................................5
INTRODUCTION ..........................................................................................................................5
Background .................................................................................................................................5
Research Problem........................................................................................................................8
Aim& Objectives of the Research...............................................................................................8
Research Questions......................................................................................................................9
Research Hypothesis....................................................................................................................9
Justification for the Research.......................................................................................................9
Brief Description of the Research Methodology.........................................................................9
Outline of the Thesis..................................................................................................................10
terms...........................................................................................................................................10
Scope of the Research................................................................................................................12
Limitation of study.....................................................................................................................13
Theoretical background ............................................................................................................13
Chapter summary ......................................................................................................................14
CHAPTER 2: LITERATURE REVIEW.......................................................................................15
2.0 Introduction..........................................................................................................................15
2.1 Current condition of interest rate and associated theories with interest rate.......................15
2.1.1 Overview...........................................................................................................................15
2.1.2 Theory related to interest rate fluctuation.........................................................................15
2.1.3 International theory related to Interest rate fluctuation.....................................................16
2.1.4 Comparison of both theories.............................................................................................16
2.1.5 Condition of interest rate in commercial banks................................................................16
2.1.6 Impact of Interest rate fluctuation in Tajikistan................................................................19
2.2 Theory behind fluctuation of Interest Rates ........................................................................21
2.2.1 Background.......................................................................................................................21
2.2.2 Interest Rate Parity............................................................................................................21
2.2.2 Classical theory.................................................................................................................22
2.2.3 How both theory affect country........................................................................................23
2.2.4 Model behind used in order to know fluctuation of Interest Rates...................................25

2.2.5 Analysis of how fluctuation of interest rates took place...................................................26
2.2.6 Impact of Negative Interest Rates on implementation in different banks or financial
institutions in Tajikistan.............................................................................................................27
2.3 To analyse the impact of interest rate liberalisation in the financial system of Tajikistan..31
2.3.1 Briefing.............................................................................................................................31
2.3.2 Interest rate relaxation relationship with the financial system..........................................31
2.3.3 Relative factors behind the cause of fluctuation of interest rate.......................................38
2.4 Comparing the interest rate liberalization of Tajikistan with the neighbourhood countries42
2.4.1 Prelude..............................................................................................................................42
2.4.2 Interest rate liberalisation of Tajikistan with neighbouring countries..............................42
2.4.3 Benefits and challenges of accession to WTO in the banking sector of Tajikistan..........46
2.5 Limitation of the review framework address by the study..................................................53
2.6 Summary..............................................................................................................................53
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................55
3.1 Theoretical paradigm and assumptions................................................................................55
3.1.1 Epistemology....................................................................................................................55
3.1.2 Ontology...........................................................................................................................55
3.1.3 Methodology.....................................................................................................................56
3.2 Selection of research methods.............................................................................................56
3.3 Research Philosophy............................................................................................................56
3.4 Research approach...............................................................................................................59
3.5 Pilot Study............................................................................................................................60
3.6 Research design, Strategy and Procedures...........................................................................61
3.7 Data Collection....................................................................................................................61
3.7.1 Primary Data Collection...................................................................................................62
3.7.1.1 Quantitative Questionnaire............................................................................................63
3.7.1.2 Qualitative Structure......................................................................................................63
3.7.2 Secondary Data.................................................................................................................64
3.8 Sampling..............................................................................................................................64
3.9 Ethical Considerations.........................................................................................................65
3.9.1 Informed consent..............................................................................................................65

3.9.2 Privacy and confidentiality...............................................................................................65
3.10 Methodological Limitations..............................................................................................65
3.10.1 Reliability........................................................................................................................65
3.10.2 Validity...........................................................................................................................65
3.11 Limitations and Delimitation of Study..............................................................................66
3.12 Summary............................................................................................................................66
REFERENCES..............................................................................................................................68

CHAPTER 1 - INTRODUCTION
INTRODUCTION
Financial liberalisation is essential for the financial activities of the organisation.
Introduction chapter provides the background and rationale of the study so that relevant aims and
objectives can be developed. It also describes research hypotheses and brief analysis of research
methods will be done.
Background
Financial liberalisation should be understood as the removal of restrictions in the
activities of banks in provision of financial services, for example, in the provision of loans,
deposit registration, etc. This enables the financial institutions to decide independently on whom
and by what criteria to allocate loans, allows them to set the price (interest rate) for loans and
interests on received deposits, and determine where to (aside from lending) allocate the funds at
their disposal (Bogdan & Biklen, 2003). There is a close connection between liberalisation and
banking crisis, which deserves close attention.
In the 1990s, beneath the impact of economic complications a number of countries started
fundamental changes in monetary policy, institutional structure and overall performance of the
economy as well as in ways to accomplish the goals (Harrod, 2008). Due to the gradual
economic backlog, many countries in Latin America and Asia, as well as countries with
centralised planning, relatively quickly abandoned government intervention in the economy and
liberalised economic activity. The process of liberalisation also spread to the financial sector, and
first of all to banks that for a long time belonged to the most regulated spheres of
entrepreneurship, not only in developing countries but also in many developed countries.
Furthermost specialists settle that financial liberalisation in itself is a progressive change since it
allows you to direct the investments to the place where they can be used most effectively. Thus,
liberalisation helps to accelerate economic progression (Sneider & Larner, 2009). Nevertheless,
the knowledge of numerous countries illustrates that under certain circumstances it can produce a
growth in rates and risks for some period of time.
Financial liberalisation significantly changes the environment banking sector. With
liberalisation, there is a risk of a disruption in the normal operation of the banking sector due to a
combination of the consequences of banks' behaviour in a regulated environment accumulated
but not solved problems and incentives acting in a new liberal environment (Ponterotto, 2005).

The environment, previously protected from external influences, together with strict regulation
of financial and credit activities, contributed to the development of negative phenomena in the
work of banks. In general, this means that decisions to place assets were made without taking
into account the market criteria for maximising profits. Often banks provided loans on the basis
of political requirements or subjective desire of owners, sometimes simultaneously acting as
customers of banking services. In such a situation, the banks were not formed, and the skills
necessary for successful functioning in an unprotected and poorly regulated environment created
as a result of financial liberalisation could not be formed.
The previous practice of granting loans created a threat of decreasing the quality of the
loan portfolio and, at the same time, did not allow bankers to monitor debtors promptly and
assess the degree of risk in lending (Harrod, 2008). Usually financial liberalisation is conceded
out within the framework of the global approach of macroeconomic balance, financial
liberalisation and structural modifications (Senhadji, 2000). As a result of overall liberalisation
the economic situation of many enterprises deteriorates and the total of resources used to repay
bank loans is reduced. In the course of reforms and the implementation of stabilisation plans
which are often related with financial liberalisation banks change the way monetary policy is
implemented. These policy changes significantly affect the rate of interest change. Also, the role
of direct delivery of credits among banks decreases and the meaning of indirect tools of
influence on fluidity in the economy such as operations in the open money market, accounting of
bills increases. Thus, in order to achieve the profitable targets banks often varies interest rate.
In the progression of macroeconomic stabilisation further restrictions on economic policy
are also introduced (Berg and Krueger, 2002). These modifications in turn decrease the
possibility for banks to appeal other resources, such as primarily loans from the central bank and
short term financial resources purchased in e-market. The costs of obtaining these assets are
increasing. These factors are primarily associated with the changing interest rates and thus
influences the profits and financing functions of the economy.
At the same time situation is complicated by the fact that debtor companies themselves
are feeling the needs of limiting economic and financial policies. As an outcome, the liquidity
crisis can provoke a wave of non-payments, as debtors lose the ability to fulfil their obligations.
(Cojocaru and et.al., 2016).
A side effect of successful stabilisation programs is a high level of market interest rates,

which is established, in particular, due to the accelerated inflation rate as compared to the
expected decrease, as well as the appreciation of the exchange rate. In the latter case, the
situation of enterprises that produce goods destined for export deteriorates, as their
competitiveness in the world market falls. Exporting enterprises in Tajikistan are forced to adjust
to the new condition increase efficiency, sales growth of products inside the country. Else, they
can face financial problems, which rises the risk for banks’ lending to these enterprises (Elsherif,
2016).
The interest rate has been one of the critical factor in encouraging the liberalisation
process within financial sector. When interest rates are increased it leads to increase refinancing
rate and thus banks have to pay higher cost to manage their resources. The increased interest
rates also affect debtors in negative manner. When such situations occurs in Tajikistan then,
investment projects promising high income despite increasing interest rates resort to commercial
banks (Fletcher, 2017)
Negative impact due to fluctuating economic policies and refinancing rate in Tajikistan is
changing the value of interest rates reliant on the loan reimbursement stage. In the course of
liberalisation, the differentiation among the interest rates short term and long term loans which is
of great meaning for banks usually decreases. In Tajikistan interest rates are differentiated on the
basis of loan terms. Hence, commercial banks of the country are able to generate profits by
transferring short-term liabilities (deposits) to long-term assets (loans) (Lane, 2018). Interest on
deposits mainly short-term through administrative limits was set at a much lower level than
interest rates on loans granted which usually issued for a long period. In a number of countries
such as UK and USA as a result of interest rate liberalisation, possibility of easy profit-making in
this way has diminished, as the cost of seeking financial resources has increased and it has suited
more problematic to establish high interest rates for the use of credit (Macit, 2017)
Banks are difficult to resist the negative impact on interest rates. Typically, bank liabilities
are sufficiently liquid, because they represent deposits that are not limited to a certain period, and
banks can quickly lose them. In contrast, assets have significantly less liquidity. Credit
obligations of borrowers, as a rule, can be sold to other entities only with large losses. The
severance of contractual credit relations, in turn, is associated with additional costs in the form of
penalties (Turk, 2016)
Financial liberalisation leads to increased competition between the banks. Therefore, they are

forced to both reduce the cost of finding resources, and to resist competitors in their use. As a
result, the profit decreases. liabilities of banks are affected by competition from other financial
institutions domestic and foreign that have access to the banking market. The situation of banks
is complicated by the fact that enterprises themselves can quickly inform about their financial
situation, which allows them to directly establish links with the owners of financial resources
without resorting to the help of banks. As a rule, enterprises that are able to seek non-bank
financing sources are the best customers and their loss means for banks increasing the level of
credit portfolio risk.
Research Problem
The main research gap that exists is the impact of interest rate on bank is highly impacting in
banking sector. But it has become difficult to identify that whether interest rate has changed due
to liberalization or not. So, this is the gap that exists. However, research done on it is not
sufficient to find out fluctuation in interest rate. Financial liberalisation is very difficult to
measure because economic fluctuations are beyond the control of any financial institutes. Hence
this has become the major issue in banking industry hence fluctuations of interest rate can not be
monitored and measured. (McKinnon and Shaw, 1973). Government of nation or finance
department of country has to keep close eye over interest rate fluctuations but it is very difficult
task that is affecting entire banking industry to great extent.
Aim& Objectives of the Research
Aim
To analyze impact of variation in interest rate in commercial banks in Tajikistan after
accession to the WTO. A case study on commercial banks of Tajikistan
Objectives
 To determine relationship between interest rate and commercial banks in Tajikistan.
 To examine with theory, models and analysis in order to investigate the fluctuation of
interest rate.
 To analyse impact of interest rate liberalisation in financial system of Tajikistan.
 To compare the interest rate and liberalisation of Tajikistan with its neighbouring nations.

In addition, any combination of a market portfolio with a risk-free asset also provides an
efficient portfolio with less risk and less expected income. This approach is macroeconomic,
since in it the main object of study. Next difference between the Markowits and Tobin theory is
that Markowits emphasised the mathematical analysis of the consequences of the initial data and
the development of algorithms for solving optimisation problems. Tobin also took as a basis the
analysis of the factors that compel investors to form a portfolio of securities rather than keep
them in one form.
Research Questions
Q.1 What is the ongoing concern regarding interest rate on the commercial banks in Tajikistan?
Q.2 What are the relative factors behind the cause of fluctuation of interest rate?
Q.3 How does the interest rate liberalisation impact on its financial system?
Q.4 What are the recommendations to guide the banks on achieving interest rate stability?
Research Hypothesis
H0- The research hypothesis significant relationship between interest rate liberalisation and
banks ‘s performance in Tajikistan.
H1- The research hypothesis is there is no significant relationship between interest rate
liberalisation and banks ‘s performance in Tajikistan.
Justification for the Research
Study will concentrate on different prudential regulations in financial sector. It will pay
emphases on level of interest rate fluctuations and its impact on entire financial sector.
Furthermore, what are factors that impact on developing country financial systems. Beside this,
how interest rates are determined and how it impact on banking sector. Along with it, the study
will explain about how interest rate is controlled and how it results in improving economic
growth. Along with it, the research will help in analysing various kinds of liberalisation
component that can help in monetary control.
Brief Description of the Research Methodology
It is necessary to apply different research methods to gather data. This is because it helps in
gathering relevant and precise data. In this research, econometric methodology is been used.
Also, some statistical tests are applied to find out mean, mode, median, etc. besides this,
researcher has taken assistance of primary data in which questionnaire and interview are taken.
Furthermore, Mckinnon and Shaw hypothesis research methodology is applied. However, data is

analysed with SPSS. Hypotheses is framed and test are applied.
Outline of the Thesis
This thesis will be divided into several sectors: As first chapter will be introduction in which
researcher will explain the topic, background will be discussed. Apart from this, aim objectives
will be framed and problem statement s will be framed. In the second chapter researcher will use
literatures of other scholars in order to develop understanding about the subject matter. It will
emphases more on financial liberalisation and regulations of government will be reviews by
getting support of different authors views. Chapter third will be research methodology in which
scholar will explain and justify various methods that can be used in any kind of dissertation and
will specify the chosen method in the current research. It will explain the type of study it is and
will defines the data collection sources that are used to answer the research questions. Chapter
fourth will be analyses chapter in which scholar will gather all details and will analyses it in
qualitative manner. All the details will be presented in systemic manner so that valid conclusion
can be drawn. Chapter 5 will be discussion in which literature review and data analyses chapters
will be combined to discuss the topic. At last conclusion chapter will come in which necessary
findings will be drawn and necessary recommendations will be given.
terms
Interest rate: It is defined as the amount paid per period which is the proportion of principal
amount or the amount which is borrowed, lent or deposited. (Shaofeng, 2017)
Commercial banks: These are the financial institutions which performs and regulate the
financial operations and accepts deposits, manage loan services, accounting services and other
transactional operations. Commercial banks also assign certificates of deposit and savings to
individuals as well as organisations. (Alotaibi, 2015)
Financial liberalisation: It refers to the removal or elimination of government ceiling or
regulation on interest rates and all other attributes of financial intermediaries. (Zhang, 2018)
Refinancing rate: minimum bid rate and can be defined as the interest rate which is paid
by commercial banks when they borrow money from European central bank. (Kothari, 2018)
Liquidity: It can be described as the extent up to which an asset can be sold or purchased
in the market at its intrinsic value. Thus, liquidity refers to the ease in the converting an asset into
cash. (Bun, 2018)

Fluctuations in interest rate: The quick changes in the interest rates are known as
fluctuations. These fluctuations are the result of inflation, supply and demand variation and
economic stability. (Aid, 2019).
Interest rate stability: For the stability and better functioning of interest rates it is
required that changes in interest rates are smooth so that financial stability can be promoted. The
reduced volatility of interest rate has direct impact on the insolvency of the commercial banks.
(Lu, 2018).
Fiscal policies: These are known as the policies which describes the utilisation of
government expenditure and revenue collection so that economy can be improved.
(GONZALEZ, 2017)
WTO: World trade organisation (WTO) is intergovernmental institute which regulates the
international trades between countries. (Smart, 2017)
Financial repression: It is known as the policies through which government and
regulatory bodies can enhance domestically held debt and tax income. (Siddiqui, 2019)
Foreign exchange trade: This trade is global decentralised market for the trading of
currencies. Thus, through this procedure currencies are bought, exchanged and sold at the
determined prices. (Verdiyeva, 2018)
Redistributive economy: It is defined as the economy system in which substantial share of
wealth is mobilised into the centralised administrative control and out from the common
population. (Shaofeng, 2017)
Gross domestic product (GDP): it is monetary measurement that describes value of goods
that are produced in a fixed time period in country. (Alotaibi, 2015)
Marginal efficiency of capital: The discount rate which equates the price or monetary
value of the fixed capital asset with the present discounted price of expected income is known as
marginal efficiency of capital. (Kothari, 2018)
Depreciation: Depreciation refers to the reduction or decline in the monetary value of an asset
over time period. The cost of the assets is allocated to the time period through which they were
in use (Aid, 2019).
Amortisation: It is known as the process or method of paying off the debts or loans
through regular payments. It is also used for both loans and assets. (Bun, 2018)
Accumulated capital: Accumulated capital is defined as the increment in the value of assets by

the means of profits or investments. It motivates the profit so that initial monetary value can be
increased. (Zhang, 2018)
Scope of the Research
The research scope’s to analyse financial market from regional or the national
perspective instead it evaluates financial market of the Republic of Tajikistan after accession to
the WTO. Also how financial reforms effected in economically similar countries. Also a set of
significant internal and external relationships of financial market segments that determine the
direction of impact aimed at reducing the deformation of the economic role of the financial
market.
Scope of the research devoted to the analysis of interest rate liberalisation that can be
divided into four areas:
(1) A quantitative assessment of income from interest rate liberalisation;
(2) The political and economic reasons for using interest rate liberalisation;
(3) Financial repression’s impact on growth of economy
(4) Optimality of interest rate liberalisation.
The study will describe about Quantitative estimates of income from financial institutions
and its significance for public finances. For example, Reinhart (2008) notes that even with
moderate inflation, interest rate liberalisation often leads to maintaining a real interest rate at a
negative level for a long period of time. De Melo (2002) also cited that the transition to financial
liberalisation leads to significant losses in budget revenues and requires budgetary reforms. As
for modern developed countries, such measures as the nationalisation of the funded part of the
pension system and the increase in the share of government bonds on the balance of commercial
banks have allowed to avoid defaulting on public debt.
The most extensive area of research on banking interest rate liberalisation affects the
ways of tightening financial regulation on economic growth. The works of such scientists as Fry
(1996) note that such a policy allows ensuring financial stability and avoiding the negative
financial shocks’s impact on growth of country and its economic condition.
The main contribution of this work will be directed to the optimal policy of financial
liberalisation. This problem is considered in the literature in the context of the government
getting inflationary tax and optimising budget revenues in conditions of evasion from paying
income tax. The subject of research is developing countries characterised by a low level of

financial development, tax evasion and monetisation of budget deficits. It is not assumed that
financial liberalisation is associated with inflationary financing of the budget deficit or a
decrease in the efficiency of the financial system. The redistribution of financial resources
between the private and public sectors does not make the work of financial intermediaries less
effective. Thus, the model is more in line with the situation typical for developed countries,
which have shifted from the financial crisis of 2007-2009 to fiscal stress. If we consider financial
reform as an implicit tax on the financial sector, then the problem of optimal taxation arises.
Among other things, this study answers two questions. First, is financial liberalisation an element
of optimal taxation. Second, whether financial liberalisation and explicit taxes are the perfect
substitutes.
It is also be necessary to consider the currency market of Tajikistan, the interrelations and
interdependencies arising in the process of its functioning taking into account interest rate
liberalisation. Therefore, is the process of regulating the aggregate of economic relations
regarding the formation and implementation of the monetary policy of Tajikistan, taking into
account financial liberalisation and strengthening the functional interrelationships of the currency
sector of the financial market with its other sectors.
Limitation of study
The study has been effective towards role of fluctuations in the interest rates on financial
systems. However, The most significant limitation of study is within data collection. Different
commercial banks have different interest rates and thus it is very challenging and complex to
interpret the impact of varying interest rates. Banking stability is considered as major factors
which affect their ability to manage the interest rates. primary and secondary sources are used to
analyses the research area. Several limitations of the study are associated with this.
However, interest rate variations are very quick and unpredictable thus the use of sources
from past few years can affect the relevancy of the findings. primary data is collected through
questionnaires and interviews are also conducted. Thus, due to budget limitations the sample size
was kept low. The data is gathered from different organisations. Thus, variations can occur in
data collection. However, accuracy and integrity of data can also be affected. Beside this, as
interview is taken so it becomes difficult to interpret finding from it.
Theoretical background
The study focus on identifying whether financial liberalization impact on banking sector or not.

Also, it analysis economic condition of country and other economies. Here, many authors have
worked on finding out relation between financial liberalization and economy.
The theoretical basis of the research was the scientific works foreign authors in the field of
studying the financial and banking system, its structure, functions and role in the economic
system. Also studies on the regulation of the interest rate, as well as the effective work of the
successful implementation and reform of the financial system in the world.
However, the beginning of the modern portfolio theory was laid by Markowitz (), whose theory,
the problem of portfolio optimization is to minimize the risk at a given average profitability.
Tobin also showed that the market portfolio, where there is a set of all available at the moment
investor securities is effective. In addition, any combination of a market portfolio with a risk-free
asset also provides an efficient portfolio with less risk and less expected income. This approach
is macroeconomic, since it is considered as major aspect
Chapter summary
From above it is concluded that there are many patters due to which financial sector is
influenced. They are :
Financial liberalisation and open economy that protect against the risks associated with the
shock effect of cross-border short-term capital flows; an effective mechanism to prevent the
adoption of undercapitalised financial institutions (primarily banks) excessive risk can be created
only through a system of control by the stock market. Moreover, financial liberalisation decide
independently on whom to allocate loans, and determine where to the impact of economic
complications as well as in ways to accomplish the goals with centralised planning, and
liberalised economic activity. Different commercial banks have impact of varying interest rates
both primary and secondary sources interest rate variations unpredictable can affect the
relevancy. Optimal policy of financial liberalisation considered inflationary tax associated with
decrease in the efficiency between the private and public sectors intermediaries less effective.
Also, it is summarized that problem of financial liberalisation occurs due to the government and
optimising budget revenues in conditions of evasion from paying income tax. It is also be
necessary to consider the currency market of Tajikistan, the interrelations and interdependencies
arising in the process of its functioning taking into account interest rate liberalisation.

CHAPTER 2: LITERATURE REVIEW
2.0 Introduction
This section furnish a critical assessment of the major theoretical approaches which are
used to describe different theme in the literature review section. Therefore, this section, provides
a deep knowledge related to current condition of interest rate in commercial banks in Tajikistan
and then define different theories behind the fluctuation if interest rates in Tajikistan. Moreover,
it also analyse the outcome of involvement rate liberalisation in the financial system and then
define different factors behind the cause of fluctuation of interest rates. Lastly, by supporting
different author point of views, researcher describe the benefits and challenges of accession to
WTO in the banking sector of Tajikistan.
2.1 Current condition of interest rate and associated theories with interest rate
2.1.1 Overview
As per the viewpoints of Barrell, Karim and Ventouri, (2017), the term interest rate has
been defined as the proportion of the debt or loan amount which has been charged in form of
interest to the borrower. Author also state that there is a affirmative kinship between economic
growth and fiscal market and it is so because when the financial market is high, the economy of
country also rises and author also state the relationship between an ability of financial market in
order to redistribute capital and degree of development of the commercial enterprise, in turns, it
increases economic growth of country. As financial development of the country is actually a
ratio of size of securities market and credit market to Gross Domestic Product.
2.1.2 Theory related to interest rate fluctuation
As per the view of Holston (2017) interest rate parity is the approach which works behind
interest rate. It is a no – investing situation which represents an balance state in which the
capitalist will be different to interest rates. This theory is also work on two assumption i.e.
Capital mobility and perfect substitutability from both home and abroad assets. On the other side,
The mechanism of profit making by such commercial banks is explained by the Martin and et.al.,
(2018) in its studies that commercial banks holds the balances of their customers at which they
some amount of interest which is evidently lower than the interest rate they charge from their
customers while lending the money. Addition in the rate of interest rates widens this gap due to
which banks becomes more able to enhance their profitability.

2.1.3 International theory related to Interest rate fluctuation
Shokirov and Backhaus (2020) stated that Neo classical theory is the international theory
in which the interest rate is stated through legislation of decreasing minimal inferior. This theory
also explain two laws such that intake of a good in high amount which create a affirmative profit,
but on the other side, contentment of extra ingestion is not good as compared to previous
consumption. On the other side, another law state that best status where the ratio of dealing of
products is equal to ratio of minimum substitute of products The ultimate effect of such low
interest rate results into higher productivity through which the total output of the economy
increases.
2.1.4 Comparison of both theories
According to Durdyev and Ismail (2017) Interest rate parity theory is that approach
which differentiate the interest rate between two state is equal to the difference between the
progressive dealing rate and spot dealing rate. This theory show an important character in the
international dealing markets and also copulative the interest rates, spot exchange rate. While on
contrary, Neo classical theory mainly depend upon the classical demand for supply and demand
of capital theory of interest. This rate of interest is also concludes all the monetary and non-
monetary aspect of interest. The ultimate effect of such low interest rate is reflected on the
higher output of the nation which in turn accelerates the profitable growth.
Xie and Han (2019) argued that the IRP model only anticipate that there are endless
finances accessibility which may be further used for monetary system investment that is further
not practical. As a result, this theory also state that when the future and forward contracts are not
available to protection then it did not hold in the real world. On comparing it with Neo- classical
theory, It has also been observed that if interest rates remains high for too many months than it
leads to slow growth rate of business present in economy. In this above mentioned manner,
interest rates does not only affects economy but it also affects individual present in an economy.
2.1.5 Condition of interest rate in commercial banks
In the view of Mehrotra and Yetman (2015), the system of banking of Tajikistan is
relatively weak and under-developed. The banking sector of the nation experienced a setback in
the year 2014 when economic crisis hit Russia due to which it faced many systemic challenges.
The country consists of about 16 commercial banks and about 80 micro-finance companies
operating and have just one western bank named as “Access Bank” which is a German bank. The

author says that due to lack of big and renowned banks across the world, the growth of banking
system of the country is relatively lower as compared to other Central Asian countries.
Essl and et.al., (2019) provides that interest rates are of two types such as borrowing
interest rate and lending interest rate. The charge at which mercantile banks lends money to the
public or organisations is termed as lending interest rate while the charge which mercantile banks
accepts deposits of public is known as borrowing interest rate for banks. Maxfield, Wang and de
Sousa (2018) stipulates that interest is considered as cost for one person while income for the
other person. It is basically taken as an opportunity cost wherein the borrower pay for grabbing
the opportunity now instead of foregoing the same which might costs it higher. Commercial
banks borrows which in other words, accepts deposit from public for which they pay some
interest to them, for the purpose of increasing the scope of their activities related to the
investments and earn higher profits for themselves.
Singh and Singh (2016) states that alteration in the interest rates can impact the market in
both favourable and unfavourable ways. Interest is basically taken as a reward for mitigating the
risk which is associated with the non-payment of the money borrowed by people. When the
interest rates at which banks charge low rate of interest, people are encouraged to take more
loans and spend on big purchases like homes, cars etc. It means people who have to purchase
house, cars, they are ready to take a loan from bank because of lower interest charge. This is
because people have to pay less interest on the amount they have borrowed which increases their
capacity of spending higher money. This have a positive impact in the economy as it’s creates a
ripple effect on country's economy. Liquidity tends to increase and money is transferred from
household sector to investment sector at a good pace.
Kasenov (2017) in its studies stipulates that farmers and businesses are the major
beneficiaries of such lower interest rates instead of other section of society as stated above. It is
due to low interest rates allows the farmers and businesses in acquiring capital assets which
involves huge costs for which financing is required. Igonina and et.al., (2016) in its research
study stated that the country has witnesses as high interest rate as possible in May 2017 when the
lending interest rate was 32.530 % which in a way significantly affected the entire system. The
disposable outgo of the group in such condition decreases and they are discouraged from getting
loans or spending more. The author also stated that the country has seen lending interest rate as
low as possible in May 2002 when the rate of interest was just 13.097%.

Donou-Adonsou and Sylwester (2017) argues that higher interest rates is an opportunity
for the commercial banks their profitability increases in such scenario. This is because financial
such as retail or commercial banks, insurance companies, investment banks etc., holds huge cash
in the form of customer balances and businesses transactions. The author further explains this by
stating that rise in the rate of interest immediately results into increase in the earnings on such
huge cash holdings.
Sheremenko, Escalante and Florkowski (2017) disagree with the view of above author
and says that just because the gainfulness of the finance sector is one of the benefit of high
interest rates, it shall not be forgot that high interest rates decreases the capital which is needed
by the banking sector and as a result, it reduces their productivity as well. The higher savings and
lower expenditure decreases the liquidity and money movement which eventually slows down
the growth rate of an economy and there is a fluctuation in the banking sector as well because
there is a direct kinship between commercial enterprise market and economy growing.
As per the studies of Al-Harbi (2019), Central Bank of the country greatly affects the
interest rates. In fact it is this organisation which lays down a guiding rate around which
commercial banks and their financial institutions have create their borrowing and lending
interesting rates. It is the body in the country which is also responsible for keep the firmness of
commercial enterprise system within the nation. In the view of MUKANOV and BEGALIEV
(2018), when the economy is progressing at such a rate which might result into hyper-inflation,
the National Bank rises the interest rates. This is done to lower down the excessive demand of
credit in the economy. The author explains the mechanism that when the discount rate is higher,
it will be a costly affair for the borrowing banks to get funds from National Bank which in turn
will squeeze the demand from customer relating to the loans. Moreover, Wang, Tsai and Chen
(2019) also argued that Lower demand would help the country in bringing down the inflation
rate to a desired level so that economic growth of the nation does not hindered. Also, this action
is required for maintaining the stability of money credit and inflation rate in a country.
Khatat (2016) articulates that when the retail banks or commercial banks borrows from
National Bank at cheaper rate, they are enabled of passing the savings to their customers by the
way of lower interest rates imposed on personal or mortgage loans etc. This leads to
development of such economic environment wherein the customers are encouraged to borrow
which subsequently leads to rise in consumer spending. However, Bougatef (2015) argues that

lessening in the interest rate have a neutral impact on the investment earnings of the customers.
The author says that although reduction favours spending culture in the economy but it also
lowers down the income which the customers are earning from their investments in bank. This
sometimes discourages the investors or household sector to put their money as investments in the
bank.
2.1.6 Impact of Interest rate fluctuation in Tajikistan
According to Mogilevskii and Asadov (2018), banking system in Tajikistan is segregates
into two parts namely, National Bank of Tajikistan and second one is commercial banks. The
National Bank of country is the body which is responsible for performing all the regulatory
functions in the nation while the second tier of banking system which is commercial banks are
needed to adhered to the regulation made by National Bank and to grant loans and accept
deposit to/from the public which is their prime function. Also, it is analysed by Bahrami and
et.al., (2019) that Tajikistan's rate of interest at which commercial banks lends money to people
has decreased over the month has a positive impact on the business and agriculture sector which
are the two highly contributing sectors of the Tajikistan's economy. When the National bank
which is the central bank of Tajikistan changes the interest rate at which commercial banks lend
currency, it has negative outcome upon financial status of state.
Shaofeng (2017) stated that the lending interest rate of Tajikistan is highly fluctuating as
interest rate in June 2018 was 28.940 which increased to 30.210 in July 2018 which went as low
as 20.511 in November 2018 which again increased to 25.351 in May 2017. This reflects the
instability in the credit supply and demand in the country. For instance, Barrell, Karim and
Ventouri (2017) stated that the one of the commercial bank in Tajikistan has balance of about 50
million Tajikistani Somoni on which 1% interest is given by the banks to its customers.
However, the same money have been invested by it in short term notes or bills on which bank is
earning 3 %. This gap of 2 % is termed as the profitability for the company.The same thing was
experienced by the Tajikistan when interest rates in the country crossed the mark of 30%
wherein people limit their expenses and hold back their money as savings. As a result, due to
increase in interest rate, banking sector affects negatively because people did not get currency
from banks and as a result, the supply of money is affected which directly affect the overall
economy growth in negative manner.

MIRAZIZOV and et.al., (2017) states that discount rate is the cost which have to paid
for borrowing wealth from the central bank. When mercantile banks borrow money from the
National bank of Tajikistan, they have to pay interest at the discount rate for the intent of shoring
up the short period fluidness needs of the banks. For instance, the National Bank of the country
may increase or decrease this rate depending upon the circumstances and condition related to
economic pace and growth prevailing in the country. Ahunov (2018) stated that National Bank in
Tajikistan is embedded with this responsibility in the country. One of the most significant power
which the National Bank have, which is to increase or decrease the discount rate in the state.
Shift in the gain or decrease in such interest rate have a massive contact on the building blocks of
state macroeconomics, like spending and borrowing power of consumers. The authors provides
that discount rate of Tajikistan as on March 2017 was 16 % which is lower as compared to 18 %
in December 2016. The National Bank of Tajikistan exercised it power and lowered the discount
rate in the year 2017 because of the stagnant or slow pace of country's economy. This decision
was taken by the National Bank as it wanted to make the borrowing of the funds affordable for
the commercial banks so that economy does not get affected significantly.
This was the reason why National Bank of Tajikistan increased the discount rate in the
year 2017 to 18 % from the previous year in which it was 17.5 % since the economy was
growing at good rate wherein for taking control over the possibility of hyper-inflation, the
National bank chose to increase the rate so that demand for credit is lowered down for the
purpose of stabilizing the economy.
Geraets (2018) in a good economic conditions, people tends to save less and spend more
which in turn increases the demand of the money credit in the system. The petition gets so high
that commercial banks are unable to meet it and for controlling such situation, the National Bank
of Tajikistan rise the interest rate so that people gets discouraged in demanding excessive credit
or borrowing from the commercial banks. The subsequent effect of such higher interest rate is
that cost of products in the state is balanced which favour the banking system and system of the
nation. Hernandez and Vadlamannati (2017), through its studies suggests that financial system of
Tajikistan is quite shallow. This is because of the fact that country does not higher financial
intermediation. The deposit and credit penetration rates of Tajikistan is lower than other regional
economies because of country's disturbed history of banking system and government's legacy of

interfering in the operational decision making which has resulted into ineffective resource
allocations throughout the country.
As per the view of Wu and Xia (2016) the policies related to lending of funds are weak in
Tajikistan, there is need of effective hazard direction in the banking system and weak corporate
governance has altogether resulted into lower productivity from the financial sector in the
country. Moreover, with the beginning of recession period in Russia 2014-2016 made the
situation worse for Tajikistan wherein many of the commercial banks became insolvent. World's
major financial organisations such as International Monetary Fund (IMF), ERBD and World
Bank are offering all the possible assistance to the authorities of Tajikistan for resolving its
problems and issues in the financial sector.
2.2 Theory behind fluctuation of Interest Rates
2.2.1 Background
This section defined different theories and models that work behind the fluctuation of
interest rates in Tajikistan such that it describe Interest rate parity and classical theory of interest
rate. Moreover, it also describe the how the theories creates direct impact upon financial
performance of state and reflect that There is a margin between rate provided by central bank and
lending loans on certain rate by commercial banks is known as spread and it is also profit margin
for commercial banks. Banks are generally free determine interest loans on deposits and on
lending rates as based on fed funds rate and other policies prevailing in economy.
2.2.2 Interest Rate Parity
This theory is also work under two typical types such hat uncovered interest rate parity
which means that state which influence to international dealing risk is unreserved. On the other
side, another aspect is covered interest rate parity which means to that status in which there is a
progressive bid that is used to concealment the exchange rate. In the view of O'Connor (2020)
Interest rate parity is the theory which is a differential between two countries in an equal of the
differential between the forward exchange rate as well as spot exchange rate. This is also plays
an important role in foreign exchange markets, connecting interest rates and foreign exchange
rates. Therefore, it can be stated that IRP is a fundamental equation that shows the relationship
between an interest rates and currency exchange rates. In the same each parity represents the
best relationship with an implication for future forecasting exchange rates. Then they will

definitely lighten a kinship i.e. Real interest rate parity which describe the real interest rates. This
theory is generally used by many emerging contries to determine the fluctuation in market.
As per Anandan (2018) this interest rate parity theory state or govern the kinship between
interest rates and currency exchange rates. For instance, when one of the state provide high rate
of return in risk as compared to another. At that time, that state who offer high risk, will be liable
to let more expensive prices in future. Hefeker (2018) said that the second force in determination
of interest rates are Treasury Bills which affects long term rates. Longer term loans are of 15 to
30 years fixed interest mortgage loans. These loans are generally for customer loans who wants
to borrow loans for purchasing auto mobiles, education, purchasing large furniture’s etc. Interest
rates on Long term loans are generally higher as compared to prime rate but decrease than rotate
credit charge. These interest rates are not fed funds rate but rather they follow every time change
in Treasury Notes Rates. In which they take highest yield rate and it depends on notes i.e. if
notes are high in demand than yield can be low and vice- versa. In this way Treasury Notes Rates
are been determined for Long term loans.
2.2.2 Classical theory
Cochrane (2016) state that classical theory of interest rate is another theory which is
completely based upon the demand and supply for a capital. Further, under this theory, the
demand side of capital is consist of demand for an efficiencies as well as for consumptive causes.
Further, the efficiency of a capital is also subject to law of variable ration and on the other side,
supply of the capital is based upon the savings and it is somehow depend upon the determination
to save the money for society. Therefore, when the demand for an investment fund is huge as
compared to supply savings then the rate of interest automatically increases and this shows the
fluctuation in interest rate within a country. Hence, this is clearly shows by Stronski (2017) that
when the demand of a money is increases in market, the interest rate offered by the bank is
definitely decreases because there is a negative relationship between the interest rate and
demand. Therefore, this is somehow lower down the economic rate of country because
fluctuation in interest rate means people do not invest to purchase product and this in turn not
supported the economic power of a country.
On the other hand Yiheyis, (2018) said that interest rates also affects economy and
individual person in that particular economy. There is direct impact of interest rates on home
loan mortgages where if interest rates are higher than loan payment will also be higher. It means

that interest rates and loan payments are directly related to each other as it can be observed if
interest rates decreases than loan payments related to house loans. Interest rates also affects
inflation rates prevailing in economy. An individual must be smart enough to examine situation
and lock its money in fixed interest loan in order to stretch more amount of income for himself.
It has also been observed that if interest rates remains high for too many months than it leads to
slow growth rate of business present in economy. In this above mentioned manner, interest rates
does not only affects economy but it also affects individual present in an economy.
2.2.3 How both theory affect country
Bodenstein (2017) said that the banks are the main participants in setting up interest rates
on loans taken by borrowers. Commercial Banks borrow some amount of loans from central
bank on certain percentage and lend these loans to general public on the rate above than
borrowed from central bank. In the same way, Zhao and Wang (2017) state that these interest
rates are been set by setting up certain rates as per reserve requirements and buying and selling
“risk- free” rates. Interest rates comes under monetary policies and are intended to influence
economic activities in a country. Other considerations which bank take at time of setting up
interest rates are inflation rates, stock market levels etc. In this manner bank decide interest rates
which are to be taken by bank on lending funds from individuals and businesses.
Arteta, and et.al., (2016) said that interest rates theory is generally related to the increase
or decrease in percentage of inflation rates in any country. Any country whose inflation rate
increases it is directly related to the prevailing inflation rates. These terms are mainly related too
macroeconomics because all these are big terms which affects whole economy with slightest
change in any inflation rate or interest rate. Generally, it has been observed that when interest
rates are risen, less number of people borrow money from banks which leads to reduction in
inflation rates, in turns it leads to reduction inflation in country. This theory is the main issue of
fluctuation in interest rates which also affected economy of Tajikistan. In any country, when
Government wants to decrease the purchasing power in country it decreased interest rates and
vice- versa. Inflation rates are only main reason which affects interest rates in Tajikistan.
On contrary, Malkiel (2015) claimed that rising prices rates are only not reason for
fluctuation of interest rates in any country. There are many other reasons because of which
interest rates increases or decreases. It is also depended on request and provide prevailing in the
market of Tajikistan. Increase in supply along with decrease in demand leads market forces to

decrease interest rates. In the situation of decrease in supply combined with increase in demand
leads market forces to gain in interest rates. Another cause which impact interest rates in country
is reverse kinship between interest rates and shared prices. Such that when interest rates
increases bond prices automatically decreases and when interest rates decreases, bond prices
automatically increases. Stronski (2017) shows that other factors which affects interest rates are
Economic Growth rate. There is minimum economic growth rate above that rate inflationary
pressure starts to increase. In order to keep interest rates under control economic growth rate has
to be under control. Other factor is rising wage rates in Tajikistan also lead to gain in interest
rates. Due to change in wage rates it leads to a wage price spiral which ultimately enhance
interest rates
Holston, (2017) said that there are various issues in Tajikistan due to which interest rates
fluctuates in any country. These various issues are Federal Funds rate which are been set up by
Government. These are rates which are been applied by Government on short term borrowings
that are paid by lenders of short term loans. Interest rates in this case are influenced by buying or
selling of securities issued by Government. Government buys more of securities which helps
them to inject more money than lending and this tends to decrease in interest rates. Djanibekov
and Finger (2018) provide their views that while when Government sells off more securities it
leads to withdraw more amount of money from banks and ultimately leads to decrease in price of
interest rates. One factor affecting interest rates in Tajikistan is Unemployment rate i.e. High
Unemployment rate leads to high inflation rates in country that leads to decrease in interest rates.
Rise in prices commodities leads to rise in inflation rates which leads to increase in interest rates
in order to control purchasing power in Tajikistan.
According to Zhang (2018) there is substantial rise in interest rates from year 2013 to
2017. Interest rates in country risen from 5.50% in year 2013 to 16.00% in year 2017. It is
observed that there has been approximately increase of 190% in four years which does not good
sign for growth of any economy. Economy is again leading to same position where country was
having 21% of interest rates in year 2000. It the same increase occurs in Tajikistan than it will
lead to again rise in interest rates up to 21%. O'Connor (2020) stated that Inflation report also
shows that interest rates are not affecting inflation rates because it is under control. It also shows
that inflation rates are not rising with rise of interest rates in Tajikistan. In year 2000 when
interest rates were high than inflation rates were also affected. Thus, it can be analysed that the

situation which occurred in year 2000 can again occur in Year 2017 which means that rise in
interest rates can also lead to rise in inflation rates. If same situation takes place then it is not
good for Tajikistan because rise in inflation rates is a hint to destructive situation for a economy.
Whole economy is affected if there is increase in inflation rates because it creates problem not
only for people living in economy but it also affects other economies which are related to
Tajikistan.
On the other hand Wang and et.al., (2018) said that not only inflation rates in Tajikistan
will be risen but it will also affect other factors such as GDP, exports and imports of country. As
per reports, GDP growth rate has been same and are not increasing as the increase in inflation
rates and interest rates in Tajikistan. Percentage of Public Debt has been risen which shows that
debt is rising leads to purchasing power of consumers. Shaofeng (2017) Trade Balance of
country has also been gone negative and GDP Per capita is also decreasing which is not good for
any country. These are certain factors that are affected by increase in interest rates which tends to
destructive situation for economy of Tajikistan. Government should try to increase more of
exports against imports occurring in country which will help economy to keep inflationary
pressure under control.
2.2.4 Model behind used in order to know fluctuation of Interest Rates
According to Cairns, 2018, there are different models used in calculation of fluctuation of
interest rates occurring in economy. A theoretical model of interest rates is money market and
inflationary rates rising in market. In money market, inflation rises due to increase in money
supply over real money demand prevailing in market. This approach was given by Milton
Friedman where he has taken three assumptions (Cord and Hammond, 2016). The first
assumption is that the velocity and demand of money in economy always remains same and
never changes. Second assumption is that in lengthy score real results is affected by factors such
as employment, capital, technology etc. Third assumption is that the supply of money can be
controlled independently because it is determined by different set of factors. It was Milton who
insisted that central bank has not increased interest rates with compulsion but it was rather the
money because of which interest rates were increased. All interest rates are then adjusted
according to the market expectations.
Kuhrt and Buranelli (2019) also argued that most of the payment in Tajikistan are made
by the bank transfer and payment should be made between two corporates entities using a

banking system. Further due to continuous devaluation of the national currency the demand for
loans is also going upward trend. That is why, high interest rate is consider one of the highest
factor which further contribute to the low financial inclusion. This is further supported by the
theory of interest rate in which when the bank stop offering services to their customers, then the
demand of the services got affected in negative way. As a result, it directly affect the economic
growth of a country in negative way. Moreover, if the supply is high and then demand of the
product is low and as a result, the financial market of the country will remain stable. Therefore,
Khatat (2016) also supported with the statement and as a result, there should be inversely
proportional relationship between supply and demand. But bank may provide the financial
services to their customers by analysing the financial market.
On the other hand Keynes (2018) said that theory used by Paul Volker also created 1980-
82 recession. Due to high- cost for raising inflation rates led to creation of inflation rates. This
shows that Milton's assumptions were more relevant than Volker’s shocker rule. Milton's
assumptions were related to money supply and demand in long term. It warns that change in
currency demand leads to temporary gain in employment but at last it increases inflation. It
assumes that monetary policies are powerful than fiscal policies because fiscal policies only puts
main focus on taxation policies. Pond (2018) presented that huge spendings creates money
supply but it creates a deficit which leads to increase in interest rates of Tajikistan. It also
assumes that central bank is more powerful than Government because they are ones who control
money supply in country. Real interest rates does affects inflation rates in economy while
nominal rates does affects inflation rates. Real rates rather remove effects of inflation. Expansion
of money supply leads to lowering in interest rates and vice versa.
2.2.5 Analysis of how fluctuation of interest rates took place
According to Avdjiev, and et.al., (2016) the main role of fluctuation of interest rates took
place because of banking sector and money in an country. It is mainly due to difference between
interbank policy rate and other rates such as collaterized rates, uncollaterized rates. Treasury
Bills rates, Pure inter temporal rates etc. Banks fails to recognize difference between interbank
rates and other short term rates and set them as minimum by 4% p.a. It affects the banking
productivity in long run because it affects policy rates. Fluctuation of interest rates can also be
analysed by petition and demand of money in activity. Shadikhodjaev (2018) shows that if
money supply in market is high it means that interest rates will be lower because of which

buying quality of public increases. If currency demand in money industry is lower which means
that interest rates are high which affects purchasing power of general public is decreased. There
is direct relation between money supply, interest rates and purchasing power factors which leads
to fluctuation of interest rates.
On the other hand Jobst (2016) fluctuation in interest rates can also be analysed by
investments done by general public in real estate business or share market. If investments in real
estate or share market are increasing than it means that interest rates have been lowered. It is
shown because if interest rates are lower than only public can borrow loans from banks which
leads to ultimately increase in investments. While investment in these sectors are decreasing than
it means that interest rates are been increased by central banks. Shadikhodjaev (2019) argued that
it is also lead to decrease in borrow of loans by public because it shows that there is less
investments in these sectors. Interest rates plays very important role in preparation of monetary
policies and sets up whole equilibrium of savings and investments. Also. Lower investments
leads to lower economic growth rate for Tajikistan and higher investments leads to higher
economic growth rate in near future.
Arteta, and et.al., (2016) claimed that interest rates are fluctuated even because of high
inflation rates occur in a country because higher inflation rates leads to high interest rates. It
shows that high inflation rates that purchasing power of public is decreasing which decreases
interest rates to low the borrow of loans by public to increase their investments. Lower inflation
rates leads to enhance interest rates because if inflation rates are higher than there will be buying
quality of public. In order to increase more buying quality of general public by central bank than
it has to decrease interest rates. In Tajikistan , interest rates have been increased which shows
that inflation rates are also been decreased because of which interest rates were increased by
central bank to maintain purchasing power of general public. Naifar (2016) stated other reasons
for fluctuation of interest rates are demand and supply of money in Tajikistan. These are the
above mentioned points because of which interest rates fluctuation took place in country and this
points can help central bank of country to improve their monetary policy in order to reduce
fluctuation of interest rates.

2.2.6 Impact of Negative Interest Rates on implementation in different banks or financial
institutions in Tajikistan
According to Brunnermeier (2016) Negative interest rates are policy in which interest
rate value is negative and is lower than theoretical price i.e. Zero percent. It is new concept
introduced in order to remove financial crisis of country. Negative interest rates leads to high
cost for commercial banks. Negative interest rates means that public has to pay for loans
borrowed by them from banks on regular basis. These is done in order to keep minimum balance
by depositors in their deposit account so that it will banks to lend loans more freely to
individuals and businessman. At the time of deflationary people hold money rather them
investing or spending in various business. This leads to price falling due to decrease in demand
by buyers and eventually leads to unemployment. Petrick and Pomfret (2016) presented that
Expansionary monetary policies are set by commercial banks at the time of stagnation in
economy. It is further also observed that if deflationary forces are high in economy than interest
rates lowered to Zero rates will not be enough. The third theory behind negative interest rates are
in order to improve economic growth rate in Tajikistan. Basically, it is applied when all other
factors are failed in order to improve economic growth of country. Reducing interest rates to
Zero leads to reduction of costs for individuals and businesses to borrow more loans from banks.
Wu (2016) claimed that Zero interest rate percentage not always help in improving
economic growth of a country. Many times it has also been observed that economic output felled
due to Zero interest rates kept by central banks. At the time of financial crisis it was observed
that Zero coupon rates were introduced in order to improve economic growth but it happened
opposite of it and there was fallen in growth of company. Lower interest rates than Zero Interest
rates may lead to shrink in economy rather than growing in economy. Mogilevskii, R. and
Asadov (2018) presente that this impact on profitability of banks and banks gets destroyed and
almost those banks who especially depend too much on customers deposit to make loans.
Negative interest rates is main problem for those financial institutions especially for those whose
main aim is still to attract more number of customers on basis of high interest rates in order to
increase deposits. It is simple phenomenon if a depositor is asking for interest rates he would be
getting and banks tell him that interest rate is Zero or negative than it will lose interest of
depositor to deposit their cash in various financial institutions. Main objective of banks to lower
interest rates to Zero or negative is to attract more number of borrowers from financial

institutions but in that case they will lose depositors. In such case negative interest rates lead to
high cost for banks and several business establishment.
On the other hand Claessens (2018) various other consequences of negative interest rates
are that it curtails profit for banks. Main business of any bank is interest rate margins which is
most important source of business of revenue for banks. Negative interest rates means a nonstop
decrease in interest rates margins which decrease in profit of banks. Competition between
individual clients and banks of negative interest rates is only profitable to banks that too in some
cases while in other cases it is disadvantage to individual client. Naifar (2016) reflected that If
individual clients are not satisfied with policies of clients than it will be problem for bank
themselves because clients may remove their accounts from banks. At this point bank has to not
only face high cost of negative interest rates but it has to also face problem of removal of bank
accounts by depositors. Thus, there be a two loss for source to bring destructive interest rates in
financial markets. The other reality of negative interest rates is creating uncertainty in financial
markets. In such a situation insurance companies gets relatively advantage because mortgage
lending business and scarcity of investment opportunities leads for investors leads to further
problems in exacerbation.
Drechsler, (2018) said that when sometimes, there is a negative interest rates then in
future it will definitely affect the banks also. The other profits in implementing negative interest
rates are additional revenues in trading business. It means that lending loans lead to increase of
profits by lending more loans to businesses and individuals. It also lead to increase in demand of
hedging or a stronger sign for bringing stability in financial centre. It causes up heal in political
parties because they need more amount funding for their parties. At this time bank provide huge
loans without even having authentication of accounts. It has been very diplomatic that low
interest rates leads to system development or not. Djanibekov and Finger (2018) justifies that it
has been observed even if low interest rates led to positive economic growth rate but then also it
lead to very slow growth rate. One such successful example of negative interest rates is in year
2017 in US where Federal Reserve targets its interbank rates to increase and just expressing its
intention to increase its rates. This policy of increase in interbank rates leads to increase rate at
international level This was happened at time or elections held in US as he promised to improve
fiscal policies in order to increase interest rates and inflation rates in country. In this way,

negative interest rates also leads to some of positive aspects of bringing interest rates below zero
rates.
On the negative side Tan (2016) again claimed that negative interest rates are not best for
country's financial performance and it does not lead to improve in economic growth of country.
Banks profits shrinks and also it lowers down trust of public from banks or financial institutions.
Also, borrowing costs of banks have been increased due to penalties imposed by central banks to
commercial banks. Commercial banks responses by cross- subsidizing both losses and lowering
profit margins for banks by charging high payment transactions fees from clients. This high
payment transaction fees can be profitable for banks but it is not beneficial for clients because
they have to pay high charges on payment transactions.
So, Sagynbekova (2017) explain that it may create problem for banks if clients start to
lose their interest in banks and it may also lead to removal of bank accounts by customers. The
other main reason for unsuccessful of implementation of negative interest rates is to lend loans to
any person there who comes for borrowing loans. Banks even lend loans to person who might
default in payment of principle and interests in nears future. This is also one of negative point
that can affect banks working and may cause them huge loss because of default payments by
clients. Thus, in such situation banks should duly take care about their payment that they will be
paying back principle and interest rates or not. On the other side, Igonina and et.al., (2016) also
state that steps should be taken by banks to keep proper adequate amount of capital in banks are
BASEL norms which help in knowing capital requirements in proportion to risk weighted assets.
Banks can also use these norms in order to know optimum requirement of capital that is to be
required by banks for lending leans to general public.
Abdullah (2015) said that negative interest rates are having both positive and negative
aspects in banks at the time of implementation of negative interest rates in banks. If negative
interest rates are having numerous of advantages to banks by lending loans to public than on
other side it is also having numerous of disadvantages such as increase in borrowing cost of
banks, default payment risk etc. Other negative aspect of negative interest rates are that it lowers
Government borrowings and it also lowers credit ratings of country. Quinlan and et.al., (2019)
explain that Alteration in interest rates also enhance to threat in share market, real estate bubble
because of less investment in such sectors. These leads to increase in more negative side of
bringing negative interest in banks of Tajikistan in order to remove financial crisis of country

because it may create a havoc. It may be possible that it may remove problem for banks but it is
not suitable removing big problem of financial crisis for whole economy. Thus, Tajikistan should
properly examine scenario of whole economy present in country and then only take decision that
whether to implement negative interest rates or not and what will be its impact after
implementation on whole economy.
2.3 To analyse the impact of interest rate liberalisation in the financial system of Tajikistan.
2.3.1 Briefing
Interest charge can be expressed either in form of annual percentage basis or as specified
of the loan amount which has been outstanding. With the help of liberalisation and globalisation
of the world economy, it has benefited many business organisation in gaining competitive
advantages by expanding their business operations to the international market across the globe.
As per the view of Kim, Sanaev and Babakholov (2018) liberalisation of interest rate is a method
in which the monetary authority relinquishes or delegated some of its power or control related to
setting or manipulating rate of interest thereby allowing the market forces the power to determine
interest rates accordingly. Through Interest rate tool, it enables the financial market of the
economy in making proper and effective allocation of its resources. Also, it ensures measures to
be undertaken related to controlling, monitoring, directing as well as managing of cash and
capital flow thereby optimising the capital allocation process. It provides a balance between the
financial allocation systems of the economy.
On the contradictory part of both Bruno and Shin, (2015), they argued that Interest rate is
like a price rate which is having the capability to perform rationing function thereby undertaking
allocating process of the limited supply of all the financial resources in number of competing
demands for such resources. Because of liberalisation made in Interest rate, many commercial
banks of different economies has to face difficulties and adverse situation in managing their
banking as well as financial activities. In case of political colour, commercial banks have to face
problems including poor and ineffective management, lack of financial knowledge, lack of risk
awareness, low environment related to excessive profits. Under such business or financial
environment, there has been a high increase in the level of competition among all the banks.
Cairns (2018) also argued that in such competitive environment, the bank competition has been
mainly related with making limitation in respect of mastery of deposits, loans, competition in
context of non-price it has created high negative impact on the performance of banking as well as

financial institution. Due to such interest rate liberalisation, it has resulted in not so strong
overall competitiveness of commercial bank along with the existing services phenomenal.
2.3.2 Interest rate relaxation relationship with the financial system
Caballero, Farhi and Gourinchas, (2017), states that with the introduction of liberalisation
in respect of interest rate mechanisms, its main objective is to provide commercial banks more
freedom to perform or act in respect of pricing of their loans, deposits so as to compete with
every commercial bank. Also, it has been aimed at bringing improvement in the overall
efficiency of bank for promoting economic development and growth thus making economy more
competitive and strong. As per the view of Jelilov, Waziri and Isik (2016) to maintain adequate
as well as fine balance between the existing competitive environment, refuge and condition of
the whole banking system, the regime has to adopt effective and cautious approach in relation
with the interest rate liberalisation process. At the time of several different stages or
methodology of such liberalization, all the mercantile banks were get complete quality to set
down all the interest rates of a loan. After the process of relaxation of interest rate was realized,
all the mercantile banks has the power to gain full authority.
Drechsler, Savov and Schnabl, (2018) disagrees with the statement that though there are
some benefits of liberalising interest rate in the economy, it has come up with some negative
implications as well. Prior to the liberalization of interest rate, all the dominant and profit making
banks are not able to exercise their market power so as to extract revenue in form of rental value
as charged from their users because the interest rates were already resolute and specified. Pond
(2018) shared their views that all the commercial banks are having thought of either raising or
lowering down the amount or rate related to the retail deposit rate, lending rates. It has been set
to almost the level same as considered when the change in the rate of policy has been announced.
From this situation, it has been assessed that the banking system structure of Tajikistan is highly
concentrated. All the dominant banks are having more power and full control over which has
been used in negative manner for seeking more benefits out of it for own growth and profitability
aspect.
As per the thoughts of Du, Tepper and Verdelhan (2018), the relationship among the
interest rate liberalization, behaviour of banks and process related to the financing of business of
small firms has been considered and studied from decades for analysing its impact on the

financial system of Tajikistan. On the other side Kasenov (2017) stated that banks and financial
institution lends their capital resource amount to the bigger corporation as well as business firms
with the objective of gaining maximum interest amount out of it. Their main objective behind
lending of capital amount to such big firms is that these firm are having good credit score i.e.
their credit information is very much transparent as well as credit and trust worthy among the
market place. Thus, banks finds such big firms as low information searching cost objectives with
high trustworthy benefit. The another reason for providing financial assistance to such big
corporation is that their financial as well as liquidity position is sound and strong enough to
repay all the amount which has been taken in form of debt or loan. Also on the other hand, the
cash flow of such big business organisation is more stable and effective which provides
assurance to lenders or financial institutions that no credit default will arise on part of these
firms.
As per the arguments made by Gust and et.al., (2017), it has been noticed that Interest
rate liberalization may not be able to produce the expected benefits out of accounting as well as
business transactions in case when the timing, pace and sequencing aspects are off or not in line
with the set defined procedures. All such aspects needs to be determined with the help of degree
of macroeconomic factors such as stability, the banking conditions and state enterprise sectors.
Furthermore, Macit (2017) state that the capabilities of central banks should be evaluated for
ascertaining all the benefits and limitations it has been facing. The impact which the interest rate
liberalization process has brought to all the commercial as well as dominating banks can be
defined under the category of the impact made on the seller side of the market with the objective
such that all the impacts on small firms are defined and known as the impact in context of the
buyer side.
As per the Memmel, (2017) study which has been conducted to determine the effects of
reformation of such policy from the perspective of buyer sides. By narrowing down of the
interest rate gap, it will force all the banks to lend or provide their money in positive manner to
its customers so as to maintain their revenue. It is related especially to the targeted small firms
which are having capacity to provide high revenue amount to such banks and vice versa. This
will provide affirmative contact on the needs of customers as well as the small firms as they will
be better satisfied with such reforms and policy.

Guthmann and Fill, (2020) provides their statements in favour of liberalisation of interest
rate and its effect on the financial system in Tajikistan. The benefit which is expected to be
received from the process of liberalisation of interest rate having main focus on the liberalised
capital account is to undertake investments in excess of domestic savings levels and economic as
well as financial growth. The policy of its relaxation had come up with the positive effect on
transmission of the monetary policy as followed by Tajikistan. On the other side, Maxfield,
Wang and de Sousa (2018) stated that all the policies related to the monetary transmission has
become more effective after adoption of policy of liberalization of the interest rate due to
improvement methods as present by the government and tough market contest in the finance
industrial sectors, newly formed home banks and non-banking business organisation of that
economy. The procedure of interest rate alleviation is almost similar and related to the procedure
of deregulation of the interest rules thereby having focus on both, and adopting gradual as well
as cautious approach so as to hold the firmness and development of the business enterprise
scheme of Tajikistan.
On the other hand Jelilov, Waziri and Isik, (2016), disagrees by saying that for
determining adequate and relevant sequence of interest rate liberalisation, financial or banking
institutions authorities are required to distinguish transactions taking place related to loan and
deposit one but also has to make difference between retail and wholesale transactions. By
adopting early liberalization of interest rates in respect of wholesale transactions has becomes
critical aspect in case of reforming of the monetary policy for the economy. It thus facilitates the
development of an interbank market economic indicators which includes commodity prices,
exchange rates, yield curves etc. thus studying impact which liberalisation of the interest rate
system has made on the financial system of Tajikistan. Due to speedy liberalisation process in
when banking institution facing issue of lack of expertise at management level which leads to
decrease the financial sector and affect the overall economy. Also Pond, (2018) stated that when
the process of liberalisation is in smooth way then system of the state will not affected in
affirmative manner. On the other side, when the process of liberalisation is increases, then it will
definitely leads to reform the policies regarding to financial system of Tajikistan.
As per the ideas provided by Liu, Wang and Xu, (2017), related to Interest rate
liberalisation is that bank which sell the services of different commercial as well as financial
institution, thereby having significant effects on the medium of exchange argumentation

sending. To maintain interest rate liberalisation on good tack it is very much important to have
close and good cooperation among all the monetary authorities, government agencies,
department who are responsible for bringing constitution changes in the real body of the
Tajikistan. Tan, Ji and Huang, (2016) provides demonstrations related to both the theoretical as
well as empirical aspects with the aim of depicting that the activity interest rates are more
delicate to alteration the charge and then the policy is decided and thus is less reactive to all the
open market operations. The activity of interest rate liberalization as carried on by the financial
institutions have power and full control in relation to charge or set different pricing options for
their own financial products. Moreover Anandan (2018) stated that the process of setting price
of its deposit and loan by the commercial Banks. Commercial Banks having power only for
making a reasonable pricing of the loan amount as an outcome of which the liberalization of the
interest rate will be realized. In respect of which Waemustafa and Sukri, (2016) makes
comments by stating that by adopting effective monetary transmission mechanism, the economy
of Tajikistan can have effective monetary policy reforms for smooth functioning of its financial
sector. The interest rate pass through is considered as the first communication performance
which has to be modelled for better performance.
Also it has been found Nishikawa (2015) by that to be one of the strong transmission
channel which supports advanced economies and its development. To maintain and promote
terms firmness, related to such policies have affected the aggregate demand and inflation thereby
affecting the financial system of Tajikistan. For effectual running of monetary communication
transmission it has be accompanying to the interest rate. Thus with increase in the interest rates,
it can leads to appreciation in the value of local currency thereby creating effect on the exchange
rate pass through. The dealing rate transmission of monetary transmittal has been found to be
one of the major channel of monetary transmission in the whole transition economy of Tajikistan
which has provided beneficiary transaction to its financial sector.
However, Wang and et.al., (2018) argued that in the financial sector of the economy
liberalizing interest rates is considered as most important cause. It helps financial system thus
allowing all the banking as well as financial departments to set policies and reforms. On the
other side Arteta and et.al., (2016) also stated that power has been allocated for developing the
financial markets in better manner so that credit facility can be allocated which may be used by
the users. Therefore, by developing a liberalisation policy, the foreign trade with other countries

are also increases with a regular import and export facilities. This is used by the highly
developed countries in order to maintain the competition within other countries and it may also
leads to lower down the tax rates and less restriction on both domestic as well as foreign market
as well. Even the liberalisation process also offer the opportunities for the sector in order to
compete internationally and also contribute to the GDP growth to generate the foreign exchange
as well. Further, Barrell, Karim and Ventouri (2017) argues that there is a increase
demand of e-banking in Tajikistan and by implementing the same, the country's economy will
also increases and as a result, it may leads to provide better working as well as helps to sustain in
the competition in a market as well. As per the explanation made by Wang, Tsai and Chen,
(2019) related to macroeconomic environment and financial sector, it has been assessed that
economy of Tajikistan is very small and vulnerable to shocks such poor business climates. The
economy of Tajikistan heavily relies on import functions with its exports having a very narrow
base. Tajikistan economy is commodity driven including aluminium, cotton, gold etc. on the
large basis. When it comes to import and export functions of Tajikistan, liberalisation of interest
rate transmission plays a vital role.
Bech and Malkhozov (2016) stated that the rate of interbank lending accurately reflects
situation in context of both the short term capital supply and demand which depicts most
representative interest rates among the financial markets of the economy of Tajikistan. Thus, it is
the main part of interest rate liberalization that interbank lending rate has become criterion of
interest rate liberalization for assessing its impact on the financial system of the economy. On
the other side, Bougatef (2015) explained that the monetary authorities and agencies are having
full control or power related to the interest rate in the indirect manner of which one cannot make
use directly for making control over the market interest rate. The central bank on the other hand
is having indirect effect on the interest rates which can use of three major policy tools broadly
named as open market operations, legal deposit reserve, re discount rate. All these policy tools
are having ability to indirectly make adjustment in the interest rates and to further provide
guidance related to the market interest rates.
On this part Khalid, Shehzad and Naqvi, (2019) argues that for avoiding or mitigating
unstable flows of deposits between the financial institutions, it is essential to not to wait till all
the lending rates becomes fully liberalized at the beginning so as to liberalize rates on different
deposits types including large time deposits etc. By making early liberalization of rates on the

large deposits, it can be justified with the help of fact that one can make efforts for competing on
increasing basis with the money market instruments such as treasury bills or repurchase
agreements. Also, it has been argued by Nwafor, (2018), that financial deregulation and
liberalisation activities can have destructive outcome on the running of the financial system of
Tajikistan. Thus it generate the direct relationship between banking sector and financial
institutes. This is done by setting the ceiling amount on the interest rate deposits, which the
government has supported to make gain in the motive risk activities by making harmful choice.
Moreover it is supported by Bruszt and Palestini (2016), With the help of financial deregulation
and liberalisation there can be a lessening in savings thus deed change in the investment amount.
Also, with the decrease in the level of investments it can bring a decline in the level of
employment thus bringing economic stagnation in Tajikistan.
As per the statements provided by Gaddis and Pieters, (2017), increasing bank
competition and use of different banking techniques and technology also helps to improve the
efficiency to reduce the funding fees. Also, emphasis has been made on making more efficient
and proper use of fiscal origin as preconditions for creating sustainable means for bringing in
more economic growth and development of the country. Interest rates as set down in the
economy is known as price of money which is have direct impact on the costs as incurred or
associated with the function of financing of the requirements of the working capital. Also, it lays
indirect influence as well on the capital structure of many business organisations as well as
business firms. Deregulation of interest rates viz. Sharpe and Suarez (2015) critic that To
removing of the cap on the deposit interest rates as set down by the authorities can results in
increasing tough and high competition among all the commercial banking industry. Also, it has
impact in form of increase in both the deposits and loans interest rates.
On the other hand Gopalan and Rajan, (2017), all the problems arising are related to too
many regulations as imposed by the higher authorities and high competition prevailing in the
market place. As it is already mention by author that if economy has too many regulations
imposed in it, then it can result in arising of conflict with the competition. Business firms facing
constrained in form of regulations have to bear negative impact or disadvantage when compared
to all the other business and market players. Regulations has also limited the scope and
possibility of conducting operations of different types of financial institutions thereby making
high interferences on directly basis with the free competition. As a result, Smart (2017) stated

that this will also help to find the interest rate of liberalisation If there is an increase in the
competitive forces on regular and at fast phase, then it can be considered as a sources of risk
which will have direct impact on the financial system of Tajikistan.
As per the observation made by Nishikawa (2015), it can be said that in the process of
financial transaction every participation is having full power as well as autonomy related to the
choice in respect of number of structure, flexible manner for meeting needs. Also it plays
significant role in the formulation of market equilibrium interest rate. All the financial
institutions which are having pricing power in respect of their financial products and tools
mainly refers to the pricing done of deposit and loan by the commercial banks. All the
Commercial Banks as well as dominating banks can only make reasonable pricing for the loans
amount and will result in realisation of the interest rate liberalization on its own.
However on the critical note, Alagidede and Ibrahim (2017) argued that the economy
which has been characterized with the factor of business subjugation thus increasing minimal
interest rates in relation to the rising prices would always focuses on increasing its saving and
supply of investible resources in its own economy for the betterment as well as smooth
functioning of its financial system. Also, it results in increase in the productivity of investment
because such resources are channelled so as to protects and have higher rates of return.
Furthermore, it has been argued that financial repression can arises in situation mostly when the
economy imposes ceilings on the nominal deposit and lending interest rates at the rate which is
much low level as compared to inflation level rate. Thus, such low real interest rates makes
affect in form of discourage of savings and its mobilization through the fiscal scheme thereby
having negative impact on both the measure and choice of investing and thus influences growth
as well as development of the economy on a large extent.
2.3.3 Relative factors behind the cause of fluctuation of interest rate
Holston, Laubach and Williams (2017) says that fluctuation in the interest rate arises due
to a factor called inflation. The term inflation means an environment in which the terms of goods
and services are increased within in a specific system. This is associated with a concept that as
the rate of inflation is increased or prices of services and goods increases, the purchasing power
of the people decreases in the country. In short, it means cost of living. Inflation have a
significant effect on the interest rates which are predominant in the state and has the capability of

fluctuating it to a crucial level. Laubach and Williams (2016) through its studies states that
interest rate is one of the way of through which the central bank of the country controls the
continuous price rise in the economy. The authors claims that for controlling the high rate of
inflation, the rate of interest in a particular economy is increased. The mechanism of this increase
in interest rate is explained by the author in its studies. For example, during high interest rate, the
cost of taking loans from banks will increase which in turn will make the borrowing expensive
for the people as they will have to give high quantity as interest to the bank which will left them
with lower disposable income. Due to such effect, the demand for such expensive borrowing will
be reduced and demand of wealth in the system will also be declined. Kiley (2015) also specifies
that a decrease in the money supply will result into lower expenditure on the goods and
services by people. The immediate effect of such lower expenditure will be reflected in the lower
supply for the goods and services. With the supply being constant and such lower demand, the
prices of the available goods and work will fall in the state and through this lower demand, the
inflation would be stabilised in Tajikistan. The author says that there is a complete cycle through
which inflation is controlled by interest rates which is fixed by the central bank in the nation.
Hördahl, Sobrun and Turner (2016) is of the opinion that supply and demand of credit in
an economy largely affects the interest rates. In the context of lending money, increase in the
demand of credit or supply shortage results into rise in the interest rates. For example,
commercial banks in Tajikistan, if facing higher demand for the credit from its customers, it is
very likely that interest rates in the country would go up since the National Bank have to
maintain the stability in money supply in the economy. Naifar (2016) argues with the above
author and claims that demand and supply is not only the sole factor which fluctuates the interest
rates in the state. The author says that national money rate is the factor which affects the
variations in the interest rate. National stock rate is that rate which the business institutions
imposes on other financial institution for short term borrowings and loans. This rate is fixed by
the central bank of the country wherein this governing body may decrease the rate for the
purpose of encouraging borrowing in the economy and may increase the rates for limiting the
borrowing power of the institutions for stabilising the money supply.
Arteta and et.al., (2016) provides another factor that cause fluctuations in the interest
rates of the commercial bank in a particular economy. This factor is saving rates. People have a
tendency to save a significant portion of their income for the purpose of meeting their needs in

the future. Such savings determine the interest rate in the nation. For example, when the saving
rates are increased, people will tend to save more as they would be earning higher returns on
their savings, and would borrow less. In such a scenario, interest rates have to be lowered down
for the purpose of compensating such imbalance. Dimic and et.al., (2016) states that saving rates
has opposite impact on interest rates when they are reduced. Like when the saving rates are
declined, borrowing becomes the necessity of the process of consumption in the economy and as
a result interest rates are increased by the central bank for keeping the things reasonable.
Bond market is another reason which is cited by Agapova and McNulty (2016) that
creates a fluctuation in the interest rates. It has been said by the author that bond market is
considered as law of land when someone talks about debt. For example, countries like Tajikistan
when issues higher debt in the name of government, the country has to often make more money
for offsetting such debt. The immediate consequence of such higher debt is gain in the money
demand which as a result, makes the interest rates to go higher. It is through this way that
borrowing environment is kept rational in the country. However, Del Negro and et.al., (2017)
disagrees with the opinion of above author and says that alteration in the cash reserve ratio
causes fluctuations in the interest rates of the mercantile banks in Tajikistan. Cash reserve ratio
means that amount of money which the commercial banks have to to keep with the National
Bank. When this authority rises up this ratio, the actual funds available with the banks decreases.
This action is taken by the central bank in order to extract out excessive money from the
financial/ banking system. The author states that it is the tool through which National bank keep
a check on increase in the prices and interest rates.
Economic growth of a nation significantly affects the interest rates as articulated by
Gelos and Ustyugova (2017) in its studies. If the country is experiencing good economic time,
demand of the credit will be increased. If the lenders i.e., banks does not have sufficient funds
for lending it to the borrowers, it will have to increase the interest rates for maintaining the
stability of forces which are demand and supply of money in the economy. For example,
economic growth rate of Tajikistan in the year 2018 was 7.3 % which is considered as very good
indicator of economic prosperity. In such a scenario, the interest rate has fluctuated, like it was
16% in the year 2017 which was higher than previous year i.e., 2016. As per the view of
Chemutai and Escaith (2017) the interest rate was increased by the National Bank in order to
decrease demand for the credit borrowing. When the demand falls, a stability in the money

supply is achieved by the nation through which the inflation rate is also controlled. Such a move
is necessary on the part of central authority so that a balance is maintained in the financial and
banking system of Tajikistan.
Dong, Li and Yang (2016) argues with the view of above author and stipulates that it is
the fiscal policy which is the reason behind fluctuation in the interest rates of the commercial
banks. Fiscal policy refers to the tool through which the government makes adjustments in its
expenditure levels and tax rates for the purpose of monitoring and influencing country's
economy. The author states that in growing economy, all the businesses requires funds for
expanding their operations which makes them to get from commercial banks and fiscal
organization. This results into higher demand for the credit in the economy and for meeting such
higher demands, the interest rates are made higher for compensating such increased demand.
Another author Batsaikhan and Dabrowski (2017) in its studies claims that monetary policy is
the major factor that cause alteration in the interest rate. Monetary insurance is a tool of
government through which it exercise its powers of controlling the money supply in the
economy. It is the statement which comprises action plan taken by government, central bank and
monetary system commission of a country in order to power the quantum of wealth that is
required to be supplied in an economy and the channels through which such money is to
supplied. The macro-economic objectives of a nation such as maintaining inflation rate, liquidity,
consumption,, expenditure and economic growth, is achieved through appropriate monetary
policy. For example, in Tajikistan, the National Bank modify the demand of currency in order to
maintain the rising prices in the country. However, Tarr (2016), states that maintaining over the
demand of wealth by the way of monetary policy is ineffective since nobody knows what
quantity of money is actually required in an economy to facilitate smooth flow of economic
activities at any time. Moreover, there is a confusion how banks use this moeny when it is
accessible or changes in the supply and demands.
Chow (2016) provides that recession is the factor which causes alteration in the interest
rate in the state. During the time of recession where the economy is stagnant, the central bank
makes all the efforts for dealing with this situation. The author says that it is business community
which is affected the most by the recession. Sharif, Purohit and Pillai (2015) presented that for
restarting and reviving the business & economic activities, the federal bank lowers down the
deduction rate, the charge at which banks borrows money from the central bank. The reason

behind such low discount rate is to induce mercantile banks to get finances from central bank so
that they can lend it to the business organizations. The lower interest rates facilitates the
businesses in acquiring capital assets and makes their expenditure quite affordable. The discount
rate is kept low by the central bank till the economy picks up and improve. Moreover, this
directly shows that due to recession there is a fluctuation of interest rates and as a results, the
demand got affected in negative manner and in turns, it may affect the overall economy as well.
However, Sagynbekova (2017) disagrees with the views of above author and claims that
risk of default is the factor which determiners the increase or decrease in the commercial banks’
interest rates. Whenever a bank lends a loan, it always undertakes a risk which is associated with
the non-payment of loan money by the borrower. Those people who have poor history of
repaying the loan are likely to show the inappropriate financial behaviour relating to a new loan.
Thus, for mitigating such risk, commercial banks lend to gain the interest rates on the debt. Such
higher interest rate compensate the hazard which the mercantile Banks takes by lending money
to such people who have records of making defaults in payments. Müller (2018) argues that risk
is the secondary factor which affects the interest rates, the major factors at macro level are
inflation, recession and system development of the state which causes the fluctuations in the
interest rates. For maintaining the balance in the economy, it is very essential to adjust the
interest rates. Supply and activity of the money credit in the economy needs to be balanced so
that economic conditions in the country does not disturbed. Therefore, it is clearly reflected that
risk is consider as a factor which creates fluctuation in the interest rates and as a result, it may
decreases or increase the interest rate, which impact the total economy of the country in just
other manner.
2.4 Comparing the interest rate liberalization of Tajikistan with the neighbourhood countries
2.4.1 Prelude
As per the views of Zhunusova and Herrmann (2018) easing off the controlling measures
of monetary policies and releasing a sort of control over the market forces. Further, on this
Vercueil (2018) stated that liberalisation of the interest rate may result in becoming a critical step
taken by the authorised monetary authorities. It may lead in increasing the amount of liquidity
within the economy and that may result in highly anticipation of market within the country's
economy. Thus, it may result in increasing the chances of increasing the amount of black money
within the economy. Thus, it is required to study the actual position of the country's economy

and formulate the policies regarding liberalization of interest rates accordingly.
2.4.2 Interest rate liberalisation of Tajikistan with neighbouring countries
Chemutai and Escaith (2017) has view that it is an essential task to be performed by the
monetary authorities of a country to formulate effective monetary plans and policies for the
country. An inefficient plan may result in inefficiently allocation of funds and other financial
resources within the loan market across the country or availability of excessive amount of
financial resources within the financial market of the country. Both the situation would lead in
increasing the risk of financial uncertainties within the economy of the country. In addition,
Verdiyeva (2018) said that a country's monetary policies need to be framed while taking into
consideration current situations of the overall economy along with monetary policies of
neighbourhood countries. Formulation of less effective monetary policies as compare to the
policies of neighbourhood countries may result in transformation of financial resources of the
country into neighbourhood country. It would have direct influence over the aligning of an
economy in the global economic activity.
As per the study of Georgiev, Nagy-Mohacsi and Plekhanov (2017) In Tajikistan, the
financial market of Tajikistan got affected due to financial crises 2008. At that time, as compared
to other countries, many national and international government institutions raised the need of
developing effective policies and plans regarding regulation of financial market. It helped in
development of Tajikistan's financial market for multi-years. Further, the liberalisation of
monetary policies also helped in improving the computers and informational technologies within
all over the country by using the financial resources of the country's economy. On the other
hand, as per the views of Gabdrakhmanov and et.al., (2016) as a result, if there is a strict
monetary polices and higher interest rate, the government failed to raise a huge amount of
foreign direct investment within the country. Further, in comparison to other neighbouring
countries, the crisis affected the many neighbouring countries in just opposite way. Thus, it can
be evaluated that monetary authorities of the country are required to maintain effective and
balanced liberalization within the country. It has direct contact over the improvement and growth
of the country.
Kuhrt and Buranelli (2019) says that recently Tajikistan have ,liberalised its interest rates
for bank that resulted in increasing the assets held by commercial banks by 21.3 times as
compare to previously held assets. Further, it also helped in increasing the capital of banks by 7.7

times. Although, due to excessive liberalised interest rate, the economy of the country influenced
in the negative dynamic, it resulted in reducing the GDP rate from 51.6% to 37%. In addition,
share of banking sector in the aggregate capital also reduced from 10.8 % to 6.4 %. It lead in
reducing the growth of finance body in the land. On the other hand, Shaofeng (2017) stated that
by seeing the decrease in the overall economical development in the country, monetary
authorities of Tajikistan improved their strategies and plans for the country. It resulted in
substantial improvement in the overall economy. It resulted in increasing the amount of
investments within the banking sector through which banks gained operational benefits and
became able to improve their performance and increase their share in country's GDP. In addition
to this, it also lead in reduction of the implicit risk of banks.
By studying the reports of World Bank Alotaibi (2015) said that Tajikistan's government
decided to liberalise the economic and monetary policies. It helped in helped the country in
increasing the amount of foreign direct investment within the country. It also helped the country
in becoming one of the big system of the global. On the other hand, talking about the economy of
China, Petrick and Pomfret (2016) said that China increased the controlling measures within the
monetary policies. It caused in slowing down the overall profitable maturation of the country.
Furthermore, due to lack of liberty in the country's economic policies, country also faced lack of
foreign direct investment that slowed down the efficiency of overall monetary and financial
market of the country. Thus, it resulted in making the monetary authorities realised that they are
required to liberalise the overall monetary policies of the country.
Lee, Park and Shin (2015) realised that for the purpose of acceleration of development in
the economy, and pursuing the national development agendas, it is required to formulate
effective policies and standards relating to the monetary policies of country. For this purpose,
developing countries like Nigeria, Mozambique, Bolivia, liberalised their interest rate with a
view to improve the amount of public investments in their commodity market. Formulation of
liberalised policies helped these countries in elimination of negative impact of their commodity
market and rising up them from decline in their GDP as well. Liberalisation of policies of helped
Nigeria, Bolivia, Mozambique, etc. in scaling up the amount of public investments that directly
influenced their economic condition positively.
On this, Kim, Sanaev and Babakholov (2018) said that neighbourhood countries of
Tajikistan like China, Russia, increases the interest rates over loan and credits. It resulted in

reduction in the flow of funds and other financial resources within the country. All these policies
lead in strengthening executive’s powers in the other institutions. It helped them in achievement
of their strategic goals and objectives in relation to maintain employed dealings with helper.
Zhang (2018) has view over liberalisation of interest rate that Russia is one among those
economies that have a huge level of influence over economic condition and monetary policies of
Tajikistan. Tajikistan keeps participate in the economy of Russia. It reduces its participant from $
3.8 billion to $ 1.28 billion in the year 2015 as compare to the year 2014. Further, as per the
reports of World Bank, this participant kept reduced further in the year 2016 as well. It also
influenced the export and import market of Tajikistan.
Moreover, Sauvé and Soprana (2018) has a view that in late 1990's the China was one of
the high economy country as compared to other Latin American countries. It also resumed its
sustainable economic growth through advanced economic strategies and plans. Policies of China
involved higher interest rate despite of it substantial capital inflows and demand of credits and
loans remained high in the country. Major liberalisation policies of China were liberalisation of
restrictions over foreign direct investors and external accounts, liberalisation of interest rate in
order to improve the positioning of banking supervision, etc. All these policies resulted in
improving quality of monetary policies and improving the impact of these policies over growth
of economy of China.
As per the views of Kaya and Woo (2018) a country is required to maintain healthy
relations with other countries. As Russia have a great influence over the Tajikistan's economic
development, financial and monetary sector's development depends upon the effective monetary
policies of the country formulated on the basis of monetary policies and plans of Russia. Banking
sectors are one of major factor of Tajikistan having power over the profitable performance of the
land. On this Kothari (2018) said that all major transactions of country's economy such as debt
repayments, foreign direct investments, international payments, foreign exchange transactions,
etc. depends upon the execution of finance body of the state. In order to improve the
performance and positioning of banking sectors, the government is required to set the most
appropriate interest rates to be applicable over the banks. Thus, it can be said that interest rates
set by the monetary authorities of country.
In the view of Bun (2018) there is a good relationship of EU with Tajikistan such that
they both developed a strategy for improving the welfare of population of the republic of

Tajikistan. As there is a weak institutional reform process and by using efficient intellectual and
financial resources which makes it difficult to achieve equal access in all terms. In the meantime,
the domestic financial market of Tajikistan suffered from higher amount of foreign investments
in the market that resulted in exploitation of the domestic investors. Therefore, by improving and
getting best financial resources will help the country to get the results or outcomes in positive
manner and the interest rate of Tajikistan also got affected. In this perceptive, Martin-Ortega and
O’Brien (2019) said that Afghanistan is one of the neighbourhood country of Tajikistan that have
a huge impact over the economic condition of it. Moreover, the monetary policy is also framed
by the government of the country which also creates a direct impact upon the money or financial
market of the Tajikistan in the term of foreign investment. Additionally, it also encourage the
domestic investor so that they may invest their excess funds into Afghanistan. Overall, it is also
analysed that as per the view of Cairns (2018) to reduce the negative contact of other country's
monetary policy, there is a need to formulate own policies and plans with regards to stable the
finanial market of Tajikistan so that it may not impact the interest rates and overall economy of
the country too.
Thus, it also have impact over the employment rate in Tajikistan. Study shows that
liberalisation of interest rate has resulted in increasing the economic growth from 49.7 % to 55.1
% in 2015 as compare to the year 2000. It also resulted in increase in the contribution of banking
sector in the from 31 % to 54.6 %. On this Aid (2019) said that with the help of liberalisation of
interest rates, the individuals have been encouraged to make a large number of deposits and take
loans as well. It has resulted in growth of individual deposits to 55.1 % along with increasing
consumer loans to 41.8 %.
2.4.3 Benefits and challenges of accession to WTO in the banking sector of Tajikistan
As per the views of Xie and Han (2019) WTO is world trade organization which is an
intergovernmental organisation that has been formulated in order to develop different regulations
and laws for monitoring and controlling each type of international business transactions. The
essential role of WTO is to act as a forum for negotiating international trade agreements and
settle down all disputes among members. Further, Arveladze and Smeets (2017) says that in
order to impose effective controlling measures over business transactions of a company made
beyond the geographical boundaries, Tajikistan made a step forward towards accession to WTO
within the country. Besides it, with the support of international trade centre (ITC) the Tajikistan

the accession of WTO ensures smooth running and orderly processing of overall international
business transactions. It also results in positively impacting advancing the negotiation process of
the international transactions made by the businesses of Tajikistan.
In the view of Buettner and Madzharova (2018) integrating with World Trade
Organization (WTO) which allows the nations to entirely collaborate with other nations for
reaping in the benefits of globalization. The author stipulates that entering into WTO would
increase the external risks in the context of open market and would decrease the social security.
This means that when the economy is open, more of foreign businesses would mark their
presence in the country as it will be an opportunity for them to explore the benefits of developing
economy. In such a situation, the capital markets would be more prone to the external risks,
fraud and higher fluctuations in the interest rates prevailing in the country. However,
Shadikhodjaev (2019) disagrees with the above author and says that becoming a member of
World Trade Organisation would make the financial and banking sector highly competitive,
which is one of the challenge for the home commercial banks. It is so because the foreign
business organization would gain a substantial share in the market of Tajikistan and would lead
to lead to a situation where less competitive banking firms would leave the field as they could
not beat such highly effective and renowned banking companies.
Sutyrin, Trofimenko and Gubina (2019) articulates that becoming a member of World
Trade Organization (WTO) would not rule out the possibility of disputes and conflicts relating to
trade. The author provides that country would continue to have trade conflicts despite being the
member of WTO. It also states that transfer the private sector into the accession to WTO.
Moreover, as a member of international governing organisation, Tajikistan would have to adhere
to enormous rules and regulations which would be a tedious task for the law making authorities
of the country. This is because they would have to make their laws and legislation which are in
line with the guidelines and framework provided by the World Trade Organisation. However,
ANDERSON and MüLLER (2017) disagrees with the claims of above author and says that
adhering to the rules and laws of WTO would help the country in enhancing its firm
establishment in the financial & finance body. This in turn would assist the banking companies
in attaining the confidence of investors which as a reason would desire to invest more of their
money as an investments in the bank. Such higher amount of money available with the bank

would aid in meeting the demand of the borrowers conveniently. Also, there will not any
material fluctuations which could hurt the economy in any possible way.
In the opinion of Chemutai and Escaith (2017), accession to WTO or becoming a
member of WTO is that this organization has certain trade rules which does not favours the
developing nations. The author states that rules and regulations of WTO may hamper the
development and growth of infant industries in Tajikistan. For instance, Tajikistan being a
developing economy desires of diversifying its economy by investing more in financial and
manufacturing sector but becoming a member of WTO restricts them in doing so. This is because
a protected environment has to be facilitated to the infant industries to bloom which is possible
only through tariff protection. Escaith and Chemutai (2017) argues with the opinion of above
author and stipulates that free trade between the countries and reduced tariff rates across the
members of WTO would make Tajikistan more efficient in the sense that more of exports would
be encouraged in the country through which greater amount of foreign capital could be brought
in the economy. The effect of such exports and international business transactions would result
into higher economic growth in the country. The consequence of such economic growth would
be seen in the lower interest rates, higher profitability for the commercial banks since people
would have more disposable income for spending on goods and services. Higher expenditure by
the household sector facilitates the banks in mobilizing the public deposits into capital
investment that eventually leads to higher industrial output of the country. All these things
collectively contributes to the GDP of the nation.
Laruelle and Peyrouse (2015) state that with an implementation of the Worl trade
organization rules, every member of teh country run in the systematic manner and as a result, it
will leads to reduce the inequalities among each nation, though they have different economic
conditions. This was considered as one of the challenge which the Tajikistan has faced by its
accession to WTO. Also, the country has not still obeyed to the policies of WTO which are
related to free trade. The nation has maintained a policy of providing protection to domestic
industries without notifying any of its partners. Kuhrt and Costa Buranelli (2019) argues with the
above author and claims that becoming a member of WTO has strengthened the economy of the
country and has improved the financial system of the nation. Due to the good trade relations with
the countries, the country has been able to stabilize the conditions in its economy in relation to
inflation. Stabilized inflation has directly impacted the interest rates of the commercial banks

which in turn has resulted into higher flow of household income into investment sector which
has facilitated higher availability of funds for industrial development in the country.
In this view Chemutai and Escaith (2017) said that WTO provides guidelines and policies
through which appropriate amount of liberalization can be imposed within the financial and
monetary market of the country. Moreover, it also leads in creation of appropriate competitive
environment among the country along with maintenance of sufficient amount of financial
resources. It also leads to spread the understanding of good practice of rules and regulations of
financial sectors and different international trade practices. Therefore, it can be stated that
accession of WTO in Tajikistan leads to improve the efficiencies of international trade practices
within financial service sectors like banks and other corporations that provides financial services
to their clients.
On the other hand, as per Sauvé and Soprana (2018) at the time of accession of WTO, a
programme was organised in which a training session on “WTO Accessions and their Business
Implications - Lessons from Other Countries” was organised. This session was having a major
focus on the process of WTO accession. It also provide knowledge regarding various benefits
and challenges that are needed to be analysed before implementation of accessions to WTO.
Organisation of this session resulted in spreading appropriate knowledge among all commercial
banks, through which they became able to implement and face all the challenges effectively and
perform build their new policies and procedures in this context easily. Further, as per the views
of Lu (2018) Tajikistan have a view that the accessions to WTO resulted in involvement of
remittance to be transferred through the banking system that is important part in increasing the
contribution of finance sector in the GDP growing rate of the land. Besides it, it also helped in
increasing the productivity of banking sector as a whole that leads in improving the chances of
potential growth of the banking sector.
The Georgiev, Nagy-Mohacsi and Plekhanov (2017) said that accession to Tajikistan was
in the year 2013, ITC contributed in the implementation of all complex reforms of this accession
and helped it in building the ability of banking sectors to gain further benefits from accessions to
WTO. It also lead in enabling the banks in making effective contribution in the economical
maturation of the land. Whereas, Gonzalez (2017) has a view that ITC played an essential role in
assisting the banks in making active participation of the banks in performance of negotiation
process of accessions. Along with this, it also helped the banks by providing appropriate

guidelines regarding formations of their policies regarding maintenance of sufficient amount of
foreign investment, domestic investment, commercial loans etc. It also help in improving the
performance of overall banking sector of Tajikistan.
Further, as per the views of Figueiredo and Lima (2017) WTO accession in Tajikistan
resulted in improving the quality of building effective plans and formulation of different
regulations by banking sectors in order to improve the growth of country's economic and
financial conditions as a whole. At the time of accession to WTO, the Tajikistan's government
signed a memorandum contract. Del Negro and et.al., (2017) also states that this contractual
agreement contains details that provides proper guidelines to implementation of economic
reforms, trade development and investment along with technical assistance. Therefore, it can be
analysed that with the help of analysing and evaluating each clause included in the memorandum
of WTO accession and understand the guidelines regarding formulation of policies in context to
setting different interest rates, export import policies, etc. It resulted in formulation of more
effective strategies through which they can improve their workings.
As per the views of Pogoretskyy and Melnyk (2016) accessions to WTO resulted in
partnering of the country with Asian development banks. It helped them in taking all the
necessary steps for developing coordination and co-hosting among the domestic banks with the
Asian development banks. It helped banks in making rising the efficiencies of mercantile banks
in formulation of policies and setting the rates with a view to spread sufficient amount of
financial resources within the world. Further, Siddiqui (2019) also said that WTO realised that
lower amount of investment is leading situation featured by Tajikistan's banking sector. Thus,
WTO made the banks to develop their strategies and plans for the private, small and medium
sized enterprise so that they can gain substantial amount of expansion.
Furthermore, as per the views of Smart (2017) with the help of accession to WTO by
Tajikistan, the monetary authorities of country started developing their monetary policies, set
plans regarding implementation of taxation system, judicial regulations regarding international
transactions, etc. Further, with the help of guidelines mentioned in the memorandum of contract,
Government of Tajikistan also became able to liberalize their monetary policies. Further, in this
context, Grant and Boys (2015) has a view that with the accession of WTO, the overall
businesses could become able to grow at the potential rate. On the other hand, as the
development of different businesses have direct impact over the growth of financial and trading

market of the country, it leads to drive up the trade and economic development and investment in
all over the country. In this order, it can be said that the accession leads to improve the trade
investment within the monetary and financial market of the country that positively influenced the
banking sector of Tajikistan.
Bruszt and Palestini (2016) also talked about the benefits gained by the banking sectors in
lieu of accessions to WTO within the monetary system of the country. As per their views,
partnering of Asian development bank with Tajikistan, resulted in improving the quality of its
domestic banks in developing effective plans and procedures for controlling the flow of money
within the country. Further, this partnership also make the banks to liberalise their policies for
different types of businesses and individuals. This step helped the banks in increasing the amount
of commercial and personal loans taken by different persons of the country. Thus, it can be
evaluated that accession to WTO in Tajikistan leads in providing great benefits to overall
banking sectors of the country. In this context, Shadikhodjaev (2018) said that the
implementation of rules developed by the world trade organization within the operations of
banking sector helps the banks in improving the knowledge of its managers, board of directors
and other members of its management team in developing more effective plans to be
implemented over the banks at the time of providing services to their customers. It results n
increasing the attraction of population towards policies of bank. Thus, banks become able to
increase their number of customers and amount of investment by this way. Hence, accessions to
WTO results in development of effectiveness in the bank regarding attracting a large number of
customers and improve their value of business as well.
On the other hand, Naseer (2017) also have view that implementation of WTO regulation
within the trade regulations of international business of the country results in implementation of
some rigid rules and regulations of the foreign companies. It affected the value of trades and
amount of foreign direct investment within the country. In this order, due to involvement of trade
policies upon several businesses of country resulted in increasing difficulties for different
business organisation who either imports or exports their goods and services across the
geographical boundaries. Thus, it negatively influenced the economic growth of Tajikistan.
In this context, Wignaraja and et.al., (2018) also said that through different policies of
monetary authorities of the Tajikistan formulated on the basis of rules and regulation of WTO,
resulted in reduction of tax rate over the cotton industry. As the Tajikistan is one of the largest

manufacturer country of cotton, the banking sector have a huge impact of cotton industry. With
reduction in tax rate, the prices of cotton also went down that helped the cotton traders in
increasing their revenues from export of cotton. In this regard, Shaofeng (2017) shows that this
accession to WTO in Tajikistan helped the cotton industry in improving their exports. Therefore,
it can be said that, with the WTO helped the cotton industry in bringing more value of foreign
currency within the country. In this regard, with the implementation of WTO Tajikistan leads to
gain an economic growth at a large level.
Del Negro and et.al., (2017) said that WTO accession contract sanctity and adequate
intellectual property right protections remain elusive. Further government of Tajikistan also
obligatory arbitrary trading policy in order to prevent the partners because they sell it without
notifying their partners. As per the view of Escaith and Chemutai (2017) banking and financial
authorities formulated effective strategies and plans, the Tajikistan effectively faced recession
and helped its banking sectors in improving its stabilization. The effective plans formulated on
the basis of policies and guidelines of WTO resulted in increasing the nominal lending rates
about 27 % for providing loans in national currency and 18 % for providing loans in other
currencies such as dollar. On this Liu, Wang and Xu, (2017) said that the commercial banks were
restricted by WTO to restrict the amount of to be borrowed. It resulted in increasing the inability
among the small and medium sized business enterprise in borrowing loans for performing their
normal business transactions or expand their business. It resulted in becoming a challenge for the
commercial banks as reduction in their business operations and amount of profit to be gained by
them in lieu of interest on loan taken by business.
Moreover, as per the view of Gust and et.al., (2017) Because of liberalisation made in
Interest rate, many commercial banks of different economies has to face difficulties and adverse
situation in managing ttheir banking as well as financial activities. Due to political reasons,
banking sector have to face various problems including ineffective operational management and
risk management. Further, due poor environment relating to generation of excessive profits. On
this Caballero, Farhi and Gourinchas, (2017) argued that WTO accession in Tajikistan resulted in
imposition of liberalisation within the monetary policies of the country, leads to provide
commercial banks more freedom to perform or act in respect of pricing of their loans, deposits so
as to compete with every commercial bank. Also, it has been aimed at bringing improvement in
the overall efficiency of bank for promoting economic development and growth thus making

economy more competitive and strong. After the process of liberalization of interest rate was
completed, all the commercial banks has the power to gain full authority. It helped commercial
businesses in growing with a rapid rate as liberalisation resulted in increasing the number of
borrowers. Besides, by charging appropriate rate of interest, they also become able to generate
appropriate amount of profit from it.
Arteta, and et.al., (2016) said that by implementing WTO within the Tajikistan will
definitely help to increase the economy of the country because it will provide large amount of
foreign investment and it will increases the supply as well. The effect of such exports and
international business transactions would result into high development of state. It would result in
a rapid growth of overall economy of the country through which banking sectors could grow
themselves easily. In this context. Bruno and Shin, (2015), argued that WTO makes its each
member state to formulate policies in uniform manner. It may provide negative effect over any
specific economy whose condition may not be appropriate for the policies framed as per the
regulations of World trade organisation. It may also have a direct impact over the business of
commercial banks of a country.
Abdullah, (2015) has a view that being a member of world trade organisation, Tajikistan
would have to adhere to enormous rules and regulations which would be a tedious task for the
law making authorities of the country. It leads to ineffective rules and regulations of the country.
It can be caused due to guidelines provided by world trade organisation on the basis of which
each monetary policy of the country. Besides it, Khalid, Shehzad and Naqvi, (2019) argued that
regulations and policies of WTO leads to improve the efficiency of banks and other financial and
monetary institutions in formulation of laws and plans with the help of which they can gain a
rapid growth. Also, it can also help in increasing the economic growth of the country as a whole.
2.5 Limitation of the review framework address by the study
As discussed above, the theoretical framework have their own limitation, such that the
interest rate parity theory is criticized because of many assumptions which are further do not
based upon the real market. As a result, it also consider the aspect when there is an gain petition
for the prevalence with a high involvement charge results which has its hold against other
medium of exchange which have low interest rates. Moreover, as theory is completely based
upon the two currencies which have their different interest rates and there will a difference that
further lead to discount and a premium exchange rates so that it may avoid arbitrage

opportunities. On the other side, Liu, Wang and Xu, (2017) stated that the classical theory of
interest has their own limitation such that the most difficult defect with the classical theory is to
disregard of the influence of alteration in outgo on saving and investment. Like, the balance
charge of interest and the level of income is actually determined simultaneously and they are also
interrelated.
Conceptual framework

2.6 Summary
It can be concluded that financial liberalisation is prominent feature in both formed and
underdeveloped state. This study aimed is to determine and examine quantitative and qualitative
impact upon the financial institution and countries. Financial liberalisation is characterized as a
gradual activity of liberalizing financial economy of the land, there are different legislature
activity which secure business liberalisation occurring at various time period. Thus, with help of
chief constituent investigation, identification of individual most essential factor serving as agent
for business liberalisation and business improvement can be done. In this competitive world by
using process of liberalisation and globalisation of world economy, it provides several benefits to
many business organisation in form of competitive advantages, market share etc.

Also, it provides supports to business firms thereby expanding their business operations
to the international market across the globe. Unless and until financial institutions brings update
in themselves as needed, it is difficult for them to last and vie in the global activity. In this
context, the study provides an overview of how the banking industry is outsourcing its activities
to different sectors in both domestic and international scenarios. The study gives information
with knowledge of how financial sector can sustain in market and helps in developing suitable
methods on outsourcing of financial services by bank (Heagney, 2016). The examination
presents different model related to interest rate that show the effects of variation in interest rates
on economic growth in developing countries especially Tajikistani case. The report has reflect
the annual report related to Tajikistan's bank from 1990 to 2015 from the National Bank of
Tajikistan, National Bureau of Statistics and World Trade Organisation.

CHAPTER 3: RESEARCH METHODOLOGY
3.0 Introduction
It is defined as process or method for conducting of research study. It is known as
systematic description which provides foundation for successful execution of research project.
The chapter will describe the different approaches used in consideration with explanation
regarding process of collecting data & analysis for making study more effective and meaningful
to others as well. Therefore, using research methodology helps to get a solution of the problem
and using the specific technique would help researcher in collecting an information which is
relevant to the topic and that is why, methodology is also used for preparing the research report
in an effective and meaningful way. Moreover, this chapter includes philosophy, approach,
strategy, design, data collection and methods of analysing the data so that these collected data
enables in conducting the research in more precise manner & researcher also achieve the defined
aim and the objectives in better manner. Therefore, to reach the aim and objectives, researcher
specifies each and every term with proper justification.
3.1 Theoretical paradigm and assumptions
The purpose of this report is mainly to determine an impact of fluctuation in
interest rate within commercial banks in Tajikistan and the purpose of present reserach report is
to choose the philosophy. For that, there are three philosophies that involves Methodology,
Epistemology and Ontology that are seen as interlinked and this are as mention:
3.1.1 Epistemology
As per the view of Cyr (2016) this study is of beliefs and the views related to suitably
determine or inquiry about nature of the globe. Thus, it is the theory of the method or ground of
knowledge which is actually set into assumptions and claims. Moreover, this also helps to
describe the validity & scope of a knowledge which are counted and techniques that employed
for purpose of conducting a study. Hence, epistemology also provides an idea relating to what
separate opinion from that of belief. Overall, it also assist to make sure that a true conclusion
reflects validity and is not counted as an opinion.
3.1.2 Ontology
According to Quinlan and et.al., (2019) Ontology is related towards what the
reality is & the way in which it is communicated with that of philosophical position. Moreover, it
also describe interpretation of people on reality nature and even the author also state that

ontology study referred as study of an existence which is developed based on assumption and the
absolute meaning of the collected information.
3.1.3 Methodology
In the view of Heagney (2016) methodology is define the procedure which is used to
acquire knowledge and the current study, it is analysed that with the help of this method,
researcher uses the methods in order to generate the results and outcomes. Author also stated that
it is a study of an instance in an action in which the different theories are used that help to meet
the define aim and conduct a study in more precise manner.
3.2 Selection of research methods
For completing research study, different method as well as procedure needs to be
followed. Based on empirical literature & Theoretical in respect of finance segment and other
hypothesis is been surveyed by keeping in view to provide better knowledge of an empirical
results that needs to be gathered. The next step involves compiling all data gathered as per
requirement of research report. The annual data has been taken from 1999 to 2014 that are
utilised for enabling empirical analysis for long run. Also, it is the time period that encompasses
pre-reform era which depicts financial repression, and involves post reform era which reflects as
financial liberalisation indication. Prior to an application of formal type of econometric
methodology, it seems as essential to assess the behaviour of data by use of correlation and
different descriptive statistical tests (Fletcher, 2017). Such statistical tests comprises of mean,
standard deviation, variance etc. which helps in making detailed analysis of data.
The empirical undertaking in validating this assertion would include co-integration
analysis by using the co-integration approach. This approach of Co-integration allows researcher
in making proper analysis into an existence of a stable long term relationship between different
pertinent variables that is financial development proxies, liberalisation proxies, rate of interest,
savings, investment and growth. Therefore, for generating financial liberalisation index, study
adopts and makes use of combination of variables relevant to internal financial liberalisation
process of economy.
3.3 Research Philosophy
Research philosophy refers to a notion through which scholar collects, assess and analyse
relevant data required for completion of the study. It is mainly categorised into two parts that is

Interpretivism & Positivism. Using the mixed approach in which both qualitative and
quantitative research helps in finding out practical solutions for overcoming the limitations of
the mono-method research that is discussed for last 50 years. Using this research philosophy,
researcher may easily analyse the assumption of the selected respondents in order to achieve a
defined aims & objectives in an appropriate manner. Further, through research philosophy,
researcher may address all the issues which are involve in a dissertation and this also involve to
being aware and formulating the beliefs as well as assumptions.
This research study is based on comparative analysis, positivism philosophy that adheres
to particular research part subject having focus on surveys, statistical data collected and
questionnaire. Also, emphasis is made only on factual knowledge as gained through observation
including measurement (Holston, Laubach and Williams, 2017). In comparative analysis study
role of an investigator limits to collection of data and an interpretation through the objective
approach & research findings are seen as quantifiable and observable. Therefore, it clearly reflect
that using assumption and beliefs, researcher may easily attain the defined aim and objectives in
better manner and also conduct the research in better manner. Moreover, by using correct
philosophy and using SPSS as a statistical tool will help the researcher to generate the best
results.
Another type is Realism which is an idea of independence reality from a human mind and
such philosophy is based on an assumption, however, Interpretivism philosophy which also
includes a researcher for interpreting an element of the study and it also assume the access of a
reality as well (Kumar, 2019). Moreover, this research philosophy also enables scholar to
interpret the results on the basis of questions so that researcher may easily reflect on the different
aspects of the issue.
Researchers on choosing positivist approach in study defines independent thoughts
related to the subject matter which can be purely objective. Positivist approach of philosophy
covers scientific part having its main focus on collection of data via surveys, questionnaire and
statistical means. Independent means as maintained minimal interaction with research
participants at the time of carrying on research process. Interest rate tool enables financial market
of the economy thereby helping in providing proper and effective allocation of available
resources. Further measures to be undertaken in respect of cash and capital flow & its

controlling, monitoring, & managing for having optimum capital allocation supporting smooth
functioning of financial sector.
Justification for the research paradigm and methodology
Research paradigm refers to an approach that relates to framing of research project
having need to cross examined and verified from research commodity side. Positivism also refers
as logical positivism defines scientific method for establishing truth and reality of objective
(Bresler and Stake, 2017). Positivism is based upon view that science is only foundation for true
knowledge as well as understanding which contains methods, techniques and procedures as used
in natural sciences. It offers best framework for investigating the social world related to the
topic. It reflects strict empirical approach providing knowledge which is based directly on
experience, facts and causes of behaviour. Positivism approach is concerned with scientific
method to study of human action, its meaning etc.
Shift from positivism to post-positivism has been observed in mid 20th century. Post-
positivism as per the dogmatic view of positivism states that turning emphasis from absolute
certainty to probability can constructs knowledge, better understanding rather than process of
laws of nature noting (Ledford and Gast, 2018). As per Post-positivism approach, strict
adherence to scientific method research is not enough as research outcomes are neither objective
nor unquestionably certain. Post-positivism process is influenced by philosophy known as
critical realism as distinguished from positivism as per focus made on theory verification or
falsification (Fletcher, 2017). As per critical realism observations may involve error and mistakes
resulting in modification in the theories.
Objectivity can nevertheless be achieved by using multiple measures, observations so as
to gain clear understanding of what is happening. To maintain proper balance in between
existing competitive environment, safety and soundness of the whole banking system, it is
required on part of government to adopt effective and cautious approaches in line with
liberalisation of interest rate (Kumar, 2019). In discussion below, two are treated as belonging to
the same family. In mixed research process, researcher makes use of combination of quantitative
and qualitative research methods, approaches in completing single research study. The
qualitative and quantitative parts of a research study can be conducted concurrently i.e.
conducting both parts at same time or in proper sequence so as to address a research question
effectively & provides positive value to researcher.

Macroeconomic analysis before Keynes was limited to monetary theory under which
neoclassical quantitative theory of money dominated. The initial prerequisite for neoclassical
macroeconomic analysis was full employment of labour and other factors of production, the
percentage was treated as a phenomenon of real economy, balancing supply and demand of
capital effect of changes in money amount done to influence price level (Meredith, Mantel Jr and
Shafer, 2017). Keynes considered savings and investments as a processes which is determined
by different factors, whereas investment and savings doesn't depends on ratio of interest rate and
marginal efficiency of capital. Liberalization of interest rate can't produce expected benefits from
accounting & business transactions with situation including timing, pace and sequencing are off
or not in line with the set defined procedures.
As per modern portfolio theory, problem of portfolio optimisation aimed to minimise risk
at a given average profitability level related to business as well as financial sector. Also the
market portfolio is a set of all available forces present at the moment the investor securities is
effective. By having combination of market portfolio along with risk-free asset provides efficient
portfolio with less risk and less expected income (Litosseliti, 2018). This approach is related to
macroeconomic, since its main object is distribution of aggregate capital in the economy into 2
forms viz. cash and non-cash i.e. in the form of securities.
The economic, monetary and fiscal policy impact on economy which is largely
transferred with help of mechanism of money and securities markets. By creating solid and
empirically applicable framework for research on the functioning of the money and securities
markets it has been able to make improvement in overall efficiency of bank for development and
growth of the economic sector thus making it more competitive and strong (Nwafor, 2018).
Furthermore, emphasis is made on changes taking place in these markets affect consumption,
investment, production, employment and the economic growth. During different stages of such
liberalization, all commercial banks were given more and full power to set down all the interest
rates of their deposits and loans as well. Therefore, to determine the exact situation, it is quite
necessary to use Positivism theory in which statistical data are used by using SPSS tool and it
provides a direct relationship between all the factors and hence research may also attain the
defined aim and objectives as well.

3.4 Research approach
It is related with concept and procedure which consist of assumptions necessary for
undertaking research process such gathering of data, analysis and interpretation for providing
detailed conclusion of subject matter. Deductive approach helps researcher in framing new
hypothesis, themes and concepts which are essential part in carrying on successful research
project. On the other hand, an inductive approach is concerned with generation of new theory
which has been emerged from the process of data collection. The research study having its basis
on comparative analysis and on existing financial liberalisation approaches as applied by
numerous countries (Meredith, Mantel Jr and Shafer, 2017). Thus for this research project, most
appropriate approach for completion of whole study is deductive one.
Deductive research approach is related to well-known theory or phenomenon, tests
whether such theory is valid or beneficial for given circumstances. The deductive approach
follows the path of logic and reasons which are most likely or closely related to research subject
matter. The reasoning under deductive approach starts with formulation of theory and thus leads
to development of new hypothesis (Quinlan and et.al., 2019). Deductive reasoning basically
deals with factor related to reasoning from general to particular area of research subject matter.
Inductive reasoning approach is opposite of this part. In other words, deductive approach
involves formulation of hypothesis along with their subjection to testing during research process,
while inductive studies do not deal with hypothesis formulation in any manner.
Pros: this method helps the researcher to correct the conclusion without making any
errors in the judgement and it also generate the results without bias so that it will help the
researcher to reach to the aim and objectives.
Cons: This approach is consider quite formal as it encourages the beliefs and it is also a
one way communication in which the researcher did not collect the information which is based
upon the research.
3.5 Pilot Study
The term Pilot study provides norms, standards & guidelines for complete scientific
research work in any of the social or management research project study. Therefore, through
effective guidelines, researcher may also making improvement in own research and also meet the
quality standards as well. Basically pilot study is used to improve the quality and efficiency so
that they gather an information prior to larger study. This is a small experiment in which

researcher is gather information to determine the feasibility of an approaches which is used by
researcher for generating results. Moreover, the study also specify that the data should be
collected for the research project should be accurate and proper so that it will help to meet the
deadlines as well. The pilot study has been conducted by selecting 50 respondents from different
banks so as to update questions and eliminate errors, mistakes which has become part of
questionnaire. For primary research, questionnaire is design in which the researcher, may also
redesigned when senior ask for some corrections in order to remove errors.
3.6 Research design, Strategy and Procedures
According to Alavi and et.al., (2018), research design refers to conceptual framework
related to techniques and methods which has been adopted by the researcher for combining
different research components in the project. It is arrangement of condition as undertaken for
collection and analysis of data in manner which aims to combine relevance to research purpose
with economy in procedure.
According to Bresler and Stake (2017), the term research design constitutes blue print of
collection, measure and analysis of data and includes different methods of research such as
survey, observation, experiment, content analysis or their combinations. Through research
design, the researcher may easily understand and interpret results in more efficient way because
it provides an insights about how the research is conducted using specific methodology, even the
direction of how the research is to be conducted is further formed with the use of research
design. Another reason of choosing the research design is such that it accurate the purpose
statement of research design & also measure analysis, further the outcome of research design are
also applicable in order to attain the key objectives.
There is competition between public and private sector banks regarding better
performance as well as productivity. Therefore, it is a keen need to study such matter having
basis of secondary data obtained from selected banks' annual reports. The population of study
consists of all type of Tajikistan banking industries and sector which successfully implemented
financial liberalisation and its related process. Design of study indicates two things such as the
size of sample and methodology used in selecting sample banks.
Banks and financial institution lends their capital to large business organisation with
objective of gaining maximum interest amount. Their main objective behind such lending is that

these business firms have good credit score as well as trust worthy among market place which
provides ease for banks in getting their loan repayment easily.
3.7 Data Collection
This study can be completed with help data to be collected from both secondary and
primary sources as obtained from the annual report of selected public sector and private sector
banks. Appropriate and relevant data has also been collected with the help of interviews and
questionnaires as prepared. Different Bank quest, books, periodicals, journals and different
website related banking industries etc. have used for better reliability. Opinions expressed in
Business standard, accounting literature, Annual review used in completion of study.
Process of data collection:
To identify perception regarding providing financial services questionnaire has been
designed and divided into 8 groups from Group A to Group G. It helps in identifying quality,
satisfaction and transparency financial sector. Also it will help in determining whether there has
been any negative or adverse impact on financial sector performance of Tajikistan. The final
questionnaire has been prepared in line with aims, objectives and hypothesis.
Questionnaire Nature:
Group A: Demographic Information It contains personal information.
Group B: General Information
Group C: Service Quality
Group D: Level of satisfaction regarding transactions
Group E: Transparency
Group F: Pensioner Information
Group G: General Opinion
3.7.1 Primary Data Collection
The process of primary data collection refers to the data that is collected first time by
researcher, so as to evaluate better outcomes out of it which includes observation,
survey,interviews etc. (Cyr, 2016). Researcher also uses the method of primary data collections
in which researcher drafted the questionnaire which will be asked to the selected respondents and
on the basis of that, outcomes are generated. As primary data collection methods is the original
documents which is actually creates for particular event

Pros: the biggest advantage of using this method is such that it has not been
misinterpreted by the outside parties because direct information is collected from the audience.
Further, the material are also generally be tracked and attributed back to the original creator
which give much more weight to the points.
Cons: On contrary, the disadvantage of using this method is such that the primary
sources may be incomplete and unusable. Even the researcher also completely relies solely on
their own knowledge as well as interpretation.
3.7.1.1 Quantitative Questionnaire
In present research study, sample is divided into two sub-groups based on respondent’s
opinion regarding to the financial services sector on nationalised and private sector banks. For
gathering data & informations relevant for quantitative research subject matter, respondents are
selected randomly from the respective banks. Scales and measurement which has been used for
such process includes: Five point Likert scale (1 to 5). such that 1 is for excellent, 2 for good, 3
for average, 4 for poor and 5 for very poor.
With questionnaire prepared related to different categories, researcher can easily acquire
information pertaining to the subject matter of research topic. It will assist researcher in getting
better understanding and interpretation about the subject matter which can be used by other
researchers and scholars as well in the completion of their project.
Pros: The questionnaire helps the researcher to involve multiple numbers of subjects &
also enhancing generalization of the outcomes as well. Further, it also allow for the increased
accuracy and objectivity of the results.
Cons: The findings related to the data are not generalized to the study population or
community and it is more difficult to analyse because it is not generally fit to the standard
categories as well.
3.7.1.2 Qualitative Structure
For conducting qualitative research project, data has to be collected accordingly.
Information on the basis of characteristic, features is gathered and further analysed. Also one of
the source of collecting information is personal interview with concerned officials of Banks
under study. This is a semi- structured interview which is used by the reseracher where open
ended questions are asked that helps to meet the define aim and conduct the entire research in
more precise manner. Through this method, reseracher is easily prepared and appear the

competent during an interview and this provide a reliable and comparable qualitative data. The
interview only takes place voluntary and all personal data will be confidential. In addition,
qualitative structure provides stronger conclusion as they are supported by relevant theories and
concepts.
Pros: One of the advantage of using qualitative structure is that it has less complexity in
analysis of the data.
Cons: this method takes lot of time and it is also difficult for the researcher for
maintaining and assessing or demonstrating. Further volume of the data also make the analysis
& interpretation more time taking.
3.7.2 Secondary Data
It is a method of data collection in which data has been collected already from published
sources with help of primary source. Secondary data has been collected from annual reports,
magazines, booklets etc. of various commercial banks, financial institutions and National Bank
of Tajikistan. Also, sources has been taken from internet publications, books, published articles,
financial and business journals (Quinlan and et.al., 2019). Furthermore, data has been gathered
from WTO and OECD publications available on the Financial Liberalisation reports. One of the
benefit of taking use of secondary data is that it is easily available and thus researcher can found
strong as well as relevant support through work of previous scholars. All information provided in
secondary sources are of reliable, accurate nature which can be used by researcher for
completing activities of the research project. As compare to primary data it is more reliable and
validate one. For creating a brief thesis & understanding, collection of data has been made from
the secondary sources like journals, books & articles related to subject matter.
Pros: using secondary research, researcher may get much more insight and also taking an
advantage of author expertise, experience. Secondary sources also aim is to expand the material
in original sources so that it may provide more context and meaning as well.
Cons: in this researcher may have a difficulty to obtain the specific information because due to
lack of research skills, may create obstacles to collect the relevant research data.
3.8 Sampling
Sampling is the process which is used in statistical analysis in which a pre-determine
number of assumption are taken from an entire population. The methodology is also used to
sample from a larger population which is depend upon the type of analysis. There are two types

of sampling such that purposive and non- purposive. Between these all, scholar has uses simple
random sampling method in which 50 bankers of Tajikistan are selected so that they will help to
meet the define aim and also determine the impact of variation in interest rate in commercial
banks in Tajikistan after accession to the WTO.
3.9 Ethical Considerations
3.9.1 Informed consent
Also, all data collected related to subject matter is take from various websites & internet
source (Silverman, 2016). All participants has willingly participated in questionnaire by giving
their written consent. Make sure that there should be no communication error because it may
have effects over the overall outcomes in just reverse or opposite way. The respect for dignity
of the research participant should be prioritise because it may help a researcher to get accurate
results.
3.9.2 Privacy and confidentiality
Researcher should ensure that proper confidentiality should be maintained and, before the
the interview, calls or mails were used
For seeking time and t participatory consent of manager of the ownners. Further, data protection
act should be followed for ensuring that privacy of all primary data has been maintained.
Moreover, adequate level of confidentiality should be maintained.
3.10 Methodological Limitations
3.10.1 Reliability
To make sure consistency of all the selected data collection methods, the internal
consistent approach is employed in order to inspect questionnaire for the reliability. Such that it
is consider one of the best method for measuring the reliability of the questionnaires. Moreover,
because of limitation and and regards time , entire questionnaire is administrated only for one
time to respondents and exercise is followed as a pre-requisite for testing method count not be
conducted.
3.10.2 Validity
The validity of research is entirely depend upon the collected data such that researcher
uses primary & secondary research methods both in which researcher chooses text books, journal
articles in order to collect information that helps in identifying impact of the interest rates in

commercial banks of Tajikistan. The validity also relies from the primary research in which the
researcher used questionnaire in which topic related questions are asked so that it will be helping
to answer research questions as well.
3.11 Limitations and Delimitation of Study
Outsourced financial services includes application & document processing, investment
management, marketing and supervision of loans, data processing etc. Outsourcing brings
in several risks which are nature strategic, reputation, operational, counterparty, systematic etc.
Failure in maintaining confidentiality, non-compliance of legal regulatory norms can result in
financial loss and reputation risk on part of bank as well.
The manner in which data is maintained, styled and its format has also been changed
which created lack of consistency, reliability etc. Out of different means of gathering primary
data discussion, observation, personal interview, mail surveying are chosen (Lane, 2018). From
perspective of accuracy of data, utmost care has been taken to minimize mistakes, errors in
collection of primary data. Primary data has been compared and confirmed with the official
banks statistics for checking its accuracy. Difficulty has been faced when bank officers
undisclosed bank data due to confidentiality.
Banks become very much cautious in sharing their official as well as financial data with
research scholars because of increasing competition in banking sector. For collecting secondary
data, researcher has to face some difficulties in collecting annual reports of some banks. Thus,
the quality of this research totally depends on reliability and accuracy of data published in the
banks' annual reports.
3.12 Summary
Research philosophy chosen is positivism approach as it is based on view that science is
key aspect for gaining true knowledge. Current research is based on comparative analysis with
existing financial liberalisation approach applied by numerous countries (Macit, 2017).
Deductive approach is considered proper one for both quantitative and qualitative type so as to
identify deep assumptions thus giving mixed combination positive value. Further, researcher also
opted deductive approach for attaining the aim i.e. “to analyse the impact of the interest rate on
commercial banks of Tajikistan”. Through this method, the researcher also generate the results
without consuming extra time and also reach to the outcomes as well.

Additionally, researcher also select both primary & secondary methods of data collection
in which questionnaire is used as primary method of method of data collection in which
questions are asked to different respondents in order to generate the best outcomes. Further,
using secondary sources such that books, articles and Journals, researcher collect information
related to topic and also generate best results too. Further, researcher opted thematic data
analysis method where the graphs, charts and tables are used through for presenting ideas in
presentable manner. The chosen research strategy is quantitative research method in which SPSS
tool is used and chi- square test is applied that helps in checking the reliability of hypothesis.
Lastly, random sampling method is also used for determining views of the respondent related to
specific topic i.e. to determine the impacts of interest rates on the commercial bank of Tajikistan.

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