Development finance assessment

Financial inclusion
Harnessing digital technology could accelerate financial inclusion. The population 
is showing increasing interest in technology adoption as evidenced by the increasing 
smartphone penetration and take up of electronic payments. These factors provide an 
opportunity for expanding digital financial services, including financial inclusion via mobile 
payment platforms, digitally enabled local entrepreneurship, innovative health and education 
delivery systems, and growing numbers of e-government initiatives.
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See: http://amcham.uz/corporate-and-social-responsibility-committee/ 
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The combined value of the privatization of ten major state enterprises, drawn from the energy, agriculture, mining, 
and manufacturing sectors, is estimated at USD 13 billion.

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DIMENSION 3: 
PRIVATE-PUBLIC COLLABORATION
The central Bank is the regulatory body responsible for the promotion of Digital Financial 
services (DFS) in Uzbekistan. Its objectives are to organize and provide effective payment 
systems in Uzbekistan; licensing and regulation of banking activities and reducing the level 
of cash in the economy. All institutions facilitating payments in the country require a payment 
service provider license from the Ministry of IT. The existing regulation and licensing regime 
does not allow for agency banking, e-money, or P2P transfers. However, the central bank is 
encouraging all other payments to be made via non-cash means. This includes services such 
as utilities, mobile recharge, taxes, and others (IFC, 2016).
Mobile Network Operators (MNOs) are currently not allowed to provide digital financial 
services in Uzbekistan. Experience from other countries indicate that opening financial 
services to non-bank financial institutions, including MNOs, may accelerate the uptake of 
financial inclusion. Under the leadership of the CBU, a multi-stakeholder technical working 
group, involving the industry’s leaders, could inform regulatory reforms that would enable 
the rise of digital financial services and fintech in the country.
HARNESSING REMITTANCES AND THE DIASPORA 
The sheer size of remittance inflows turn them into an important opportunity to finance 
development in Uzbekistan. Migrant workers and the remittances they send may be vital 
to underpin remote, rural communities across the country. They can improve welfare by 
raising household incomes and financing purchases of basic needs. In Uzbekistan, an 
important spending category of remittances is traditional ceremonies, such as weddings. 
Research shows that weddings account for almost as much remittance money as housing 
(18-20 percent), which is still less than what is spent on food (24 percent), but more than on 
health (7 percent) and education (10 percent) (Prokhorova, 2017). Geographic inequality of 
remittance distribution persists in Uzbekistan. Most remittances are sent to the Samarkand 
and Syrdarya regions of the country. At the same time, the largest number of migrants 
comes from the Samarkand and Kashkadarya regions, while the smallest number comes 
from the urban areas of Tashkent and Navoi (Irnazarov, 2015). 
Uzbekistan has a relatively large (over 10 million), but concentrated diaspora
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. Most Uzbeks 
are spread in the neighboring countries (Afghanistan, Kazakhstan, Kyrgyzstan, Russia and 
Tajikistan), with the small numbers being represented in the other former USSR republics. In the 
relatively recent years the diaspora has been growing outside CIS. As this trend is expected to 
continue, there may be opportunities to harness the diaspora to support the socio-economic 
development of their homeland. A scoping study might be advisable to assess the likely scope 
and nature of financing that could be raised from the Diaspora, before engaging in significant 
reforms: so far, emerging Central-Asian countries are considered countries of origin of diasporas, 
but not yet as countries wherein diasporas want to invest and work (Elo, 2016).
Currently there are no policies, instruments or institutions dedicated to harnessing 
remittances and the diaspora more strategically. Undertaking any meaningful reform may 
require improving the extent and quality of information available to actual and potential 
migrants—many of which come from under-developed and isolated rural parts of the 
country. This would involve developing detailed profiles of the Uzbek diaspora by location, 
economic activity, skills profile, earnings, savings, and investment profile as well as identifying 
representative associations with whom to collaborate for implementing such a strategy. This 
information could inform a tailored approach towards channeling diaspora financing and 
remittances to local economic activity in construction, communications, wholesale and retail 
trade, personal services, and other sectors.
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IOM defines diasporas as “migrants or descendants of migrants, whose identity and sense of belonging have been 
shaped by their migration experience and background.”

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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
CIVIL SOCIETY PARTNERSHIPS 
Uzbekistan is undergoing a major political transition developing a decentralized, 
participatory democracy, where the civil society is to become a major partner to the 
Government. Hover, effective models of genuine public-private partnerships remain under 
construction in Uzbekistan. For the political system to really embed the changes, it is 
necessary to have them first endorsed by the population, build and strengthen democratic 
political cultures, nurture public dialogue further to support open and constructive exchange 
of views between various political options. 
Uzbek law provides for freedom of association, but the government continued to restrict 
this right
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. Authorities sought to control NGO activity, internationally funded NGOs, and 
unregulated Islamic and minority religious groups. In practice, the operating environment 
for independent civil society, human rights defenders, remained restrictive, although several 
activists reported improved cooperation with government officials. The NGO law requires that 
organizations with an operating budget and funds register formally with the government. It 
also requires that NGOs file annual reports to the government. Registered NGOs can receive 
grants from domestic and foreign donors, but receiving organizations must notify the Ministry 
of Justice of their grants and present a plan of activities to the ministry that details how the 
NGO would allocate the funds. If the ministry approves, no other government approvals are 
required. The ministry requires yearly financial reports from NGOs.
In practice, civil society organizations are mostly excluded from the policy process and 
relegated to non-political matters. The third sector is dominated now by government-
organized NGOs (GONGOs), which are indeed periodically invited to meetings at local and 
top levels. But these organizations should not be confused with the genuine civil society 
(BTI, 2018). The Government may entrust dealing with ‘some social issues’ to the third 
sector organizations through contract, which will be funded from non-government sources, 
thus securing independence of the third sector partner. The Parliament’s ‘Public Fund for 
the Support of Nongovernmental, Noncommercial Organizations, and Other Civil Society 
Institutions’ conducts grant competitions to implement primarily socioeconomic projects. 
Some civil society organizations criticized the Fund for primarily supporting GONGOs. There 
are a few independent NGOs that are active and realize various projects in the sphere of 
environmental issues
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. 
For a robust and lively civil society to flourish in Uzbekistan, and act as a partner in 
sustainable development, for example, through an INFF, further steps are necessary 
to liberalize the legislation on non-government non-profit organizations. Current laws 
governing NGO registration, financing, travel, events, are excessively restrictive and are not 
in compliance with international standards. This means that civil society capacity to monitor 
government reform, or to act as a countervailing force against arbitrary state action, remains 
limited. One factor that can strengthen civil society capacity is effective enforcement of the 
Right to Information Law. This will enable citizens to directly hold the state accountable for 
its actions by demanding information on how decisions are made, how public money is 
spent, contracts awarded, among other things.