85
RECOMMENDATIONS
fraction of those remittances into development projects may represent a significant amount
of additional financing available for SDG financing: sustained
household spending supports
progress mostly on the people’s SDGs (SDGs 1 to 6), whereas channeling remittances into
local development projects support the prosperity SDGs. Formulating tailored remittance
policies may require additional in-depth analysis to better understand the current role of
remittances in household spending.
An important aspect of any remittance strategy involves lowering the cost of receiving
remittances. Reducing remittance costs to 3 percent by 2030 is a global target under
Sustainable Development Goal (SDG) 10.7. Progress so far has been slow: the average cost
of sending USD 200 to the ECA region declined modestly to 6.48 percent in the first quarter
of 2020 from 6.67
percent a year earlier
123
. A hypothetical decline of remittance cost to the
SDG target of 3 percent would unlock an estimated USD 280 million available to Uzbek
households in 2021
124
.
Based on other countries’ experiences, several other innovative financing approaches
could be assessed for their feasibility and desirability in the Uzbek context:
The diaspora may be invited to participate in various economic (privatization, for instance)
and cultural projects (preservation of cultural sites and artefacts), or more generally
involved in national development.
Diaspora micro-loans to rural areas or diaspora-business funding
basic income-type
programs. Such arrangements benefit post-socialist economies with reduced presence in
the global capital markets and lacking significant FDI inflows by channeling remittances
into microfinance or revolving funds for local development
125
.
Blending remittances with ODA or public budget funds as a sort of ‘co-financing’ to
magnify their development impact
126
.
IFAD’s multi-donor Financing Facility for Remittances (FFR)
could be a model to consider.
Developing and strengthening the supply of bank and non-bank products for migrants.
For example, developing classic linked bank accounts would promote access to banking
services and financial inclusion in the countries of origin, and mobilize transferred
savings.
Issuing diaspora bonds can be an innovative approach to finance Uzbekistan’s
socio-
economic development. Diaspora bonds are standard, ‘plain vanilla’ bonds that are offered
by the country to its expatriates. They are often used for well-defined infrastructure projects
and/or remedying the damage resulting from natural disasters. India and Israel are the best
examples of countries that have engaged their large diaspora though diaspora bonds (box
5). Diaspora bonds usually pay the lower-than-market interest rate, due to the patriotic duty
and national sentiment of the diaspora. If the diaspora bonds are offered to migrants and
migrant workers, they may often be used to pay the
government and other dues, with some
discount. They could be issued in the Russian Federation as the main destination country
123
https://www.worldbank.org/en/news/press-release/2020/04/22/world-bank-predicts-sharpest-decline-of-remittances-
in-recent-history
124
This rough estimate equals the difference between the current cost of sending remittances (6,48% * USD 8.1
billion) and the SDG target (3%*USD 8.1 billion).
125
Recent studies have found, for example, that remittances could finance much needed small-scale household
energy efficiency investments in rural and mountainous Central Asian communities that spend much of the winter
without access to reliable heat and energy supplies (Basel Agency for Sustainable Energy (2015))
126
Under the Mexican ‘Tres por uno’ scheme, for every dollar contributed by a Mexican
migrant association in the US,
the Federal, State and Local Government Areas in Mexico each matches it with an additional dollar, thus tripling up
the funding made available by remittances for development projects back home.
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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
of Uzbek emigrants, depending on the condition of the economic recovery of the Russian
economy (see below).
Explore the potential of philanthropy to fund SDG targets related to human development.
International and domestic philanthropy is an untapped potential source of finance worth
exploring more in-depth. Such analysis would have to identify the binding constraints and
potential funding opportunities specific to Uzbekistan. Enabling international philanthropic
organizations and foundations to operate in Uzbekistan will most
likely involve addressing
regulatory and legal limitations. Although philanthropic flows are only about 5 percent
of official development assistance, they can have an important impact on key sectors, for
instance in health care (OECD, 2018). Beyond funding, private philanthropic efforts can
spur innovation in service delivery, and help build capacity in recipient countries together
with other development partners. However, international philanthropy tends to focus more
on upper middle-income countries.
Access untapped sources of faith-based finance: Zakat.
The national dialogue on the role of Islamic finance in
financing SDGs provides an
opportunity to support accelerating the SDG alignment of Islamic finance. Practical steps
may include setting up a centralized database on
zakat
, including the legal registrations of
religious endowment for the Government to establish as to how the resources are used, and
that they are used in line with the endowment documents. The JP is conducting a situation
analysis to develop a roadmap for harnessing innovative Islamic financing solutions in
collaboration with the Ministry of Finance, Ministry of Economy and Industry,
CBU and the
Capital Market Development Agency.
STRENGTHENING THE ENABLING ENVIRONMENT
Beyond resources, developing political and civil society consensus, enhancing state
capacity, and promoting good governance are needed to achieve the SDGs and build back
a more inclusive and resilient society.
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