Financial Inclusion, Regulation, and Literacy in Uzbekistan



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ADBI Working Paper 858 
M. Ahunov 
13 
4. BARRIERS TO FINANCIAL INCLUSION 
Column (a) of Table 14 presents the major reasons for not using formal financial 
services in Uzbekistan. The high costs of financial services are reported as the top 
reason for households not using formal finance in 2014. Indeed, as Figure 3 shows, the 
interest rates on commercial loans for individuals (panel a) and businesses (panels b 
and c) are high given that the ADB has published figures of 16% inflation and 4% GDP 
per capita growth. Blondel (2015) mentioned that the government policy to restrict 
access to cash and cash transactions translated into additional informal transaction 
costs that entrepreneurs had to pay to cash their bank loans in 2015.
Table 14: Major Reasons for Not Using Formal Financial Services
and Reasons for Having No Bank Account 
 
 
Major Reason for
Not Using Formal 
Financial Services
(a) 
Major Reason for 
Having No Bank 
Account 
(b) 
1 Insufficient money to use financial institutions 
0.4 
35.9 
2 Lack of the necessary documentation 
21 
17.6 
3 Someone else in the family already has an account 
30 
16.6 
4 Financial institutions are too far away 
12 
11.8 
5 Financial services are too expensive 
44 
11.2 
6 Lack of trust in financial institutions 
10 
9.8 
7 Religious reasons 
30 
2.0 
Source: Columns a and b are based on the Findex database from 2014 and 2017, respectively. 
Importantly, private domestic and foreign banks charge relatively high interest rates. 
Until 2018, the Central Bank of Uzbekistan set the commission fees on the use of bank 
cards centrally. Anecdotal evidence suggests that the amount of fees charged to 
private individuals did not enable private banks to offer their services to private 
individuals. However, in 2018, the CBU started to publish recommended commission 
fees for the use of bankcards.
Religious reasons are the second most important reason for people not using financial 
services. The CIA Factbook reports that 88% of the members of Uzbekistan’s 
population are Muslims; however, the banks offer no Islamic banking products.
8
 This is 
partly a legacy of the former Soviet Union and a cautious approach to reforms in 
Uzbekistan. In May 2018, a number of news websites announced that, with the support 
of the Islamic Development Bank, the Ministry of Finance was preparing a presidential 
decree on creating a legislative base and infrastructure to support Islamic finance.
9
A lack of documentation and the inability to obtain an account are the next important 
reasons for not using formal financial services. A total of 10% of the respondents 
reported that they do not trust financial institutions. This is in line with the CER (2011), 
which reported, based on a 2010 Uzbekistan national survey, that 78% of their 
respondents indicated that they do not save with banks because they cannot withdraw 
cash when needed.
8
The website of the CIA contains information on the religious composition of the Uzbek population. 
Accessed 3 June 2018. https://www.cia.gov/library/publications/the-world-factbook/geos/print_uz.html. 
9
The news website Gazeta.uz contains information on this. Accessed 3 June 2018. 
https://www.gazeta.uz/ru/2018/05/16/islamic-banking/. 


ADBI Working Paper 858 
M. Ahunov 
14 
Figure 3: Weighted Average Interest Rates on Loans as of May 2018 
Source: Central Bank of Uzbekistan.
Note that Findex 2017 asked about the reasons for not having a bank account, which is 
different from Findex 2014, which asked about the reasons for not using financial 
services in general. Therefore, columns (a) and (b) in Table 14 are not comparable. A 
lack of money to use an account, a lack of documentation, the long distance to a bank 
branch, and the high cost of using a bank account are the major reasons for not using 
formal finance. 
Table 15 describes the top reasons for firms not using bank loans/line of credit. They 
ranked high interest rates and complex application procedures as the two major 
reasons for not applying for a formal loan/line of credit. The cost of borrowing from a 
financial institution increased between 2008 and 2013. Indeed, Blondel (2015), based 
on a field study in Uzbekistan, also reported that entrepreneurs declared that the 
paperwork needed to obtain a loan was among the most difficult.
Table 15: Top Reasons for Not Using Bank Loans/Lines of Credit 
2008 
2013 
High interest rates 
0.24 
0.42 
Complex application process 
0.37 
0.33 
High collateral requirements 
0.18 
0.22 
Insufficient loan size and maturity 
0.11 
0.03 
Won’t be approved 
0.08 
0.00 
Source: Enterprise surveys.


ADBI Working Paper 858 
M. Ahunov 
15 
The third-largest group, containing 22% of firms, reported high collateral requirements 
as the major reason behind their decision not to use formal finance. Blondel (2015) 
stated, for the sample of firms that her study covered, that the collateral values ranged 
from 130% to 500% of the loan values, with a median of 175%.

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