Financial services of business entities, their tasks and functions

Definition of Microfinance Services in Uzbekistan

Demand-side analysis of SMEs in Uzbekistan likewise points to limitations in their eligibility and appetite for bank services. A lack of real-estate collateral, limited financial capacity, and lack of credit history constrain these firms’ access to formal bank credit, but the need for finance is currently addressed by microcredit institutions.

Commercial banks provide microcredit at concessional rates but require high rates of collateral and provide only noncash credit. Borrower requirements to access bank microcredit seem overly burdensome for the target borrowers, who may not be able to meet these requirements (provide financial statements, a business plan, documented proof of repayment capacity, formal collateral, notarized confirmation of agreement, etc.). Commercial microfinance is not well developed either through banks or MCOs. All microfinance activities, both concessional and commercial, are strictly regulated. Although MCOs offer simplified credit in cash and without collateral, they have low financial capacity and small loans. There is a gap between these two providers, and hence the financial needs of businesses (small and medium-sized) and entrepreneurs are not currently accommodated. The microfinance market consists of 78,337 active borrowers. Following the CBU requirement to increase the capital up to SUM2 billion ($250,000), the MCOs were able to attract more capital financing and doubled their loan portfolio over 2015−2017. The outreach of microcredit organizations has shown a positive tendency since 2012 as well as financial penetration increasing from 5% to 8% over 2012−2017 (see Figure 5).