Financial services of business entities, their tasks and functions

Foreign investments and external assistance programs. International Financial Institutions (IFIs) such as Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), the World Bank, International Finance Corporation (IFC), and KfW (German bank) have been actively providing credit lines to SMEs’ lending as well as more targeted business groups such as women businesses and horticulture farms. Given a high interest rate environment, significant unmet demand for SME finance, and limited government subsidy programs, funding from the international financial institutions is very important in Uzbekistan (see Table 4).

Among multilateral donor institutions, ADB is the most active in financing SMEs through two partner commercial banks—”Hamkorbank” and “Ipak Yuli Bank”—over the past decade. Within the framework of these projects with participating financial institutions (PFIs), funds for SMEs’ working capital and fixed assets financing were channeled to developing agriculture, production, and service in rural areas to create jobs. The capacity of PFIs in credit underwriting and analysis also improved so that more than 6,000 micro and small enterprises were trained on financial literacy. Capacity building from these projects suggests that PFIs need to be provided with longer term funds for lending to small businesses, rural outreach, risk management, and continuous enhancement of their entrepreneurial capacity.

Table 4