Financial services of business entities, their tasks and functions

Conclusion

In this coursework describes the financial services of business entities, their tasks and functionsin in Uzbekistan with a special focus on two types of non-bank microfinance institutions – Credit Unions and Microcredit Organizations.

The private commercial nature of these MFIs provides new evidence on the commercially oriented microcredit model and SME lending, which is an emerging trend in mainstream microfinance.

The coursework provides two important contributions. On the supply side of microcredits, the determinants of initial placement of MFIs are analysed. Using district level data, we find that the determinants of MCO growth are closely associated with the household/family nature of business to which the microcredits are disbursed. In contrast, CUs serve middle class enterprises on a higher business and economic scale, for which the economic development of the region and industrial composition is an important factor.

The results suggest that non-bank microfinance institutions in Uzbekistan follow general economic principles. Given that MFIs represent the financial segment functioning based on competitive market principles, historical changes in the legal framework and other exogenous changes did not impede their free market functioning. On the demand side, the excess demand for microcredits is analysed. The specific contribution is based on identification of eligible non-participants, as not all visitors to MFIs end up eventually getting the microcredit.

Analysing the ratios from MFI managers and credit officers, we find that the total probability of microcredit approval is on average 0.5. This data is potentially important for policy makers, as actual margins of the untapped market could shrink by as much as half when the narrow definition of eligible applicants is taken into consideration.