Development finance assessment

Promoting entrepreneurship and SME 
The main obstacle that holds back private sector growth is the strong presence of the 
state in the economy (EBRD, 2019). The preferential access of SOEs to resources such as land, 
infrastructure, financing and government procurement, and the de-facto execution of state 
functions by them such as standardization and other regulations, put private businesses at 
a disadvantage and prevent them from fully exploiting their potential. The authorities have 
started to reduce state overregulation and interference in the economy, and the business 
climate has begun to improve. Property and other business rights are still not always well 
protected, not least due to the limited capacity of courts to review commercial and economic 
disputes (EBRD, 2019).
State-directed lending, mostly to SOEs, has constrained access to finance for private 
companies, especially SMEs. State-directed lending is largely carried out via state-owned 
banks. The government provides concessional funding to banks via UFRD loans, loans from 
the treasury, deposits at the commercial banks, and recapitalizations. These SOBs lend those 
funds to SOEs and to the private sector to achieve specified policy goals (IMF 2019). State 
banks account for about 85 percent of banking system assets and their main function is 
to support government investment and development plans. The authorities are planning 
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For a full list of duties and authorities see Art. 12 of the PPP Law.
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“Develop quality, reliable, sustainable and resilient infrastructure…to support economic development and human 
well-being, with a focus on affordable and equitable access for all”.

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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
to reduce distortionary directed credit and other non-transparent support to state-owned 
enterprises. Uncoordinated cutbacks on government funding of banks could create funding 
gaps if the banking system does not manage to tap alternative and more diversified funding 
sources over the medium term, for example harnessing households’ savings or tapping 
into international debt markets. Banks would be limited in their ability to intermediate the 
economy’s savings to fund investment projects and support more inclusive growth.
At around 29 percent of GDP, credit to private sector is moderate compared to the 
regional peers. Uzbekistan ranked 55
th
out of 190 countries in Getting Credit according to the 
World Bank’s 2018 Doing Business report. Firms report that complex application procedures 
and high collateral requirements are the second and third most important reasons for not 
using formal finance. Commercial banks and other lenders generally view SMEs as high-
risk borrowers. Consequently, small companies often face high interest rates and collateral 
requirements that they are unable to meet. Financial inclusion is therefore constrained on 
the supply side.
Because of this high borrowing cost most households and firms, rather than using 
formal finance, save and borrow informally, and few use digital finance products (Ahunov, 
2018). Accessing business finance is particularly challenging for women, young people and 
individuals in Tashkent and southern Uzbekistan (EBRD, 2019). There are significant regional 
disparities with regards to access to finance for starting up new businesses. 
Promoting entrepreneurship ranks high on the priorities of the GoU. Over 50 percent 
of the Presidential decrees issued have dealt with the promotion of entrepreneurship and 
small businesses.
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According to the World Bank’s Doing Business ranking these reforms are 
starting to pay off. In their 2020 ranking the country was listed as the world’s top twenty 
most improved economy for ease of doing business. Uzbekistan ranked 69th globally with a 
score of 69.9 out of 100 this year, having moved up from 76th place in 2018. 
The State Entrepreneurship Development Support Fund was created in 2017 to provide 
SMEs with financial support, both in national and foreign currency. This Fund is co-financed 
by loans and grants from development partners. The EBRD has provided a loan of EUR100 
million for the programmatic support of SMEs and development of small businesses and 
entrepreneurship. The Fund provides guarantees and compensations for loans, as well as 
resources for banks to finance projects in the agricultural sector. 
In 2018, the GoU launched the microcredit program ‘Every family is an entrepreneur’
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to 
foster regional development. The program’s aim is to provide low-cost credit to households 
to spur economic activity that leads to self-employment and micro-entrepreneurship. The 
approaches are strongly focused on the supply of credit to asset and equipment induced 
entrepreneurship, including the supply to agribusiness-related home-based businesses 
(greenhouses, pedigree cattle, sheep, catfish fingerlings) as well as sewing machines and 
other equipment involved in small manufacturing of consumer products (Tadjibaeva, 2019). 
The lack of nonfinancial services, such as advisory services, business development, 
incubation, and market support, undermine the effectiveness of these SME financing 
instruments. Around 60 percent of surveyed SMEs in Uzbekistan could not name any private 
BDS provider and almost none were aware of the existence of third-party providers, such 
as NGOs or business associations (Ibid.). This is especially true for SMEs operating in the 
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https://mfa.uz/en/press/news/2019/07/20183/?print=Y 
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Presidential Decree No. PP-3777 of June, 7th 2018 on the Implementation of the Programme Every Family is 
an Entrepreneur; and ensuing Presidential Decree No. PP-4321 of March, 7th 2019 on Additional Measures for 
Widespread Public Involvement in Entrepreneurship and the Development of Family Entrepreneurship in the Regions. 

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