Role of the financial market in attracting external financial resources to finance the activities of enterprises plan

Certain categories of firms and entrepreneurs face higher barriers to accessing bank finance…
While credit has become more easily available for some SMEs, other segments of the SME population still face substantial difficulties in accessing debt finance. Transaction costs are particularly high in relative terms for micro-enterprises, start-ups, young SMEs, innovative firms and businesses located in remote and/or rural areas, potentially excluding them from any sources of formal external financing. At the same time, these firms’ financing needs tend to be high compared to their turnover and assets, and they usually lack assets that are easy to collateralize. Moreover, evidence suggests that financial institutions have become more risk-averse compared to the previous period, and that the financing constraints of these firms may have become more structurally entrenched (OECD, 2017a). In addition, certain categories of entrepreneurs, such as women, migrants or youth, often face additional obstacles to accessing financing in the appropriate volumes or forms. For instance, in many countries, women are much less confident than men that they can obtain the financing they need to start or grow a business. ddddddddddddd

3.Development of financial markets in Uzbekistan and the opportunities for enterprises.
Recent years, there have been a lot of positive developments in legislation of Uzbekistan to accelerate betterment of financial markets in Uzbekistan. In 2014, for example, amendments and additions to the Law Republic of Uzbekistan On the securities market has opened lots of opportunities for businesses to participate and attract external financial resources from financial markets. In the law, legal rights and duties of enterprises regarding to financial markets, basements of activities in financial markets and other important rules are determined, which has created considerably good chances for enterprises to have extra funds.
According to the law, The Central Securities Depository has the right to:
-to open accounts to a foreign nominee holder to account for the rights to securities issued by residents of the Republic of Uzbekistan and traded outside the territory of the Republic of Uzbekistan;
-receive, under an agreement with the issuer, funds intended for the payment of income (dividends) and repayment of the value of securities, as well as make appropriate payments;
-when performing the functions of maintaining registers of securities holders, it is entitled to receive from investment intermediaries and foreign nominee holders the information necessary for the formation of these registers.
The Central depository of securities may have other rights in accordance with the law.
-The Central depository of securities is required to:
-provide the opportunity for interested parties to familiarize themselves with the rules for storing and recording securities in the Central depository of securities ;
-ensure the safety of documentary securities accepted for storage;
-keep records of the quantity and nominal value of securities belonging to each of its depositors;
-keep records of encumbrance of securities with obligations, as well as their termination;
-store in the departmental archive primary documents that are the basis for transactions on the custody accounts of their depositors;
carry out operations on the custody accounts of their depositors on the basis of written instructions from the depositors or their authorized persons, except as otherwise provided by law;
-confirm the ownership and other property rights of his depositor for securities with the issuance of an appropriate statement from his securities account;
-ensure confidentiality of information on the availability and movement of securities on securities accounts, their condition, except as provided by law;
-suspend operations on the custody account of its depositor on the basis of decisions of the authorized state body for regulating the securities market, the state antimonopoly body, as well as the court, bodies of inquiry and investigation in the manner prescribed by law;
-provide, upon written request, of the authorized state body for regulating the securities market, the state tax service body, the state antimonopoly body, as well as the court, bodies of inquiry and investigation, within the limits and in the manner established by law, information related to its activities.
The Central depository of securities may carry other obligations in accordance with the law.
The Central depository of securities, when performing the functions of maintaining the registers of securities owners, is obliged to:
-keep registers of securities owners formed as of a certain date;
-provide information contained in the registers of holders of securities in accordance with this Law;
-ensure confidentiality of information contained in the registers of securities owners;
-provide information contained in the formed registers of holders of securities issued by commercial banks, in case of consideration of facts of violation of banking legislation at the written request of the Central Bank of the Republic of Uzbekistan.
The Central depository of securities, in the exercise of the functions of maintaining the registers of securities owners, may also bear other obligations in accordance with the law.
The Central depository of securities is not entitled to:
-use securities transferred to him for storage;
-provide financial assistance to other legal entities and individuals;
-participate in the authorized capital of other legal entities.⁹
Additionally, other actions are being taken by the government to support enterprises. The Resolution of the President “On additional measures to implement effective capital market support mechanisms”: sssssssssssssssssssss
-income accrued in the form of dividends on shares of individuals – residents and non-residents of the Republic of Uzbekistan are exempt from income tax;
on income accrued in the form of dividends on shares of legal entities - non-residents of the Republic of Uzbekistan, a 5 percent income tax rate is applied by analogy with legal entities – residents of the Republic of Uzbekistan; ffffffffffffffffffffffffffff
-income in the form of accrued interest on bonds of business entities of individuals and legal entities – residents and non-residents of the Republic of Uzbekistan are exempt from income tax of physical entities and corporate income tax.
In accordance with the Resolution No.PP-90, from July 1, 2022, when making securities transactions at organized over-the-counter trading in securities, the seller (excluding the issuer) pays a fee in the amount of 0.3 percent of the transaction amount instead of profit tax and income tax. fdddddddddddddddddddd
Moreover, when the general meeting of shareholders makes a decision to exclude the company's shares from the exchange quotation list of the stock exchange, the shareholders – owners of the voting shares of this company are given the right to demand the repurchase by the company of their shares. Starting from April 1, 2022, local issuers may, on the recommendation of the underwriter, place -their shares on foreign stock markets after preliminary placement on the RSE “Toshkent” or place them simultaneously on local and foreign stock exchanges. The Resolution No.ПП-90 amended the Resolution of the Cabinet of Ministers “On organizing a public offering of shares on the stock exchange” No.268 dated May 10, 2017. According to the amendments, the offer price of shares through the initial (IPO) and secondary (SPO) public offerings of shares is now determined only by the organizer (previously, the price was determined by the organizer in agreement with the initiator based on the methods provided for by the rules of the stock exchange).
The Government of Uzbekistan has accelerated its transition toward a market economy with the adoption of the Strategy on Actions for Further Development of Uzbekistan (2017–2021) and follow-on Roadmap of Reforms (2019–2021). Both the strategy and the road map recognize the central role played by the banking sector and financial markets in fostering this transition. The Roadmap of Reforms tasks the government with modernizing and developing financial markets to better address the financing needs of the real economy, which is moving away from a state-led and state-dominated economy towards a market-oriented, private sector led model.5 Underdeveloped financial markets have contributed to the ineffective mobilization of savings with gross domestic savings at 31% of gross domestic product (GDP), which is lower than regional peers such as Kazakhstan (42% of GDP). The introduction of market-based instruments, backed by a sound enabling environment for competitive financial markets, will mobilize private sector financing and help the private sector become the driver of sustainable economic growth
The Asian Development Bank (ADB) today approved a $100 million policy-based loan to support policy, regulatory, and institutional reforms needed to create an enabling environment for competitive financial markets in Uzbekistan.¹⁰
“As Uzbekistan accelerates its transition toward a market economy, robust and competitive domestic financial markets are essential for mobilizing private investment,” said ADB Director General for Central and West Asia Yevgeniy Zhukov. “ADB will help develop financial markets in Uzbekistan and stimulate private investment—a key driver of economic growth and an important source of new jobs in the country.”
ADB’s Financial Markets Development Program will support reform measures to deepen and broaden Uzbekistan’s financial markets. It seeks to promote a more liquid government bond market and diversify the investor base. The program will also help develop critical market infrastructure, including surveillance systems and enhance the supply of alternative financial instruments such as exchange-traded funds.
“The program will help reduce systemic vulnerabilities in Uzbekistan’s financial system through diversification away from a predominantly bank-based system of financial intermediation. It will promote the development of the corporate securities market, enhance demand from institutional investors such as insurance companies, diversify the financial instruments available, and broaden the investor base,” said ADB Principal Financial Sector Specialist Syed Ali-Mumtaz H. Shah. “By strengthening governance of the financial markets, the program will enhance market efficiency and improve investor protection.” fgfgfgfgfgfgfgfgfgfgfgfg
Uzbekistan’s finance sector, dominated by banks, does not effectively play its intermediation role due to constrained mobilization of long-term financial resources. The economy is overly reliant on bank financing, with banking sector assets accounting for 63.1% of GDP as of January 2021.10 Until 2019, the state-owned banks pursued government-directed lending programs at below-market rates, crowding out market pricing, and primarily lending to state-owned enterprises (SOEs). The country has 32 commercial banks; 13 of which are state-owned banks, and account for more than 85% of banking sector capital and assets.11 Their direct involvement in the financing of SOEs has disincentivized provision of commercial services to the private sector. 12 With long-term government funding steadily declining since 2019, customer deposits are insufficient to support long-term financing because a large share of customer deposits continue to be of short duration. The decline in long-term government funding to banks is evident from the transfer of $4.3 billion of long-term Uzbekistan Fund for Reconstruction and Development (UFRD)-funded loans to SOEs from the balance sheets of state-owned banks to UFRD, and the swap by UFRD of $1.5 billion in loans for equity participation in state-owned banks.¹¹ ghhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh
The program is aligned with the following overarching development objective: a well-functioning financial system that supports basic capital and investment needs and the country’s long-term economic objectives. 23 Development of financial markets will contribute towards achieving this objective by creating efficiencies and innovations to ensure the balanced development of the finance sector through diversification of a predominantly bank-based system of financial intermediation, expansion of the sources of financial intermediation, reduction of financing costs by stimulating competition, and enhancement of the financial market’s contribution to meeting the financing requirements of a growing economy. The expected outcome of the reforms will be: capacity and size of the financial markets augmented. The outcome is supported by three reform areas: dffffffffffffffffffffffffffffffffffffffffffffff
(i) market facilitation enhanced; dfffffffffffggffffffffffffffffffffffffffffffffffffff
(ii) demand measures enhanced; rrffffffffhgghghhgggfffffffffffffffffffffffffff
(iii) supply measures enhanced. fffffffffffggffffffffffffffffffffffffffffffffffff
The reforms under subprogram 1 establish a solid foundation for financial market development featuring critical changes in legal, institutional, and human resource structures by focusing on supporting the money market, strengthening DMO’s debt management expertise and capacity, developing the public debt management framework, and enhancing retail investor demand through tax incentives as well as simplified KYC. Subprogram 2 builds on this financial market development foundation by catalyzing institutional investor (insurance and pension sector) demand to support development of the government bond market yield curve and increasing the supply of alternative financial instruments such as exchange-traded funds to diversify the financial markets; this can only take place if the critical prerequisites under the previous subprogram are in place. A programmatic approach is needed because the structural reforms require a long-term horizon to be implemented effectively. Understanding capacity constraints while designing the reforms is also important, which makes sequencing of reforms critical. For example, streamlined efficient market infrastructure (such as the integration of the trading platforms) in the program requires sufficient preparatory and implementation time. It is therefore critical that the reforms are properly identified and sequenced over two subprograms as described in this paragraph. A programmatic approach is ideal for chronologically sequencing the reforms in a multiyear framework. The proposed reforms of standards and procedures conform to best practices, including those promulgated by the IOSCO.¹²