Uzbekistan Diagnostic Assessing Progress and Challenges in

needed for providing long-term funding and equity to the private sector. 
The state dominates the financial sector, to the disadvantage of the private sector. 
Large 
state-owned banks (10 out of 28) hold close to 80 per cent of system assets (with the largest 
state-owned bank holding a 25 per cent share). State-owned banks until recently operated 
mainly as agents of government programmes, and disproportionately lend to state-owned 

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OFFICIAL USE
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OFFICIAL USE
enterprises (over 50 per cent of their portfolios). The remaining banks – medium-sized banks 
(five with foreign ownership) and several small private banks – operate on a more 
commercial basis. The authorities currently consider only the privatisation of non-strategic 
state-owned banks, the privatisation of core financial institutions is not on the agenda at this 
stage. Directed lending practices in state-owned banks and foreign funding tied to the 
purchase of specific goods and equipment from specific countries undermine proper risk-
based underwriting. Banks rely heavily on collateral and state support in lending decisions as 
well as in the assessment of loan quality. Both funding and lending are often made on sub-
commercial terms. The resulting distortions are crowding out those parts of the private sector, 
which are not of strategic importance in the view of the government. Even in the absence of 
privatisation of state-owned banks, the private sector would greatly benefit from these banks 
behaving more commercially and being driven by markets.
Despite double-digit credit growth over the last five years, access to finance is an issue 
for SMEs. 
Uzbekistan’s banking sector (179.7 trillion sum of assets as of 1 May 2017, 
according to CBU data or 72 per cent of 2017 GDP, 55 per cent of GDP credit penetration) is 
relatively large. However, the high concentration of the sector around state banks and state-
directed lending constrains access to credit outside state programmes. SMEs are strongly 
constrained in accessing finance, according to survey results: only around one quarter of 
SMEs have a bank loan and more than 80 per cent finance their investments through 
internally generated funds, a share that is significantly higher than in other countries in 
Central Asia.