Uzbekistan: Developing Microlending

Jul 2010
Tashkent, Uzbekistan, July, 03 2010 - According to the Uzbek Agency for Financial Sector Development, three projects on further development of micro financing have been launched in 2010. They are being implemented by the Central Bank in cooperation with the UN Development Programme, German Technical Cooperation Center (GTZ), and the International Finance Corporation.

The term microlending appeared in Uzbekistan's legislation in 1999, when the Ministry of Justice approved the procedure of lending of individual entrepreneurs and small and medium-sized businesses by commercial banks through off-budget credit lines. In 2000, a simplified procedure to issue micro-loans for small and medium-sized businesses was introduced.

Uzbekistan now has 103 loan unions, 32 micro-loan organizations, and 48 pawnshops. In 2009, the amount of micro loans allocated by non-bank loan organizations exceeded 193 billion sums.

In April, a draft for creating a Fund to support non-banking loan organizations in Uzbekistan was submitted at the general meeting of members of the Uzbek National Association for Microfinance Institutions and Credit Unions. The Fund will encourage further expansion of joint projects of the Association and Uzbekistan?s public funds, such as the Grant Program to develop family businesses, Grant program to develop small businesses and farming, micro-loan programs for young families and young entrepreneurs, programs to improve the living standard of women from large low-income families.

Today, the Uzbek Association for Microfinance Institutions and Credit Unions includes 22 credit unions and 21 micro-loan organizations with the total amount of assets of 52.2 billion sums as for January 1st 2010, of which 47.8 billion sums are from credit unions, and 4.4 billion sums from micro-loan organizations.

One of the micro-lending organizations successfully operating in Uzbekistan the Sabr, established in 2001 with support of the Netherlands -- is located in the Samarkand region.

We issue loans at 6% per month to groups of between three and seven people. The minimum loan amount is 120,000 sums, said Ravshanbek Kuchkarov, Sabr director. The loan is given for a period of three to six months. Last year, the total amount of micro loans provided by us was over 3 billion sums.

Several projects aimed to support women's entrepreneurship are being implemented in the Karakalpakstan Autonomous Region in northwestern Uzbekistan. For over ten years, these projects are being implemented by the Tadbirkol Ayel Karakalpak Department of Business Women in Uzbekistan. In particular, it is the Micro-lending program in Karakalpakstan one of the components of UNDP's project in Uzbekistan entitled Restoration of the Aral Sea coast and development of its potential, and the Asian Development Bank project entitled Innovative methods of improving living standards in Karakalpakstan.

This year, the micro-loan organization in Nukus has issued over 2 billion sums to implement these projects.

According to international experts, the group lending has several advantages. In particular, the principle of group guarantees instead of collateral allows lending the poorest citizens who can not provide any collateral.


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