Microfinance in Uzbekistan: Current State and Future Prospects

This policy brief examines the key role that microfinance can play in the revival of the economy of Uzbekistan, especially in the areas of poverty reduction and employment generation.

The brief examines:

• International experience with microfinance;
• The urgent need for microfinance programs in Uzbekistan, stating that microfinance can:
  • Provide public employment and reduce poverty, especially in rural areas;
  • Address employment challenges;
  • Service small entrepreneurial activities and reduce the flow-out of migration;
  • Boost savings and enhance social stability and cohesion;
  • Improve the women's role in business.
• The current state of microfinance in Uzbekistan, and finds the following hindrances to the growth of non-government-organization (NGO) MFIs:
  • Lack of legislative and regulatory frameworks;
  • Further taxation.
• The role of donors.

The policy brief recommends:

• A regulatory and legislative framework that ensures the transparency, consistency and sustainability of microfinance programs;
• The extension of preferential taxation status;
• New pilot projects;
• An appropriate interest rate policy.

The brief concludes that:

• The microfinance sector is at an embryonic stage of development in Uzbekistan and requires further improvement;
• Attracting local financial institutions would significantly strengthen the competitive environment and the extent of financial intermediation and promote socioeconomic development in Uzbekistan.