Small and Medium-Sized Enterprise Finance in Uzbekistan: Challenges and Opportunities

Microkreditbank. Mikrokreditbank was established in 2006 by a special Presidential 
Decree
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with the purpose of “further expanding the provision of financial resources for 
the development of small business, private entrepreneurship and farming, the creation 
of new jobs by spurring individual labor activity, family business and home-based 
business, and the provision of access to microfinance services to broad strata of
the population, especially in rural areas.” Due to its large network (85 branches and 110 
point of services), the bank was able to increase the total number of customers to 
341,607 in 2017.
A new regulation issued in 2018
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provides for extending Mikrokreditbank’s tax 
exemption until 1 January 2023 (together with Halq Bank), increasing the 
Mikrokreditbank’s charter capital in 2018−2019 by SUM600 billion ($73 million), as well 
as mandating a number of other exemptions and privileges—for example, free 
advertisement of Mikrokreditbank’s and Halq Bank’s socially oriented financial products 
by mass media and 50% discount on the advertisement of commercial products. 
Interest rates are very competitive as the bank is mandated by the government to provide 
preferential loans to SMEs. This has resulted in interest rates averaging 5% per annum, 
which are well below the inflation rate of 14.4% in 2017, meaning that the bank lends not 
only below costs but also in negative real terms (see Table 6). 
The losses are assumed eventually by state because the government is an ultimate 
beneficial owner (State Assets Management Agency). By the end of 2017 the number of 
outstanding loans amounted to SUM1.3 trillion ($180 million) of which only SUM 313.8 
billion was concessional (microfinance) lending, demonstrating that despite 
specialization, the vast majority of business is not directed at SMEs. 
Microkreditbank takes various types of collateral, but does not include future cash-flow 
considerations. The bank offers a narrow range of credit products to SMEs like other 
commercial banks. Equity finance, factoring, and longer-tenure loans are not offered. 
Due to the bank’s collateral requirements, SMEs may be denied credit despite having 
sufficient cash flow or purchase orders, or may be limited only to short-term credit 
facilities and not the type of financial products they need.