Microsoft Word Microfinance development in Uzbekistan Eng doc

General problems of microfinance include: 
Legislation. The lack of legal framework for MFOs and the concept of the 
microfinance market development is the greatest factor hindering development. Although 
some components of microfinance have existed in Uzbekistan for 7 years, their legal 
framework is not uniform as seen in the following criteria. 
Types of organizations. While there is a full package of regulations on microcredit 
through commercial banks and a law on CUs, the legislative and regulatory framework for 
microcredit operations by NGO-MFOs is missing. 
Types of activities. Given the relatively developed legislative and regulatory 
framework for microcrediting, there is no legal framework for microinsurance, microleasing, 
and microsavings. 
Fig. 2 Composition of microcredits by type of market 
participant (billions of soums) 
Fig. 3. Share of own banking resources in the 
total volume of banking microcredits, % 
 
 Source: Author’s calculations. 
Institutional. The lack of legislative and regulatory framework
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and official legal 
status prohibits NGO-MFOs (the most ‘social’ institutions in microfinance) from borrowing 
capital from external sources (loans from commercial banks and individual deposits), and 
thus limits their lending capacity. 
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See, Table 9, Annex 1. 
8
Except basic Resolution # 309 of the Cabinet of Ministers “On actions to develop microfinance in the 
Republic of Uzbekistan” adopted on August 30, 2002. 
0
5
10
15
20
25
30
35
40
45
50
2002
2003
2004
commercial banks
credit unions
MFO
c

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Economic. There is no official distinction between cash and non-cash money in 
Uzbekistan. But in practice one’s ability to withdraw cash from a bank account is limited 
due to cash shortages. Due to the nature of their activities, all types of MFOs suffer from this 
problem. 
The analysis has shown that there are currently no microcredit products available which 
are able to ensure financial sustainability for all MFIs. The main reason for this is the 
relatively high level of transaction costs, which can reach as high as approximately 20-25 
percent of the loan portfolio. On the other hand, there are no clearly developed unified 
criteria for the assessment of MFI financial sustainability and their social impact. 
Information. The primary informational demand of potential clients is for information 
about the organizations providing microcredits. Clients’ secondary demand is for assistance 
in completing the requisite paperwork. Assistance in paperwork is the second. 
The consolidation of information about all institutions which provide microfinance 
services is a more wide scale problem. Bad borrowers are winners in the current situation 
due to the highly fractured availability of credit history information.