Microsoft Word Microfinance development in Uzbekistan Eng doc

Inadequate staff capacity. This is a completely new and specific dimension. There 
are no experienced staff, and the need for staff training and the creation of training materials 
and guidelines (especially in Uzbek) is acute. Staff members are not yet competent to create 
new credit products independently or to effectively adapt borrowed products, particularly 
those aimed at the creation of sustainable sources of income in rural areas.
• 
Audit.
Conducting audits of NGO-MFOs is hindered by high costs and 
underdeveloped audit institutions. Uzbek law must provide for mandatory audit procedures 
for NGO-MFOs and determine the list of independent organizations authorized to conduct 
those audits in the future. Audits by the government body which registers and supervises 
MFOs are not permissible. 
2.2. Microfinance services of commercial banks. 
Microfinance services of commercial banks consist of two components: 
• Offering microcredits from bank’s own sources; 
• Servicing microcredit lines of non-budgetary funds and international credit 
lines. 
Commercial bank microcrediting from own resources
In accordance with Central Bank guidelines, microcredits in local or foreign currency 
equivalent to USD 10,000
15
can be issued for up to 3 years to farmers and other small 
businesses, who initiate by forming a legal entity. Microcredits are issued only to residents 
with deposit accounts at the Central Bank. Loans are not permitted to be issued to clients of 
other banks.
16
Cash loans can be issued up to 50% of the microcredit amount to farmers for the 
purchase of cattle, birds, seeds, and saplings for up to 18 months. Interest rates for 
microcredits are set in accordance with the loan agreement but not higher than Central Bank 
rate. 
14
First method – deposit the loan into another business unrelated to business-plan. Second method – one 
person in the group handles the microcredit by agreement with other group members. 
15
By Central Bank’s exchange rate on the day of loan issuance. 
16
The list of all microcredit products offered by Uzbek commercial banks is given in the Table 19 of Annex 1. 

---

18
Microcredits are provided to borrowers for the following purposes: 
- Purchase of mini equipment; 
- Development and expansion of one’s own production line including the purchase of 
seeds, cattle, calves, lambs, birds, forage and mixed fodder, veterinary drugs, plant 
chemicals, mineral fertilizers; 
- Primary processing of raw materials; 
- Purchase of job instruments, raw materials, semi-finished products, accessories; 
- Production of art, crafts and applied art works; 
- Development of craftsmanship, the establishment of household-based work; 
- Development of the services sector and the provision of consumer services; 
- Healthcare development; 
- Development of the tourism industry; 
- Establishment of small-scale production; 
- Other types of entrepreneurial activities related to the manufacturing of consumer 
goods and the services sector not prohibited by law. 
Microcredits cannot be issued for following purposes: 
• Repayment of earlier borrowing or any other debts; 
• Tobacco growing and production of alcoholic beverages; 
• Trade and middleman ship; 
• Purchase of private property unused for business purposes. 
Loan periods vary from 1 year (to boost working capital) up to 5 years (for investment 
projects financed from the bank’s Fund for Preferential Crediting). 
The procedure for issuing microcredits is the same except that the maximum amount is 
USD 5,000. 
Preferential interest rates are set for microcredits to encourage small businesses and 
private entrepreneurship: not higher than 50 percent of the current refinancing rate, if the 
funds are disbursed from the Fund for Preferential Crediting, formed by 25 percent 
deductions from bank’s profits. Meanwhile, the banks are granted tax benefits for revenues 
derived from crediting small businesses and funds allotted to increase the loan portfolio for 
microcredits.