Microsoft Word Microfinance development in Uzbekistan Eng doc

2. State Fund for Employment support (SEF) under the Ministry of Labor and Public 
Welfare issues loans to retain and create new jobs. SEF funds are formed by contributions 
from companies, institutions and organizations into to the Wage Fund (WF). Starting in 
2002 the development of household-based businesses among poor families has been the 
priority for WF microfinancing. 
For the period between 2001 and 2005 the total amount of WF’s loan portfolio 
amounted to 50 billion soums, of which 12 percent (6.1 billion soums) went to microcredits.
The number of clients who used WF’s microcredits has substantially grown, reaching 8,000 
persons. The average size of microcredits was to 0.9 million soums
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. 
A list of services by credit lines is given in Annex 1 (Table 19). 
The Ministry of Labor and Public Welfare annually forms territorial programmes for 
public employment and identifies priority districts for microcrediting. It envisions 
earmarking 16.9 billion soums in loans for the period of 2005-2006, 6.2 billion of which will 
be distributed in 51 districts of the republic with high unemployment level. 
 
Figure 9. Trends in the Employment Fund’s loans
0
5000
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15000
20000
2001
2002
2003
2004
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oum
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Credit resources, total
Мicrocredit resources 
Loan recipients, total 
Micro-credit recipients 
Source: Ministry of Labor and Public Welfare
Analysis has shown that microcredits are most attractive for agricultural practice 
(particularly for livestock farming) and forming start-up capital. The advantages of non-
budgetary loans fund are obvious: low interest rates
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, opportunities to obtain cash loans, 
longer loan maturity and an extensive grace period. All the same, problems of the use of 
non-budgetary fund credit lines include: 
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As of May 2005. 
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To form start-up capital – 1/6 of the current refinancing rate of Central Bank; for the development of 
dekhkans and farmers, the purchase of agricultural equipment, the construction of farm buildings – 1/3 of the 
refinancing rate; for the production and extensive processing of raw materials, local industrial development – 
40% of the refinancing rate; for other purposes – 45% of refinancing rate. The bank margin for microcredits 
from the Employment Fund and ADF is set at 50% of the preferential rate. The bank margin for other loans is 
set at 45% of the preferential rate. 

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• Limitations. Credit resources of all non-budgetary lines are limited and continue to 
decrease due to a reduction in the rates of the WF’s deduction for Employment Fund 
from 1.5% in 2002 to 0.5% in 2005. Lower capacity requires the Fund to focus 
lending on the development of household-based businesses in areas where access to 
loans from other sources is limited. 
• Low level of efficiency. The low amount of unpaid and overdue loans and interest is 
a testament to the efficiency of WF microcredits. Loans do not achieve targeted 
social objectives, such as increasing the income of poor families, due to the fact that 
the mechanism for issuing loans without collateral is virtually nonexistent, despite 
provisions for its implementation. 
• Remote location of banking institutions. It is necessary to have a bank account to 
get a loan. This is a hindrance for rural entrepreneurs due to the distant location of 
banking institutions. Furthermore, it is essential to register with the local department 
of justice although the money required to do so may not be available.