Microsoft Word Microfinance development in Uzbekistan Eng doc

 
 
4.3. Access to external sources of borrowing  
In the microfinancing sector of Uzbekistan two segments clearly stand out as having the 
financial resources necessary for their activity: microcrediting of commercial banks and CUs. 
Although financial sources of the activity of the said segments also have problematic issues, 
they are in a better position in comparison with NGO-MFOs which are dependant 
exclusively on donor financing.
The increased trend of donor fatigue raises the issue of finding other sources of loan 
capital for both NGO-MFOs and all types of MFO as a whole. 
At present such sources may include the following: 
1. Establishment of relations with commercial banks thereby expanding access to 
commercial sources of funding. 
а) According to the draft of a new Resolution and its annexes (Annex 2) MFOs can 
receive commercial loans from domestic banks. In this case there is no need to use prudential 
regulation provisions regarding MFO-debtors, since the appropriate prudential norms are 
enshrined in bank licenses. Therefore, the receipt of bank loan capital cannot serve as an 
argument in favor of applying prudential provisions to a greater extent than to any other 

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debtor. This issue must be reviewed in the framework of the Law “On Microfinance” as it is 
related to a number of previously adopted legislative acts. 
b) A particular issue in the MFOs’ relations with banks is the form of crediting. MFOs 
provide loans to its clients in cash, while commercial banks can not issue a cash loan to an 
MFO.
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In this regard, the Resolution draft provides for the right of MFOs to receive cash 
money in the established procedure and on the first demand in the amount necessary for 
carrying out microfinancing, within the limits of resources available in their bank account. 
c) By raising remaining cash limits, it is possible to ease the burden of MFOs dealing 
with cash transaction issues. Therefore, it is necessary to recommend in the draft Resolution 
that banks, together with MFOs, consider and define how to use cash received as 
microdeposits, taking into consideration projections for cash microloans. The 
recommendations passed by the Resolution of the Cabinet of Ministers automatically 
obligate the banks to settle this issue in favor of raising the cash limits. 
d) For stimulation of bank loans to MFOs it is necessary to set lower classification of 
risks for these loans according to the bank’s liquidity coefficient. It allows banks to increase 
loans to MFOs, and to reduce the service cost to a certain degree.
In the future commercial banks with a developed affiliate network and broad clientele 
among small businesses and individuals will have to examine the conditions necessary to 
establish and develop separate divisions to provide microfinancing services. It enables the 
expansion of the microfinancing market and the diversification of bank operations.
d) It is absolutely essential to enable MFOs to interact with credit history bureaus. 
This supports MFOs’ efforts to reduce risks, and it provides debtors with the good credit 
history necessary to get new loans.
A credit history system was created in Uzbekistan in accordance with Resolution #197 
of the Cabinet of Ministers “On action to form account information system” dated April 23, 
2004. The National Credit History Institute (NCHI) was established within the Central Bank 
and the Inter Bank Loan Bureau (IBLB) was founded under the Banking Association of 
Uzbekistan. The task of these organizations is to collect and analyze information on loan 
transactions and their debtors as well as to provide information to commercial banks.
MFOs can provide information and use the services of IBLB by making contracts. The 
problem here may be technical support for the transfer and exchange of data, which requires 
significant funding, and may turn out to be too expensive for some MFOs. This is where 
donor support is needed.