Microsoft Word Microfinance development in Uzbekistan Eng doc

When and what norms of prudential regulation provisions shall be applied. 
The majority of local MFOs defy commercial definition of microfinance services. 
Secondly, NGO-MFOs want to keep their NGO status and under these terms they get 
permission to draw upon loans and individual deposits as resources of finance although doing 
so is contradictory from a legal point of view. Third, according to survey results MFOs do 
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Regulatory provisions or supervision are prudential when they are directed to the protection of financial 
reliability of licensed mediators to avoid instability of the financial system and losses for small depositors who 
lack special knowledge.
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Development of microfinancing does not stay idle. Thus, as soon as the developments of MFOs, which accept 
deposits, reach to a certain level, in addition to interest protection, issues of systemic risks will arise. Failure of 
licensed MFO with relatively small assets but with a significant number of clients may discredit the whole 
concept of microfinancing. 
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There are significant differences in opinions: from supervision by association of microfinance institutions 
(self-supervision) up to transfer to the responsibilities of the body exercising general supervision over financial 
institutions. The experience of other countries in use of the mechanism of self-regulation illustrates the failure 
of this approach. 
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They are simpler for execution and are not as expensive as the prudential provisions. 

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not yet provide loans with profit margins high enough to cover interest payments and the 
protection of deposits upon which they are willing to draw. 
Analysis has also shown that profit margins of existing MFOs are yet not high enough to 
cover the financial and administrative expenses that come with accepting deposits and 
without depleting their own capital. The “Barokot” MFO, however, may be an exception as 
they have accomplished a high level of operational cost-recovery. 
Under such circumstances, and considering the popular distrust of financial systems in 
CIS countries, which is difficult to overcome, it is inexpedient to permit the existing MFO to 
accept individual deposits without clear requirements such as a license from a regulator. 
Deposits of enterprises and deposit-substitutes. In a number of countries MFOs can 
carry out self financing by issuing commercial securities, bonds, or analogous instruments in 
the domestic funds market as well as directly releasing large deposit certificates. Unlike 
individual deposits, these instruments are purchased by big investors. Although MFOs in 
Uzbekistan are still relatively young, it is necessary to consider the regulatory methods of 
this process in the development of a law on microfinancing. The complication is in the lack 
of a unanimous opinion as to how to regulate the work with such instruments
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 Member’s savings. Disputes about the selection of regulatory provisions center mainly 
upon NGO-MFOs created by donor resources. Because of tendencies such as donor fatigue 
observed in the world, MFOs which began their activity by granting loans are now thinking 
of accepting deposits from their own members.
Although it is often said that since such organizations accept deposits only from their 
members and not from the general public, they should not be subject to the prudential 
supervision. However, such an argument seems unconvincing because of two circumstances: 
First, when such MFOs develop the opportunity for its members to control management 
occurs not higher than those of the depositors of a commercial bank. Second, the notion of 
membership may become faded. For example, an MFO which functions on a larger 
geographic scale can draw deposits from a broad territory. In this case it is logical for those 
MFOs to simply offer membership to anyone willing to make a deposit.