Microsoft Word Microfinance development in Uzbekistan Eng doc

Study objective – Analyze the current state of microfinance in Uzbekistan and develop 
proposals for its further development. 
Research methodology – Economic analysis methods and sociological survey
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Materials from the Central Bank, Ministry of Labor and Public Welfare, IFC, ADB, World 
Bank, Central Asian Microfinance Alliance, and operational data of commercial banks 
provided input to the study. Data from the Microfinance Center of Central and Eastern 
Europe and CIS countries and analytical reviews of the World Bank were used for cross 
country comparisons. 
Practical results of the study 
• Materials about microfinance in Uzbekistan have been systematized; 
• Analysis of the work and problematic issues of all MFIs have been presented; 
• Registration procedures for various types of MFOs (with or without the right to accept 
deposits from the population) has been proposed in the form of a draft resolution to the 
Cabinet of Ministers “On the Measures for Further Development of Microfinance in the 
Republic of Uzbekistan”; 
• The main methodical components of the Law “On Microfinance in the Republic of 
Uzbekistan” have been presented; 
• Assessment of the demand for microfinance resources in Uzbekistan has been conducted. 
1. The Role, Significance and Specific Nature of Microfinance
Microfinance – the process of providing low-income people
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an access to financing for 
the purposes of establishment and development of microbusiness. In the context of achieving 
the UN Millennium Declaration
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Goals, microfinance facilitates the development of the 
following processes: 
- Meeting the essential needs of low-income groups and protecting them from risks; 
- Expanding entrepreneurship, including private and household businesses; 
- Promoting gender equality by empowering women to participate in economic activities; 
- Investing in the production potential of local communities; 
- Reducing poverty and inequality, enhancing social and human development
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The main objective of this component was to get extensive information on the needs of entrepreneurship in 
MFO services as well as a general assessment of sector potential, including analysis of its needs and limitations 
on further development. 
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Low income persons (vulnerable groups), who are active in economic sense and are capable of engaging in 
appropriate activities but are not able to do so due to the lack of funds. 
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It relates to Goal 1 “Eliminating poverty and hunger”. 
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Access to financial resources enables poor families to create sound business, thereby increasing their income, 
ensuring their information security, and their children’s education; Secondly, it reduces the vulnerability at the 
time of a breadwinner’s ailment, adverse weather, partial loss of property, and other shock situations; 
Employment will increase and unemployment will subside; People will have hopes for better future, which will 
grow into confidence in tomorrow as businesses develop further; Access to financial resources prevents the 
transformation of poor groups into the poorest groups with all the related socioeconomic and psychological 
implications; It contributes to the closure of the economic gap between urban and rural areas. 

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- Involving poor persons in economic processes; 
- Creating of new jobs; 
- Establishing new segments of the financial market. 
The role of microfinance in the modern world of financial services has been reinforced 
by World Bank surveys: there are more than 10,000 MFIs in the world, catering to more 
than 500 million. poor people in developing countries. The assets of these organizations are 
estimated to total USD 2.5 billion. 
Initial efforts to provide financial services to low-income population groups were 
linked to the end use of these services. In the 1950s-70s government agencies and donor 
organizations provided subsidized agricultural loans to small-scale and low-income farmers 
with hopes of increasing their productivity and incomes. In the 1980s-90s microcredits were 
issued primarily in the form of loans for low-income entrepreneurs for the purchase and 
accumulation of assets which would enhance their income and welfare. A significant group 
of recipients was comprised of women, for whom microcredit turned out to be particularly 
effective. 
The development of services, methods, and organizational structure have led to the 
emergence of financial organizations specialized in servicing the poor. These organizations 
were named microfinance organizations (MFO)s. They are ‘micro’ because amount of 
transaction is relatively small (loans in the amount of USD 50 and deposits in the amount of 
USD 5). 
The concept of microfinance penetrated the countries of Central Asia in the mid 
1990s, much later than in other regions. Like in other parts of the developing world, the 
market for microfinance services in the region is rapidly growing. Annually the regional 
microfinance loan portfolio and number of clients is increasing by 40 percent and 20-30 
percent, respectively. Microfinance markets of Central Asia have just started to form – 
market penetration is insignificant and increasing the population’s savings has not yet started 
(except for mandatory savings within group crediting programs).