Small and Medium-Sized Enterprise Finance in Uzbekistan: Challenges and Opportunities

1. INTRODUCTION AND OVERVIEW OF SMES’ ROLE
IN ECONOMY AND SME FINANCE 
1.1 SMEs’ Role in the Economy 
Uzbekistan is the most densely populated country in the Central Asian region, with
one third of the population under the age of 29 and half residing in rural areas. As 
800,000 people under the age of 29 join the labor market every year, job generation is 
an urgent and challenging priority.
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The development of private micro and small enterprises (MSEs) and entrepreneurship 
has often been declared as a priority by the Uzbek president currently. It is recognized 
now that small business is a driving force for economic growth, an increase in GDP
and the primary solution to acute social problems such as unemployment, poverty
− especially among women and youth − and poor quality of life.
Small businesses in Uzbekistan include individual entrepreneurs and micro and small 
enterprises
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. The size of an enterprise is defined by the number of employees, without 
considering a revenue component or the ownership structure. The threshold number of 
employees varies by sector (see Table 1).
Table 1: Definition of SMEs
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Category
Number of Employees
Individual
1−3 employees 
Micro-enterprises
up to 20 employees 
Small enterprises
Up to 200 employees 
There is no legal definition for medium-sized enterprises in the legislation. However, 
according to the draft President Resolution,
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the government intends to propose 
amendments to legislation and expand the scope of prerequisites required to qualify
for being treated as a small business, effective from 1 January 2019. According to
draft proposals, the following entities will be classified as small and medium-sized 
businesses
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: 
 individual entrepreneur; 
 micro-firms with an average annual number of employees of not more than 25; 
1
ADB Sector Assessment https://www.adb.org/sites/default/files/linked-documents/42007-014-ssa.pdf 
(accessed 26 September 2018.
2
The definition of small business is stipulated in Article 5 of Law N 69-II, enacted on 25 May 2000
and amended on 2 May 2012, which states that small business includes individual entrepreneurs, 
microfirms, and small enterprises. (Government of Uzbekistan. 2000. The Law of the Republic of 
Uzbekistan N 69-II on Guarantees for Freedom of Entrepreneurial Activity. Tashkent; Government of 
Uzbekistan. 2012. Presidential Decree No. 328 on Measures for Further Improvement of the Business 
Environment and to Provide Greater Freedom of Entrepreneurship. Tashkent). https://mineconomy.uz/ 
files/prilojenie_1.pdf. 
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https://mineconomy.uz/files/prilojenie_1.pdf. 
4
https://regulation.gov.uz/ru/document/639. 
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Draft President Resolution “On measures to further stimulate the expansion of small businesses and 
private entrepreneurship in order to create competitive companies.” See at: https://regulation.gov.uz/uz/ 
document/639 (accessed 26 September 2018).

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ADBI Working Paper 997 
D. Tadjibaeva 
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 small enterprises with an average annual number of employees of not more than 
100; 
 medium-sized enterprises with an average annual number of employees of not 
more than 250. 
The criteria for defining small business and private entrepreneurship do not entirely 
match international practice. In international practice, the definition of SME, aside
from the criterion staff size,” includes annual turnover/ sales or industry specific. 
Preservation of the industry-specific differences is necessary subject to certain tax (e.g., 
stimulation of individual industries) or statistical (e.g., comparison of labor productivity) 
tasks set by the state.
Using SME definition for tax purposes in Uzbekistan hinders jobs creation and growth. 
In addition, the definition of SMEs by number of employees has become difficult
due to part-time work, casual work or temporary work becoming more widely used
by employers.
Figure 1 illustrates the poverty rate decrease from 33.6 % in 2001 to 12.3 % in 2016, 
which in many ways can be attributed to a rise of small and medium-size businesses, 
albeit, in the informal sector.