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

8. CONCLUSION AND RECOMMENDATIONS 
SMEs are recognized as a “thrust sector” because of the contribution of this sector
to jobs creation, ensuring social stability and economic growth. Despite being highly labor 
intensive, still a major portion of job opportunity is generated by SMEs. It plays a vital 
role in the balanced development all over the country. Despite the government’s positive 
attitude toward SME financing in Uzbekistan, SME lending is still below the international 
level.
The regulator should consider allowing for larger loan sizes and relaxing rules about cash 
disbursement, and allow greater flexibility for MCOs in their sources of funding. The 
regulator could reinvigorate competition and increase the physical distribution of MCOs 
by allowing more market entry and permitting branching by MCOs. On their part, MCOs 
need to develop more efficiency to drive down operational costs and use credit. 
The key barriers to SME access to finance can be summarized as the following:
• Deficiencies in a country’s enabling environment in terms of both (i) SME 
development infrastructure (business development services, business incubators 
and business accelerators) and (ii) the overall legal and regulatory framework for 
financial institutions and SME alternative financing instruments and delivery 
channels; these are potentially the most significant impediments to unlocking 
substantial SME finance
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See at: https://www.gazeta.uz/ru/2018/11/24/banks/. 

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• Market distortion due to a high-level state presence in the banking sector and a 
prevalence of subsidized lending practices, which hinder commercial 
microfinance and SME finance
• Inadequate capacity of financial institutions to serve the financing needs of SMEs 
due to a lack of effective instruments to assess SME creditworthiness and offer 
specific lending products such as factoring, trade credit, leasing and asset-based 
lending.
• Low level of SMEs’ financial literacy
• High SME commercial lending rate
• High collateral requirements for SMEs 
• Gender issues 
To further increase SME access to finance the following recommendations are proposed:
• Improve the effectiveness of government SME financing support through the 
restructuring and consolidation of subsidy programs in the government’s 
development bank, and eliminate the interest rate subsidies for existing and 
sustainable enterprises; 
• Build a whole ecosystem of SME finance, which includes venture capital 
companies, business angels, platforms for the emergence and communication of 
start-ups, incubation and acceleration platforms; 
• Improve access to finance for small businesses through regulatory reform, 
including addressing cash-flow-based lending, collateral alternatives, lending
in cash, and better use of credit histories (develop credit scoring). In particular, 
removing certain prudential requirements for MCOs may include relaxing 
collateral requirements and removing the 10% of charter capital threshold on 
uncollateralized loan portfolio services. Providers should also be explicitly 
allowed to use such types of loan security as goods for sale and future harvest 
(currently, collectively used for less than 0.1% of all loans)—as these may be 
suitable options for many micro and SME finance borrowers; 
• Optimize regulations to the development of digital services for SMEs;
• Support the development of a sound legal environment and institutional 
strengthening for effective functioning of partial credit guarantee fund;
• Design and implementation of SME financial literacy program to improve SME 
capacity to acquire finance; 
• Partnership with international finance institutions to design the capacity building 
for commercial banks and microfinance institutions to serve SME market 
efficiently; 
• In parallel, there is need for fundamental institutional and legislative reforms, 
including liberalization of land ownership, reduction of governmental intervention 
in agricultural production and marketing processes. In order to boost value chains 
besides horticulture, such as meat and dairy production chain, it will be necessary 
to introduce international SPS standards and principles and a change of 
philosophy in food safety and food security.

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