Uzbekistan: Second Small and Microfinance Development Project
This project performance evaluation report assesses the Second Small and Microfinance Development Project in Uzbekistan that provided intermediary loans of $50 million to three commercial banks (Hamkorbank, Ipak Yuli Bank, and Agrobank) for onlending to micro and small enterprises (MSE) in Uzbekistan. The project was approved in April 2010 and completed in December 2013.
The project was appropriately designed to help address the unmet credit demand from MSEs, ease restrictions on local cash currency loans and loan terms, and develop the capacity of banks for MSE lending. The envisaged outcome of expanded, viable, and sustainable finance operations was not fully realized, while of the six target outputs, three were met and the other three were partially achieved. There were significant delays during implementation that left the project with only about five months to disburse the sub-loans to target enterprises, although the funds were fully disbursed and the project was completed within the original time plan. MSE lending of the participating commercial banks grew between 17% to 56% per annum after project completion and nonperforming loans have remained at less than 2%. Overall, the project is assessed successful.
The evaluation recommends three follow-up actions: (i) ADB should proactively engage the government in policy dialogue and share international best practice in the region, to help policymakers gain a solid understanding of the issues and constraints and how these can be addressed for long-term development of the sector; (ii) In a very regulated policy environment and the absence of government demand for policy-based loans, ADB should consider a TA cluster approach to help the government with policy reforms; and (iii) ADB should give more attention to addressing demand-side constraints through building the capacity of MSEs, including promotion of financial literacy, strengthening of business skills, and providing greater access to markets, information, and technology, to help MSEs become more viable and increase bankability.