Uzbekistan: Second Small and Microfinance Development Project
ADB is helping Uzbekistan meet a growing demand for credit from micro and small enterprises. The project will provide a credit line to three commercial banks - Ipak Yuli Bank, Hamkorbank, and Agrobank, which will lend funds to these businesses. It will also help build the banks’ capacity for microfinance operations and provide entrepreneurial skills training to end-borrowers.
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|Project Name||Second Small and Microfinance Development Project|
|Country / Economy||Uzbekistan
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Gender Equity and Mainstreaming
Governance and capacity development
|Sector / Subsector||
Finance / Inclusive finance - Small and medium enterprise finance and leasing
|Gender Equity and Mainstreaming||Gender equity|
The Project facilitates access to credit by micro and small enterprises (MSEs) across Uzbekistan. It supports the generation of employment and sustains about 30,000 jobs for men
and women. It contributes to inclusive economic growth. ADBs proposed intervention comprises (i) a loan of $50 million to be channeled through three participating commercial banks (PCBs) for onlending to viable MSEs; and (ii) a TA grant of $600,000 to improve PCBs MSE finance capacity and their subborrowers' entrepreneurial skills.
|Project Rationale and Linkage to Country/Regional Strategy||
Despite increased bank lending in recent years, demand by MSEs remains unmet at present. According to the Central Bank of Uzbekistan, total loans granted by commercial banks to MSEs reached $898 million (SUM1.25 trillion) in 2008 and $1.2 billion (SUM1.85 trillion) in 2009. The amount allocated to microcredit by commercial banks increased by about 100% in 2009 over 2008 and was targeted to increase by another 30% in 2010. According to a World Bank survey, only 7.8% of business financing is met by loans the lowest percentage in the region (where the average is 23.3%). ADBs past credit lines to Uzbekistan indicate high demand from micro, small, and medium-sized business operating in all sectors, particularly agriculture and agroprocessing.
MSEs access to credit is constrained by the nature and characteristics of the financial sector in Uzbekistan, which is subject to various distortions. For instance, directed lending at subsidized interest rates leads to misallocation of resources. For depositors, practical difficulties in cash withdrawals from bank accounts have created a premium for cash and a trust gap for banks in terms of their ability to mobilize customer deposits. This is manifested by a low (individual and household customer) bank deposits'GDP ratio of 6.6% in 2009. The government has put in place measures to increase public confidence in the banking system which are expected to raise deposits mobilization.
The proposed intervention will meet a share of the MSE credit demand while addressing financial sector distortions. This will be achieved through working with participating commercial banks (PCBs) committed to sustainable MSE financing that meet the following criteria: (i) financial soundness (solvency, liquidity, profitability, efficiency, and prudence); (ii) extensive rural retail network; (iii) a proven track record and efficiency in non-subsidized microfinance intermediation; (iv) ability and willingness to manage the foreign exchange risk prudently; and (v) transparent corporate, financial, and management governance practices. Based on these criteria, ADB selected three PCBs: Agrobank, Hamkorbank, and Ipak Yuli Bank (IYB). Hamkorbank and IYB are privately owned, while Agrobank is majority government owned.
The selected PCBs business models and client profile correspond well with the proposed project objectives. Their business models aim at (i) increasing their retail presence geographically, (ii) diversifying operations into various sectors, (iii) offering new products to meet customer needs and increase profitability, and (iv) better outreach to viable but unbanked and under-banked potential clients. Their client base is diverse: Agrobank has a strong presence in the agriculture and agro-processing sectors, while Hamkorbank and IYB are more focused in the trade finance sector (IYB also has significant exposure to light manufacturing). Micro and small business loans constitute close to one-third of Hamkorbank's and one-fourth of IYB's loan portfolios; for Agrobank, they constitute one-tenth (given the much larger size of its overall portfolio). For their loans up to $20,000, the average loan size is $4,000, with an average repayment period of 18 months. These loans finance both investment and working capital.
The project complies with ADBs country partnership strategy, which supports sustainable economic growth, poverty reduction, gender and development, and its Microfinance Strategy. For rural nonfarm enterprise development, ADBs country partnership strategy encourages forward and backward linkages with the agricultural sector. These linkages absorb surplus labor released from agriculture. The loan will carry forward this principle to other sectors as well. It also supports the development of rural financial services and promotes more efficient intermediation functions by commercial banks. It seeks (by allowing subborrowers to draw down their sum subloans in cash if they so choose) to abolish the distinction between cash and noncash market transactions.
|Impact||More individuals earn their livelihood in the formal private MSE sector.|
|Description of Outcome||Expanded, viable and sustainable MSE finance operations|
|Progress Toward Outcome||
As of December 2013:
Access to capital eased and job creation stimulated in both rural and urban areas across Uzbekistan; to date, 20,700 jobs created, with women accounting for 38%.
|Description of Project Outputs||
Delivery of training to improve entrepreneurial capacity of subborrowers, including women and MCOs
Increase in microfinance loans to financially viable subborrowers (men and women)
|Status of Implementation Progress (Outputs, Activities, and Issues)||
As of December 2013:
(i) 14,312 microfinance loan accounts have been opened under the project by low-income households, and micro and small businesses in urban and rural areas, with women accounted for 36%.
(ii) 10,372 sub-borrowers, with women accounting for 38%, trained for enhanced entrepreneurial capacity.
(iii) 590 loan officers at participating commercial banks trained for improved microfinance loan appraisal skills, safeguards awareness, and gender equality.
|Summary of Environmental and Social Aspects|
|Environmental Aspects||This project is FI category with respect to environment safeguards. By nature of PCBs' anticipated subloans, it is anticipated that these will have minimal or no adverse environmental effect and thus the project is treated as category C and need not apply any other specific requirements. In any case subprojects shall comply with Uzbekistan's enviromental, health and safety, and social laws and regulations, and will conform to ADB's safeguards policies (Safeguards RRP Chapter D, para. 29). PCBs will finance only those subprojects which have minimal or no adverse environmental risks.|
|Involuntary Resettlement||This project is FI-C category with respect to social safeguards (Involuntary Settlements). By nature of PCBs' anticipated subloans, it is anticipated that these will have minimal or no adverse social risks, and thus the project is treated as category C and need not apply any other specific requirements. In any case subprojects shall comply with Uzbekistan's enviromental, health and sefety, and social laws and regulations, and will conform to ADB's safeguards policies (Safeguards RRP Chapter D, para. 29). PCBs will finance only those subprojects which have minimal or no adverse social risks.|
|Indigenous Peoples||This project is FI category with respect to social safeguards (Indigenous Peoples). By nature of PCBs' anticipated subloans, it is anticipated that these will have minimal or no adverse social risks, and thus the project is treated as category C and need not apply any other specific requirements. In any case subprojects shall comply with Uzbekistan's enviromental, health and sefety, and social laws and regulations, and will conform to ADB's safeguards policies (Safeguards RRP Chapter D, para. 29). PCBs will finance only those subprojects which have minimal or no adverse social risks.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||During project design, the ADB mission consulted stakeholders comprising workers, NGOs, womens' organizations, microcredit organizations, credit unions, commercial banks, Central Bank of Uzbekistan and other development partners. Their feedback and lessons learned by them were incorporated into the project's design.|
|During Project Implementation||
Loan Review Missions will continue to consult with stakeholders to determine the loan's intended outcome's efficacy
Project design parameters will be monitored closely during implementation. Particulary, information will be sought regarding:
a) Amount lent to MSEs (it is envisaged that subloans up to $10,000 will be 50% of the total loan amounts disbursed)
b) Projects financed and assets created in the MSE sector
c) Total incremental employment created
d) Number of bank staff trained on enhancement of their appraisal skills of MSEs
e) Number of women provided with subloans
f) Regional distribution of subloans in Uzbekistan's 13 regions
g) Overall social and economic benefit that will accrue to Uzbekistan
h) Future areas and issues of development specially related to microfinance and MSEs
Information obtained will be placed on the 3 PCBs' websites and shall be included in the PCBs' reports to ADB.
ADB will also communicate with MOF and PCBs through written documents. MSE subborrowers would provide monthly information at the time of repayment through personal interactions. PCBs will communicate to ADB through quarterly and annual written reports. PCBs will communicate to their staff through training programs, sensitization programs and workshops and to borrowers through awareness programs.
The information related to this project would be provided by ADB, PCBs, MOF, microfinance and small enterprise borrowers, and public at large comprising researchers, evaluators, commentators and representatives of media.
The frequency, at which communication on this project will be quarterly from MSE borrowers to PCBs, from PCBs to ADB. ADB will thereafter disclose such information on its website. There will be periodic review by ADB and communication to the public by experts.
|Consulting Services||All consultants were recruited according to ADB's Guidelines on the Use of Consultants. The terms of reference for all consulting services were detailed in in Section D of the Project's Facility Administration Manual. ADB's Quality and Cost Based Selection (QCBS) procedure using the bio-data technical proposal was used in consultants' recruitment.|
|Procurement||Procurement to be financed under the loan will be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time). The procurement of goods and services will, as provided in para. 3.12 of ADB's procurement guidelines, (i) be from member countries of ADB; (ii) be of reasonable price, given time of delivery, quality, and efficiency; and (iii) in accordance with established private sector commercial practices which are acceptable to ADB.|
|Responsible ADB Officer||Mukhamedyarova, Aliya|
|Responsible ADB Department||Central and West Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, CWRD|
Ministry of Finance
5 Mustaqiliik Square
Republic of Uzbekistan
|Concept Clearance||04 Mar 2010|
|Fact Finding||26 Jan 2010 to 12 Feb 2010|
|MRM||08 Mar 2010|
|Approval||21 Apr 2010|
|Last Review Mission||-|
|PDS Creation Date||04 Mar 2010|
|Last PDS Update||18 Sep 2014|
|Approval||Signing Date||Effectivity Date||Closing|
|21 Apr 2010||01 May 2010||03 Aug 2010||31 Dec 2013||-||28 Apr 2014|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||142.87||Cumulative Contract Awards|
|ADB||50.00||17 Jun 2022||50.00||0.00||100%|
|Cofinancing||0.00||17 Jun 2022||50.00||0.00||100%|
|Status of Covenants|
|Approval||Signing Date||Effectivity Date||Closing|
|21 Apr 2010||17 May 2010||17 May 2010||30 Jun 2011||30 Jun 2012||18 Oct 2012|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|600,000.00||0.00||0.00||0.00||0.00||0.00||600,000.00||17 Jun 2022||456,602.69|
|Status of Covenants|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
|Title||Document Type||Document Date|
|Uzbekistan: Second Small and Microfinance Development Project||Project Performance Evaluation Reports||Dec 2017|
|Uzbekistan: Second Small and Microfinance Development Project||Validations of Project Completion Reports||Jul 2016|
None currently available.
The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.
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