Uzbekistan: Small Business Finance Project

Finance / Small and medium enterprise finance and leasing

Favorable hydrocarbon revenues and substantial public investments supported a strong gross domestic product (GDP) growth at an annual average rate of 8% during 2000 2015. The GDP per capita increased from $558 to $2,036 and the poverty rate decreased from 27% to 14% during the same period. An industry-focused growth strategy resulted in an increase in the industry sector's share of GDP from 14% in 2000 to 24% in 2015, while the agriculture sector's share of GDP decreased from 30% to 17% during the same period. However, the strong GDP growth failed to effectively absorb the country's growing workforce. While the unemployment rate remained low at 5.2% in 2015, the number of Uzbek migrants doubled to 2 million during 2000 2015. The ongoing recession in the Russian Federation, which hosts over 90% of Uzbek migrant workers, has led to an increase of returning migrants, posing challenges to absorb them into the economy. Small businesses effectively generate employment and income, and are critical for Uzbekistan's inclusive growth.

The financial system is dominated by banks, which control 94% of finance sector assets. Eight state-owned banks control 75% of banking assets and provide the bulk of credit to state-owned entities. During 2011 2015, bank credit to small businesses substantially increased from 4.5% to 7.1% of GDP, reflecting a compound annual growth rate (CAGR) of 34.1%. However, lending to small businesses still represents less than one-third of overall bank credit, which is insufficient given their economic significance. Eighty percent of small businesses are still being funded by family and friends and informal resources. Access to finance remains a key constraint for private business growth.