Uzbekistan: Horticulture Value Chain Development Project

Sovereign (Public) Project | 47305-002 Status: Active

The Asian Development Bank is helping Uzbekistan enhance its horticulture sector value chain to generate sustainable employment and incomes. The project provides loan financing to eligible farmers and businesses for establishing intensive orchards, greenhouses, storage facilities, and processing/packaging equipment. The loan proceeds, which are being on-lent through participating financial institutions, aim to address the lack of long-term funding sources in the banking system.

Project Details

Project Officer
Bui, Giap Minh Central and West Asia Department Request for information
Country
  • Uzbekistan
Sector
  • Finance
 
Project Name Horticulture Value Chain Development Project
Project Number 47305-002
Country Uzbekistan
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3471-UZB: Horticulture Value Chain Development Project (Formerly: Innovations for Agriculture Modernization Project)
concessional ordinary capital resources lending / Asian Development Fund US$ 154.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Agriculture, natural resources and rural development - Agricultural policy, institutional and capacity development - Agro-industry, marketing, and trade - Land-based natural resources management

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project will provide a loan to the Republic of Uzbekistan to channel through qualified participating financial institutions (PFI's) who will on-lend to horticulture-related farmers and businesses for fixed asset investments such as intensive orchards, cold storages, processing and packaging equipment. The project will address the critical constraint lack of long term resources in the Uzbekistan banking system. Since horticulture sector has high value produces, the project will contribute significantly to creating sustainable enterprises, increasing employment, and improving household income. Key lessons learnt from previous and ongoing projects financed by ADB and development partners are taken into account in the project design: (i) there needs be a dedicated project management office, other than the Ministry of Finance, to monitor the PFIs' lending activities and safeguards compliance; and (ii) terms and conditions of PFIs' subloans must be business- and demand-based without any government interventions.
Project Rationale and Linkage to Country/Regional Strategy

Agricultural gross domestic product (GDP) grew at an annual average rate of 9.8% over the period 2010 2013. In spite of its decline during the past 10 years as a reflection of the strong growth in other sectors, agriculture still plays an important role in employment creation and as major source of cash income and wellbeing. During the period 2005 2015, the horticulture sector has witnessed dramatic change and increased importance to the economy. Production areas have increased significantly (vegetable by 41%, melons (and watermelons) by 53%; fruits and berries by 28%). The government aims to enhance the horticulture value chain to increase export of horticulture produces from 0.6 million tons in 2015 to 2.2 million by 2020. It is estimated that this effort will require a budget of approximately $500 million to finance farmers and enterprises to improve and/or set up intensive orchards, cold storages, processing and packaging equipment.


As part of the export promotion strategy, a farm size optimization program targeting horticulture sector announced in December 2015 has resulted in more registered farmers an increase of 57,969 farmers in the horticulture sector alone. Under this program, numbers of registered horticulture and grape producers increased by 196% while for farmers registered as producing fruits and vegetables, the change in numbers was increased by 86%. This program addresses inequities in rural employment and to bring more unemployed people into the workforce as registered farmers.


However, small farm sizes bear risks of inability to attract credit because of issues with levels of fluctuating profitability, available cash flow, lack of suitable levels of security and collateral to access finance as well as inefficiencies of scale. Although bank credit outside the capital city represents about 65% of total credit, universal access to finance for private individuals and small businesses in rural areas is constrained by weak rural branch networks and limited mobile banking services. Also, most available bank loans carry a short tenor of up to one year, which do not match farm cash flows generated by the typical multiyear agricultural product cycles. Farmers and small businesses have limited business sophistication and skills, which impede their growth, with surveys indicating that they lack access to information on market opportunities, suppliers, competitors, technology, and banking products. Low financial literacy of small businesses and low-income households, many of which are led by women, limit their access to financial services and their ability to invest and grow.


Significant cost of funding, perceived risks, and administrative costs associated with lending require banks to charge interest rates that range from 11% 25% for local currency and 6% 15% for foreign currency loans. Especially individuals and small businesses borrow at higher rates. Traditional bank credit processes restrict the use of cash flow-based lending and emphasize recourse to collateral. Insufficient collateral limits the size of loans, thus restricting small businesses from borrowing.


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.

Impact Improved contribution of horticulture sector to inclusive economic growth and rural employment.
Project Outcome
Description of Outcome Production and marketing of horticultural products increased
Progress Toward Outcome
Implementation Progress
Description of Project Outputs Finance to the horticulture sector increased
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Safeguard Categories
Environment FI
Involuntary Resettlement FI-C
Indigenous Peoples FI-C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services

Three (3) consulting services packages worth $600,000 for the following: (i) technical advisory services for PFIs; (ii) capacity development for project beneficiaries, including gender development; and (iii) Uzagroexport capacity development.

One (1) package for project financial audit worth $150,000

Procurement Shopping (goods) in five (5) contracts worth $91,000 for the following: (i) motor vehicles for PMO's project monitoring; (ii) computers and printers for PMO; (iii) air-conditioners; (iv) office furniture; (v) accounting software
Responsible ADB Officer Bui, Giap Minh
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, CWRD
Executing Agencies
Rural Restructuring Agency
[email protected]
39B, Kary Niyaziy Street
Tashkent, 100000
Uzbekistan
Timetable
Concept Clearance 26 Sep 2016
Fact Finding 19 Aug 2016 to 30 Aug 2016
MRM 07 Oct 2016
Approval 25 Nov 2016
Last Review Mission -
Last PDS Update 12 Sep 2017

Loan 3471-UZB

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
25 Nov 2016 03 Mar 2017 28 Apr 2017 30 Jun 2022 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 215.00 Cumulative Contract Awards
ADB 154.00 25 Nov 2016 0.04 0.00 1%
Counterpart 61.00 Cumulative Disbursements
Cofinancing 0.00 25 Nov 2016 0.26 0.00 9%

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 Public Communications Policy (PCP) 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.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Title Document Type Document Date
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Project Agreement for Loan 3471-UZB: Horticulture Value Chain Development Project Project/Program Agreements Mar 2017
Loan Agreement (Special Operations) for Loan 3471-UZB: Horticulture Value Chain Development Project Loan Agreement (Special Operations) Mar 2017
Horticulture Value Chain Development Project: Report and Recommendation of the President Reports and Recommendations of the President Nov 2016
Horticulture Value Chain Development Project: Gender Action Plan Gender Action Plans Nov 2016
Horticulture Value Chain Development Project: Project Administration Manual Project/Program Administration Manual Oct 2016
Horticulture Value Chain Development Project: Procurement Plan Procurement Plans Oct 2016
Horticulture Value Chain Development: Project Preparatory Technical Assistance Report Project Preparatory Technical Assistance Reports Sep 2016
Horticulture Value Chain Development: Initial Poverty and Social Analysis Initial Poverty and Social Analysis Sep 2016

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.

Title Document Type Document Date
Horticulture Value Chain Development: Environment and Social Management System Arrangements Environment and Social Management System Arrangements Sep 2016

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


The Public Communications Policy (PCP) 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.

Requests for information may also be directed to the InfoUnit.