Financial Inclusion, Regulation, and Literacy in Uzbekistan
In Uzbekistan, the majority of households and firms save and borrow informally; few use digital finance products.
The level of financial inclusion in Uzbekistan remains low: the majority of households and firms, rather than using formal finance, save and borrow informally, and few use digital finance products. Both households and firms indicate the high cost of finance as the top reason for not using digital finance products. Second, households, which are mostly Muslim, declare that religious reasons prevent them from using formal finance, as only conventional finance is available. Meanwhile, firms report that complex application procedures and high collateral requirements are the second and third most important reasons for not using formal finance. Financial inclusion is therefore constrained on the supply side. Policy recommendations include promoting private and foreign capital participation in all segments of finance; removing/limiting the use of direct interest rate controls and administrative policy tools; and facilitating infrastructure development to promote digital finance. Demand-side policies, like improving financial literacy and customer protection, are necessary to supplement these policies. Strikingly, Uzbekistan needs to create a financial inclusion and education strategy that will enable better-coordinated actions, leading to sustainable results.