Uzbekistan is set to implement sweeping changes to its microfinance sector effective January 1, 2024. The key catalyst for this transformation is the presidential decree (PP-364) issued on November 10, which outlines a comprehensive set of reforms aimed at not only increasing the maximum amount of microloans but also introducing structural changes to the microfinance landscape.
One of the headline reforms is the doubling of the maximum amount of microloans in Uzbekistan from the current UZS 50mn (over $4,000) to UZS 100mn (over $8000). This move is poised to provide entrepreneurs with increased access to capital, facilitating the expansion and development of small businesses.
The decree mandates non-bank credit organizations to adopt a corporate structure in the form of a joint-stock company or a limited liability company.
Microfinance organizations are now permitted to attract loans from non-residents and extend financial services to legal entities in foreign currency. Additionally, they can attract loans from individual shareholders, not exceeding twice the amount of their contribution to the authorized capital or the par value of the shares they own.
Individuals and legal entities can now own up to 20% of the share in the authorized capital of a non-bank credit organization without prior permission from the regulator, marking a significant increase from the previous 10%. Notification to the Central Bank is only required for acquisitions between 10% and 20%.
The decree introduces the concept of microfinance banks in Uzbekistan, designed to offer fundamental banking services. Furthermore, a mechanism will be established to transform existing microfinance organizations into microfinance banks.
Banks providing loans to microfinance institutions can now accept, as collateral, the rights of these organizations to claim for the microfinance services they provide, facilitating more secure lending practices.
Microcreditbank has been directed to establish a new microfinance organization with an increased authorized capital of $30mn by April 1, 2024, with a focus on microfinance services and the participation of strategic investors. The People's Bank has also been tasked with raising $100mn for microfinance in 2024.
The presidential decree outlines an ambitious program for 2024-2026, aiming to significantly enhance the role of microfinance services in Uzbekistan. The objectives include increasing the microfinance market volume by at least five times, extending services to over 1mn entrepreneurs, doubling the funds raised by individuals in microfinance organizations, and providing microfinance services to 500,000 people without official income to support self-employment and business development.
By January 1, 2024, Uzbekistan plans to develop a regulatory framework for the provision of Islamic finance services by microfinance institutions, signaling a commitment to diverse and inclusive financial solutions.
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