Presswire
December 11

The Asian Development Bank (ADB) approved a US$20 million loan to help provide microfinance services to poor households, micro-enterprises and small businesses in Uzbekistan.

In addition, ADB will provide a technical assistance grant of US$400,000 to strengthen the capacity of the Central Bank of Uzbekistan for prudential regulation and supervision of savings and credit unions (SCUs).

The loan will help create SCUs and strengthen the capacity of commercial banks to provide microfinance services.

The assistance package supports the Government's efforts to promote the development of micro and small enterprises (MSEs) as a means of generating income and employment and easing the challenges of structural reforms. As Uzbekistan moves towards a market-oriented economy, it must carry out difficult reforms, including the restructuring and privatization of state-owned enterprises. The development of MSEs will help to offset the unemployment created by such reforms.

But Uzbekistan has a small and underdeveloped financial sector with limited capacity to provide financial support to MSEs and to poor households, particularly in isolated areas. In the past, there have been no formal, legally incorporated microfinance institutions.

"An effective and well-funded financial system, which mobilizes savings and provides the poor with financial support to set up MSEs is critical to supporting the country's transition to a market economy and reducing poverty," says Radhakrishna Narasimham, Senior Portfolio Management Specialist in ADB's East and Central Asia Department.

The Small and Microfinance Development Project has three major elements:

* Developing an effective regulatory and institutional framework for SCUs

* Setting up an institutionally and financially sustainable network of 20 SCUs, supervised by the Central Bank

* Providing a credit line to commercial banks for onlending to households, microenterprises, and SCUs.

The total cost of the project, due to be completed in 2010, is US$50 million. Apart from ADB, it will be funded by contributions from the Government, SCU members, participating commercial banks and their borrowers.

The ADB loan will be made from its ordinary capital resources and will have a 20-year term, including a grace period of five years. The interest rate will be determined in accordance with ADB's LIBOR-based lending facility.

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