At project preparation in 2012, women and rural small businesses in Uzbekistan had limited access to credit, restricting their growth and capacity to become more efficient and profitable, and thus contribute more fully to overall economic growth and development. While this was largely due to small businesses’ inability to meet high collateral requirements, weak institutional capacity especially in risk management of the banks, which dominated the country’s finance sector, was also a significant factor.
To help address the situation, the Asian Development Bank (ADB) approved in November 2013 a $50 million loan for the Small Business and Entrepreneurship Development Project. The project was to improve the ability of women and rural small businesses to grow productive enterprises in profitable sectors, access financing, and benefit from economic opportunities through the establishment of dedicated credit lines in two smaller private sector banks, the HamkorBank and Ipak Yuli Bank, which passed all ADB due diligence requirements, had large portfolios in small business and microfinance, and were willing to expand their presence in rural areas. Participating commercial banks (PCBs) were to provide matching counterpart funds of $50 million to the project while sub-borrowers were to put up $33.3 million equity contribution.
The project’s expected impact was viable rural small businesses with women’s participation. Through two outputs ─ strengthened capacity of PCBs to deliver financial services to women and rural small businesses and improved borrowing capacity of the targeted businesses ─ its expected outcome was increased financial access by small businesses with women’s participation. In addition to the loan, ADB also provided a $500,000 technical assistance grant for capacity development.
In accordance with the loan agreement, the PCBs revised their lending policies to simplify the process of reviewing and approving loans for small businesses, strengthen decision-making and responsibility of branches, and relax collateral requirements on microfinance loans. Known gender issues in the financial sector were addressed, and gender awareness seminars, public awareness campaigns, and business and financial literacy workshops were conducted to increase the availability and uptake of women business loans. E-banking was promoted, including an online system that reduced loan processing time by 1.5 to 2 times. Subloans were required to have a repayment period of up to 5 years, a market-based interest rate, a coverage of up to 75% of the subproject costs, and an aggregate value for individual sub-borrowers of not more than $100,000.
By 2017, the two PCBs had issued 5,098 microfinance loans, against a target of 5,000, of which 76% supported rural clients and 33% supported women businesses. Against a target of 100, 854 new small business loans had been provided, 79% of which went to rural clients and 34% went to women, exceeding the targeted 50% in rural coverage and 30% women coverage.
Overachievement in output targets allowed the project to attain its intended outcome, also beyond targets. At project completion in 2016, the entire ADB loan amount was disbursed. Early loan utilization allowed the banks to refinance new projects as soon as repayments were made, thus expanding credit beyond the targeted amount.
Uzbekistan’s Ministry of Finance was executing agency.
