Republic of Uzbekistan Financial Sector Assessment (Academic Journal of Digital Economics and Stability)

Summary

• Cumulative government capital injections into state-owned commercial banks reached US$5.8 billion between 2017 and 2023.p.17
• Total distressed assets in the banking system reached UZS 111 trillion as of December 2023, representing a net increase of UZS 75 trillion since 2020.p.14
• MSME lending stood at around US$6.2 billion at end-2023 against an estimated total demand of US$13 billion, leaving a financing gap of US$6-7 billion.p.27
• Foreign exchange loans represented 44% of total bank loans at the end of 2024.p.11
• Non-life insurance penetration remains low at 0.7% of GDP, while life insurance penetration stands at less than 0.1% of GDP.p.30

Key insights

1. Nine state-owned commercial banks dominate the financial system with a 62.0% market share of total financial system assets as of December 1, 2024.p.12
2. Prudential regulations allow banks to under-report problem assets, resulting in an IFRS Stage 3 ratio of 7.8% compared to lower official prudential NPL figures.p.15
3. State-owned commercial banks required annual recapitalization ranging between 0.4 and 2.0% of GDP from 2017 to maintain solvency.p.7
4. Directed and preferential lending programs represent approximately 30% of total banking sector lending as of end-2024.p.17
5. Less than 40% of adults in Uzbekistan made at least one digital payment during 2021 due to low account ownership and cash reliance.p.29
6. Non-bank financial institutions comprise only 3.5% of total financial sector assets as of December 1, 2024.p.11
7. Up to 42% of total bank lending in 2022 was allocated to emissions-intensive activities.p.33