A Detailed Study on the Importance of Microfinance on the Banks in Uzbekistan

Nagimov Fakhriddin ,Zhang Ping

doi:10.7176/rjfa/12-20-02

Abstract

This research work investigated the Importance of Microfinance on the Banks in Uzbekistan. The study examined how micro-finance activities and features such as group membership, pre-loan training, cross guarantee ship, loan size, technical and managerial training, among others, impact on the survival, growth, productivity and performance of Micro finance in Uzbekistan. The hypotheses formulated were developed around the theories of financial growth model, pecking order theory, and contract theory. Four hypotheses were raised and tested at 0.05 significant levels. The findings revealed that micro finance and micro-financing enhance survival of Micro finance but not sufficient for growth and expansion of such Micro finance. The result also revealed that microfinance has positive effects on productivity and performance of local entrepreneurs. The findings from the interview sessions revealed that micro financing is not effective and substantially being practiced in Uzbekistan as many grant more individual loans than group based loans, thereby increasing their running cost and putting their portfolio at risk. We also recommend that enterprises supported by MFBs should be linked up with larger financing window like the fund or Strategic Partners for expansion and growth funding after survival. DOI: 10.7176/RJFA/12-20-02 Publication date: October 31 st 2021

Highlights

Background SinceUzbekistan attained independence in 1991, considerable efforts have been directed towards industrial development
This was echoed by Yumkella (2003) who observes that all these programmes could not achieve their expected goals due largely to abuses, poor project evaluation and monitoring as well as moral hazards involved in using public funds for the purpose of promoting private sector enterprises
5.1 Conclusion Entrepreneurs in the small and micro sub-sector of the economy in Uzbekistan require access to finance for their businesses to thrive on a sustainable basis

Summary

Introduction

Background SinceUzbekistan attained independence in 1991, considerable efforts have been directed towards industrial development. The initial efforts were government-led through the vehicle of large industry, but lately, emphasis has shifted to Small and Medium Scale Enterprises (SMEs) following the lessons learnt from the success of SMEs in the economic growth of Asian countries (Ojo, 2003). Despite MSME’s important contributions to economic growth, small enterprises are plagued by many problems including stagnation and failure in most sub-Saharan African countries (Bekele, 2008). In Uzbekistan, the problem is not limited to lack of long-term financing and inadequate management skills and entrepreneurial capacity alone, and, includes the combined effect of low market access, poor information flow, discriminatory legislation, poor access to land, weak linkage among different segments of the operations in the sector, weak operating capacities in terms of skills, knowledge and attitudes, as well as lack of infrastructure and an unfavourable economic climate

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Conclusion