The e-Newsletter of the Gender Network

December 2013 | Vol. 7, No. 3

By Boosting Access to Finance, ADB Helps Womens Business Development in Uzbekistan

By Lotte Schou-Zibell1
Small Businesses in Uzbekistan Generate Employment Women accounted for half of the population and 45.5% of the working population in 2010. However, womens economic participation has been declining since 2007, with their formal labor force participation rates dropping from 59.3% in 2007 to 45.5% in 2010.2 The gender gapthe difference between male and female rates of participation in the formal labor forcehas widened from 6.5 percentage points in 2007 to 9.0 in 2010. The unemployment rate for women was 6.3% in 2010, considerably higher than the 4.6% recorded for men. While there is no legal definition of womens small businesses in Uzbekistan, the Central Bank of Uzbekistan defines them for reporting purposes as businesses either managed or owned by women or with women accounting for at least half of employees. National statistics do not include sex-disaggregated data for small businesses except for individual entrepreneurs. In 2010, women were 38.3% of all individual entrepreneurs. Most women entrepreneurs are engaged in retail sales, handicrafts, services, food production including sweets, confectionary products and bakery goods. Large Unmet Demand for Credit Limited access to bank credit and the high cost of borrowing are among the largest impediments to small businesses. The lack of liquidity and availability of capital, coupled with high perceived risks and high administrative costs when lending to small businesses, compel banks to charge high interest rates. Bank loans usually have short maturities, restraining small businesses from expanding and modernizing. Weak bank risk management capacity restricts their lending, preventing engagement with small businesses that have little or no collateral. Insufficient collateral also limits the size of loans, thus restricting small businesses from borrowing more for their business expansion and capital investments. Collateral requirements for small businesses (146.0% of the loan size) are higher than for large enterprises (128.0% of the loan size).3 In stakeholder and focus group discussions, insufficient collateral was cited as the single greatest impediment to borrowing. Common forms of collateral include cars, jewelry, and real estate. Banks offer third-party guarantors, but they are difficult to find for first-time borrowers as they are often considered high risk. Estimates of the demand for small business loans vary. An analytical report conservatively projected demand for microcredit loans at $1 billion in 2013 and $6.5 billion in 2020.4

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Principal Economist, Public Management, Financial Sector, and Trade Division, Central and West Asia Department, ADB State Committee of the Republic of Uzbekistan on Statistics. 2012. Women and Men of Uzbekistan. 20072010 Statistical Bulletin. Tashkent. World Bank. 2011. The World Bank Groups Enterprise Survey. Washington, DC. United Nations Development Programme. 2011. Microfinance Development Perspectives in Uzbekistan. Tashkent.

2 ADB Support Makes a Difference: More Women are Accessing Finance Under the Second Small and Microfinance Development Project (SMDP2), the number of new microfinance loan accounts opened was 13,794 in June 2013, of which 36% or 4,564 were opened by women, exceeding the design and monitoring project target of 25%. A total of 8,703 subborrowers were supported by participating commercial bank (PCB) credit officers in business planning and management, of which 37% or 3,255 were females, exceeding the target of 1,000 potential female subborrowers trained. As of June 2013, the project had generated 16,761 jobs, of which 37% were filled by women. PCBs have exceeded their target of 30% loan officers trained in microcredit appraisal with a total of 590 microcredit loan officers trained, or 100%, of which 25% were women. Seventeen PCB trainers have been trained on capacity building for gender mainstreaming. Hamkorbank and Ipak Yuli Bank have established gender focal points to support gender sensitizing capacity. 126 PCB staff (113 males and 10 females) have been trained on gender and development mainstreaming. Box 1. The Second Small and Microfinance Development Project The SMDP2 was approved on 21 April 2010 and became effective on 3 August 2010. The project cost is $142.85 million funded by a $50 million loan from ADB, $50 million as PCBs counterpart funding and $42.85 million from sub-borrowers as equity contribution. The Ministry of Finance is the executing agency. Three PCBs were selected as implementing agencies: Hamkorbank, Ipak Yuli Bank and Agrobank. The majority of loans issued under the project are provided to the trade sector, followed by the service, manufacturing, and agriculture sectors. While the government encourages banks to offer medium- and long-term loans, most deposits and financial products are short-term. Only one-third of banks microcredit loan portfolio is for more than 3 years, with the rest issued with maturities varying from 6 to 24 months.5 On average about 75% of subloans are extended via fund transfer. The majority of subloans are provided in local currency. All loans are collateralized by pledge of real estate, equipment and inventories, transport, cash and gold. The loan-to-value ratio is about 125%. Loans issued for working capital generate on average 1-3 new jobs while investment loans generally generated more new jobs.

In the first project under the multi financing facility Housing for Integrated Rural Development Investment Project (HIRDIP), women constituted 25% of all HIRDIP 2012 homebuyer applications, and 21% of approved applicants. Among approved women applicants, 95% are married; 44% have jobs in the education and health sectors, indicating that teacher associations and health professional associations can be used as channels of the HIRDIP public awareness campaign to provide outreach to rural women; and about 60% of the women are in the age bracket 3049 years old. Of the total number of loan applications submitted, 36% were approved; of the total number of loan applications submitted by men and by women, 38% and 30% were approved respectively. Targeted beneficiaries for the HIRDIP housing loans are moderate to low-income households, young families, and teachers and health workers (two occupations in which women predominate), all of which are to reside in rural areas. Women are expected to constitute at least 30% of beneficiaries.

Central Bank of Uzbekistan. 2012. Banking Sector Statistics. Tashkent. Unpublished.

3 The HIRDIP also increases opportunities for home-based businesses and micro and small businesses, the majority of which are expected to be operated by women, through: (i) improved access to reliable infrastructure services to support home-based businesses, and (ii) community designs with include provision of retail and commercial space for new MSEs. Womens access to finance may also be positively influenced by home ownership as mortgage loans under the HIRDIP must lead to joint registration of the home; thus providing women with collateral for future loans. Under the equity Investment in Joint-Stock Commercial Bank Ipak Yuli (IYB), lending to microenterprises owned and/or managed by women is benchmarked at least 25%. Lending to womens small and medium-sized enterprises is benchmarked at 10% each year within the next 5 years. To realize these targets, IYB will develop women-friendly loan products and other financial services, and develop marketing strategies that target women. IYB will also enhance its automated information system to include a data field to collect sex-disaggregated data on the borrower and the borrowers employees. Box 2. Medical services for women Dr. Saodat Nasyrova started her business in womens health care in 2000. Within ten years, she was able to expand her business from working out of a small room to a clinic in a 2-storey building in Yangiul City. Saodat-Salavat is a reputable medical institution which specializes in obstetrics and gynecology. The clinic staff, four doctors and three nurses, all women, treat about 600 women patients every month. They only treat out-patients. In February 2012, Agrobank provided a SUM36 million ($16,500) loan under the ADB project to Nasyrova to purchase modern ultrasound equipment. The 3-year loan was provided as a cash transfer to the supplier of the ultrasound equipment at 18% annual interest rate. As collateral, she used a small building that she owns. The construction of her new 2-storey clinic was through a previous loan. In addition to providing finance, Agrobank provided advisory services to Nasyrova on new financial products and helped identify equipment suppliers. Nasyrovas business strategy is to expand the range of services provided and improve the quality of medical services. To achieve this, Nasyrova plans to apply for a new loan from Agrobank to purchase additional medical equipment, including laboratory clinic equipment.

Box 3. Garment factory with a family orientation Nigora Ashurova is a 30-year old entrepreneur who started her business in clothing manufacturing in 2005. As part of a government program supporting businesses that employ women, she was provided with a building from which she could conduct her business. She has been able to expand her business, as well as the number of employees from three to 30. All employees are women. They produce an array of clothing depending on the season, including childrens clothing, coats and dresses. Ashurova has an arrangement with the local University in which she accepts about 20 students every year to get 2 months practical experience as well as university credits. Each student is given a stipend of about $70 per month. For each student, she receives a small sum of money, as well as tax incentives. The business has a family orientation. Children, for example, accompany their mothers to work on Saturdays and on days when there is no school or daycare. Ashurova is in the process of building a new canteen in which the employees can cook and take their meals. Ashurova has been a client of Hamkorbank for 7 years. Her previous loans were used to buy additional machines for her shop. In 2011, Hamkorbank provided an equivalent of $13,000 loan under the ADB project to her to buy 15 new sewing machines. The loan was in cash with a tenure of 15 months and an annual interest rate of 42%. As collateral, she used her two cars. Hamkorbank has provided advisory services, including business planning, analyzing local businesses, accounting and marketing. As a result, Ashurova was able to employ an additional 15 persons. Currently, her main markets are Tashkent and Andijan. Her business strategy is to expand her business further and reach other regions of the country and possibly start exporting the clothes outside the country. To achieve this, she aims to apply for a new loan from Hamkorbank to buy an additional 70 sewing machines.

The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology.