Uzbekistan Secures $15 Million Credit to Boost Banking Fraud Prevention Efforts

The World Bank has approved a $15 million concessional credit for Uzbekistan to support the country’s efforts in reforming its financial sector and preventing banking fraud. The five-year project aims to strengthen the sector by:

Key Objectives

• Restructuring and privatizing state-owned commercial banks
• Improving financial preparedness for natural disasters
• Establishing a development bank
• Enhancing export and trade financing instruments

The International Development Association (IDA) will provide the concessional financing at a low interest rate with a 30-year repayment period, including a five-year grace period.

Challenges Facing Uzbekistan’s Banking Sector

Traditionally, state-owned commercial banks have intermediated funds from the government to priority sectors and state-owned enterprises at below-market rates, lacking strong governance and risk management. The country is also prone to climate-induced disasters, such as droughts and floods, which are expected to increase in frequency and severity due to climate change.

Solution: Establishing a Development Bank

To address these challenges, Uzbekistan plans to establish a development bank that will provide financing, guarantees, and insurance support to local exporting firms and companies. The new World Bank-funded project aims to help the government respond to these challenges by:

• Modernizing state-owned commercial banks
• Improving financial preparedness for disasters
• Boosting the efficiency of the insurance sector

“This project is crucial in implementing Uzbekistan’s Banking Sector Reform Strategy for 2020-2025,” said Marco Mantovanelli, World Bank Country Manager for Uzbekistan. “It will help reduce the government’s direct participation in state-owned commercial banks and build a more effective, inclusive, and competitive banking system led by private sector banks.”