Uzbekistan Banks Battle Problem Loans: How Do They Prevent Fraud?

The banking sector in Uzbekistan is facing a significant challenge with problem loans, and it’s essential to examine how banks prevent fraud in this context.

The Problem of Problem Loans

According to the latest report on loan portfolios, the total loan portfolio across all banks in Uzbekistan stands at UZS 460.4 trillion (over $37.4 billion), with a staggering 3.6% classified as problem loans.

Banks with State Shares: A Mixed Bag

Banks with state shares have a total loan portfolio of UZS 329.5 trillion (around $27 billion), out of which UZS 13.069 trillion (over $1 billion) are classified as problem loans, accounting for 4.0%. Some banks, such as the National Bank of Uzbekistan, SQB, Agrobank, and Asaka Bank, have reported a significant amount of problem loans.

However, some banks have managed to maintain a lower share of problem loans. Kapitalbank, HamkorBank, and Ipak Yuli Bank have impressively reported 1.2%, 0.8%, and 2.4% in problem loans, respectively.

The Impact of Non-Performing Loans (NPLs)

Despite the decreasing share of non-performing loans (NPLs), some banks still face considerable challenges. Garantbank, Oktobank, and Saderat Bank Iran have reported NPLs of 18.9%, 84.0%, and 19.7%, respectively.

Experts’ Concerns

Experts suggest that excluding corporate loans and government-subsidized NPLs from the statistics may provide a more accurate reflection of the real NPL situation, estimated to be between 1.5 to 2.5%. This could indicate that there is considerable potential for NPLs to expand further.

Investment Banking Director’s Warning

Investment Banking Director of Alkes Research, Bekhruzbek Ochilov commented, “Non-performing loans (NPLs) at major Uzbek banks may experience a significant increase, potentially reaching two to three times their current levels.”

Effective Fraud Prevention Measures

As the banking sector continues to battle problem loans, it is essential for banks to implement effective fraud prevention measures. Some of these measures include:

Implementing robust risk management systems
Conducting regular audits and reviews
Providing employee training on fraud detection and prevention

Advanced Technologies and Partnerships

Additionally, banks can consider investing in advanced technologies such as artificial intelligence and machine learning to help detect fraudulent activities. They can also establish partnerships with other financial institutions and law enforcement agencies to share information and best practices.

Prioritizing Fraud Prevention and Risk Management

As the Uzbek banking sector continues to evolve, it is crucial for banks to prioritize fraud prevention and risk management to maintain a healthy and stable banking system.