Central Bank Implements Stricter Regulations for Microloan Issuing Banks
The Central Bank of Uzbekistan has announced plans to tighten regulations on microloan issuance, limiting their share in banks’ total loan portfolios to 25%. This decision was shared during a media dialogue by Sanjar Nosirov, Department of Methodology for Regulation of Credit Institutions, on February 25.
Data from the regulator shows that the number of citizens taking out microloans exceeded 2 million in the first half of 2024, with the figure approaching 2.5 million by the end of the year. On average, each borrower holds 1.6 microloans.
There is a noticeable concentration of assets in banks’ loan portfolios, especially in auto loans and microloans. The Central Bank views the rapid growth of these loans, disruptions in borrowers’ income, and the declining market value of cars as potential risks to banking stability.
In order to prevent overheating in the retail lending sector and maintain the stability of the banking system, the Central Bank aims to restrict the share of microloans to 25% of commercial banks’ loan portfolios, similar to auto loans, drawing insights from countries like China and India.
Currently, five banks have microloans exceeding 25% in their portfolios, with three of them being “new” banks. The Central Bank has engaged in discussions with two banks to adjust their loan products and bring them in line with the new regulations.
While blogger Nikita Makarenko mentioned TBC Bank and Anor Bank as having “100% of all loans in the portfolio” as microloans, the Central Bank representatives did not disclose the full list of banks during the media dialogue.
It is important to note that the regulator does not anticipate a significant decrease in microloans compared to auto loans after the restriction is implemented. Many banks already have a share of microloans below 25% in their loan portfolios.
Overall, the Central Bank’s decision to tighten regulations on microloan issuance aims to promote financial stability and prevent risks associated with the rapid growth of retail lending in the country.
