UZBEKS ANNOUNCE "MICRO-FINANCE DEVELOPMENT PROGRAM"

C O N F I D E N T I A L TASHKENT 001445

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/09/2017
TAGS: PGOV UZ
SUBJECT: UZBEKS ANNOUNCE "MICRO-FINANCE DEVELOPMENT PROGRAM"


Classified By: CDA Brad Hanson for reasons 1.4 (b) and (d).


1. (U) The Government of Uzbekistan (GOU) has announced a
plan to expand popular access to microcredit over the next
three years. The "Micro-Finance Development Program",
adopted by decree of the Cabinet of Ministers in June,
recognizes the important role the availability of microcredit
plays in economic development, especially in rural areas, and
provides a roadmap for practical implementation of the legal
framework established by three earlier laws on credit unions
and micro-finance organizations. The decree envisions the
eventual creation of 62 credit unions and 97 micro-lending
organizations across the country and tasks the Ministries of
Justice, Finance, and Labor, the Central Bank, and various
commercial banking organizations with preparing the
institutional infrastructure and regulatory controls needed
to support the expansion of credit access and attract foreign
investment assistance.


2. (U) The GOU's very detailed program also features a
proposal to create a special bank, "Microcreditbank", to act
as a clearinghouse for microcredit-designated assistance
funds from international organizations. According to the
plan, "Microcreditbank" will be the primary receiver for all
international microcredit finances and will allocate funds
competitively among domestic micro-lending organizations and
supervise their use. (Note: Microcredit organizations,
including several funded by USAID, had operated under the
terms of a previous Cabinet of Ministers decree until it
expired in 2006. Virtually all of these organizations have
been forced to close as a result of GOU pressure. End Note.)



3. (C) Comment: The "Microcreditbank" scheme appears to
represent an attempt to eliminate the presence of independent
foreign micro-lending organizations in Uzbekistan without
losing any of the development assistance such organizations
provided. The Uzbek Government is clearly torn: the
Cabinet's serious, detailed plan suggests a sincere
enthusiasm for the economic potential of microcredit
financing, but also a deep unease at the idea of foreign
organizations distributing sums of money to private
individuals without state supervision. The GOU therefore
seeks to have the best of both worlds by permitting, even
encouraging, micro-lending and foreign donations, yet
insisting that the funds be administered and controlled by
the state. Whether this arrangement will be as effective as
the previous network of private lenders remains to be seen.
This situation is only the newest development of a continuing
pattern in which the GOU, suspicious of independent non-state
organizations to the point of paranoia, forces such groups
out and replaces them with government-controlled facsimiles.
HANSON