Central Bank to tighten regulations on banks issuing microloans

This was announced on February 25 during a media dialogue by Sanjar Nosirov, Department of Methodology for Regulation of Credit Institutions.

According to data from the regulator, in the first half of 2024, the number of citizens who took out microloans exceeded 2 million, and by the end of last year, the figure had approached 2.5 million. On average, each borrower holds 1.6 microloans.

Additionally, there is an increasing concentration of assets in banks' loan portfolios, particularly in the segments of auto loans and microloans. The Central Bank considers the rapid growth of these loans, interruptions in borrowers' income, and the declining market value of cars as negative factors for banking stability.

"Based on this, it is crucial to implement macroprudential measures to prevent overheating in the retail lending sector and to ensure the stability of the banking system," said Sanjar Nosirov.

Specifically, the Central Bank intends to limit the share of microloans to 25% of commercial banks' loan portfolios, similar to auto loans. The regulator cites the experience of countries such as China and India.

According to Nosirov, five banks currently have microloans exceeding 25%, three of which are "new" banks. The regulator expects that as their loan portfolios grow, their microloan share will decrease. The Central Bank has held discussions with two banks and given them time to adjust their loan products.

In his Telegram channel, blogger Nikita Makarenko mentioned two banks — TBC Bank and Anor Bank — where "100% of all loans in the portfolio" consist of microloans. However, during the media meeting, Central Bank representatives did not disclose the list of banks.

The Head of the Banking Prudential Supervision Department, Nusratulla Fazilov, noted that the regulator does not expect microloans to decrease as significantly as auto loans after the restriction is introduced. He emphasized that in many banks, the share of microloans in the loan portfolio is already below 25%.

Microfinance

In January 2024, the then-head of the Central Bank, Mamarizo Nurmuratov, stated that there were no preconditions for a bubble forming in the microfinance market. In 2023, the share of retail loans in the total portfolio increased from 26% to 33%, with certain segments of retail lending showing signs of overheating.

At the end of February that same year, President Shavkat Mirziyoyev approved doubling the maximum microloan amount — from 50 million to 100 million UZS.

By the end of last year, the president had ordered the creation of 50 microfinance organizations and allocated them financial resources totaling 1 trillion UZS.

In July, the Central Bank approved regulations governing the operations of microfinance organizations in the field of Islamic finance. These organizations will be allowed to engage in Islamic finance; however, they must establish a special council and maintain separate accounting records.

Additionally, since November 1, a "cooling-off period" has been in effect for online loan issuance. When applying through an app, biometric identification is required to verify that the application was personally submitted by the borrower. If a borrower has multiple outstanding debts or overdue payments, the bank may reject the loan application or reduce the approved loan amount.

By the end of 2024, the volume of issued microloans (45.83 trillion UZS) and microcredits (17.4 trillion UZS) had increased by more than half. In the second half of the year, the growth rate of microloans accelerated, and in December, an all-time record was set — 5.1 trillion UZS.