A new investment by IFC will help smaller businesses in Uzbekistan boost their access to finance, develop the country’s green banking capacity and support privatization in the country’s banking sector.

IFC's $75 million loan to Uzpromstroybank will support the bank’s path to privatization, as it aims to finance more climate-friendly projects and expand lending to small and medium enterprises (SMEs) in Uzbekistan. The funding will be structured as an Uzbek Soum-linked loan to provide access to long-term local currency funding to the bank. The long-term funding—not readily available in the market given the COVID-19 pandemic—will further incentivize the bank's transformation with an option for IFC to convert the loan into equity.

While the proceeds of the project will be earmarked for on-lending to SMEs, 50 percent of the loan will be dedicated to climate finance, enabling the bank to scale up its green banking program.

Uzbekistan plans to sell shares in state-owned banks to investors as part of a drive to transform the country's financial sector. Privatization will bring in new capital, global expertise, and modern technology that will benefit the banking sector and its customers. Currently, state-owned banks dominate Uzbekistan’s banking sector—83 percent of banking assets are held by state-owned banks.

“IFC welcomes Uzbekistan’s determination to attract private investment into its financial sector,” said Makhtar Diop, IFC’s Managing Director. “Our financing aims to help Uzpromstroybank prepare for its privatization and become a standard setter on SME lending and green finance. This initiative is in line with IFC's strategy to support green growth by spurring investments and seizing opportunities to help Uzbekistan meet its climate goals and build a greener, resilient future."

Since 2019, IFC has worked with Uzpromstroybank—the second largest bank in the country—to prepare for privatization by strengthening the bank’s corporate governance practices, commercializing its operations, and reducing state involvement in decision-making, while also helping the bank build a green banking franchise.

«This agreement is the result of our intensive work with IFC to support Uzpromstroybank’s transformation and its subsequent privatization. IFC’s Uzbek Soum-linked loan will help expand the bank's capabilities to finance investment projects in national currency, de-dollarize its loan portfolio and support its path to privatization. IFC’s investment will be used to increasing financing to SMEs and green projects," said Sakhi Annaklichev, Chairman of the Management Board, JSCB Uzpromstroybank.

Uzbekistan, the most populous country in Central Asia, is undergoing an unprecedented economic transformation. As of September 1, 2021, IFC had $158 million in investment commitments in Uzbekistan. IFC’s advisory services aim to help the government of Uzbekistan in preparing state-owned banks for privatization, developing and diversifying the financial market, transforming the cotton sector, developing the chemicals industry, and piloting public-private partnerships (PPPs) in the power and health sectors.