the reformulation of Xalq Bank's business strategy towards retail banking. The project was composed of an introduction of risk (mainly credit) management, a development of new products, and an improvement of branch network performance (SBFIC, 2008).
Xalq Bank is the oldest financial institution in Uzbekistan, which was opened in 1875 in Tashkent city. By 1896 its branches operated in other Uzbek cities, accumulated deposits and provided letters of credit and government securities. During the Soviet period, it was the state-owned bank called "Uzsberbank" (Uzbek Saving Bank). After the dissolution of the Soviet Union, Uzsberbank was transformed into the state-owned Xalq Bank on October 4, 1995. It is important to mention that at the beginning of 1994, 98.5% of the total savings in Uzbekistan was accumulated by Xalq Bank (Uzbank.net, 2011). It is also worth noting that the pensions of all retired Uzbekistan citizens are accumulated on their accounts at Xalq Bank. Also, the bank is the financial agent of the government in targeted assistance to low-income families and benefits for children (children's allowances).
There are other large banks which aim to develop strategic sectors in the Uzbek regions. For example, Qishloq Qurilish Bank focuses on long-term mortgage lending, especially in rural areas. Agro Bank provides financial services to agricultural enterprises and farm households.
During the last decade the government has introduced several strategic programs on reformation and liberalization of the banking system. The last program for the period 2011-2015 has composed complex measures on further improving the stability of the commercial banks and achieving high international standards. The central and local authorities together with commercial banks are responsible for fulfilling the main goals of this program (Decree of the President of Uzbekistan #1438, 2010).
In 2008 the Decree of the President of Uzbekistan "On measures to further raise the financial stability of the enterprises of the real sector of economy" was accepted for the purpose of financial recovery of insolvent enterprises during the global financial crisis. As a result, till 2013 the large Uzbek banks accepted 171 bankrupt enterprises to their balance (Uzdaily.uz, 2013). The main part of these enterprises was companies with debts and with the value of less than US $2 million. For managing the assets of these enterprises the banks established management companies or specialized sub-divisions. The banks have invested over 442,6 billion soums of their own resources ((approximately US $200 million) official currency rate on 14.10.2013 1$=2158.36 soums). The Central Bank declared that as a result of the banks' investments, 156 enterprises rehabilitated their activities and created over 25,000 new jobs. Currently, 122 enterprises were realized to investors. One can claim that these measures to rescue bankrupt enterprises were important for financial stability in the real sector. On the other hand, the administrative order on the acceptance of insolvent enterprises to the state-owned banks' balances could be a challenge for the Uzbek banking system during the global financial crisis.
Due to a lack of data, we cannot analyze the distribution of credit among the sectors from 2007 to 2013. However, the available data shows that in 2011 more than 40% of the total bank credit was concentrated in the industrial sector (Graph 1). Stimulation of this sector is one of the main priorities of the current economic policy. The Uzbek large banks finance the long-term strategic projects in such areas as chemical, electric power, and the automobile industry, among others.
Graph 1
Distribution of the banks' loans among the economic sectors in 2011
Source: The Central Bank of the Republic of Uzbekistan.
In 1995 the commercial banks established a lobbying organization - Uzbekistan Banking Association. By its status, the Banking Association is a voluntary, non-commercial and non-governmental organization which was established to protect the rights and interests of commercial banks and assist them in various issues. Nowadays, the Association consolidates 22 from 29 commercial banks of the republic, with more than 90% of the total banking sector assets in Uzbekistan.
The Uzbekistan's Banking Association composes numerous committees on bank legislation, audit, taxation, corporate governance, banking ethics, and other issues. Also, the Association includes a bank rating agency, companies' credit history, insurance, consulting, syndicated credit, and others. Together with the Bank and Finance Academy of Uzbekistan, bank colleges, regional training centers, and international financial institutions, the Association organizes different trainings, seminars, and round tables for bank specialists. The Association is eligible to offer changes to the legislative regulations regarding commercial banks.
Overall, there seems to be evidence to indicate that during the period 2007-2012 Uzbekistan's banking system remained stable. Nevertheless, one can claim that there is still scope for the further development.
A high concentration of the banks' credit in Tashkent city is one of the main problems. The share of the banks' credit in the capital city exceeds the share in sums of Gross Regional Product (GRP) (Graph 2).
Graph 2
Distribution of the banks' loans among the Uzbekistan's regions and share in sum of the regions' GRP in 2011 (%)
Source: Calculations are based on the statistical newsletters published by the State Committee on Statistics and Central Bank of the Republic of Uzbekistan.
Uzbekistan is divided into 13 regions (including the capital city - Tashkent) and 1 autonomous republic - Karakalpakstan. Tashkent city, Tashkent region, Qashqadaryo region, and Bukhara region are traditionally considered as high income territories. The Karakalpakstan autonomous republic, Jizzakh region, and Sirdaryo region are usually referred to as low income areas.
The analysis of banking system development in the Uzbek regions from 2007 to 2012 is not provided due to a lack of data. However, available data shows that in 2011 more than 50% of total bank loans were absorbed by the capital city. Banks tend to concentrate their credit in the Tashkent region and Tashkent city. These regions absorb 60% of bank credit, but produce only about 30% of the total regions' GRP. Only in Tashkent city does the share of bank loans exceed its share in sum of the regions' GRP. The distribution of the banks' loans among the other regions does not vary substantially.
Now, let us consider the levels of savings accumulation in banks among the Uzbek regions. The issue was analyzed by Urmanova (2011), who tried to determine the potential reserves for credit institutions to raise funds from savings and analyzed a special indicator called the Index of Savings Business Development (ISD), which is calculated as the ratio of bank savings per capita relative to the per capita income in 2010 for each region (Table 4).
Table 4
Reserves for attracting people's deposits according to people's income in 2010 (in %)
Source: Urmanova 2011)
Urmanova (2011) found that in the regional context there is a considerable differentiation in the levels of this indicator. The highest index value was in Xorazm region - 9.15%, the lowest - in Namangan region (4.02%). Here it should be noted that Xorazm region does not have the highest per capita income (income level is on the 8th place). The difference in the level of per capita income between the regions with maximum and minimum values of
