The document discusses the role of Islamic finance in supporting women entrepreneurship in Uzbekistan. It notes that while Uzbekistan is undertaking political and economic reforms to attract investment, it faces challenges like corruption and lack of judicial independence. Islamic finance tools like Murabahah and Ijarah are available through the IDB and other institutions and can be alternatives to the country's banking system which tends to favor state-owned banks and has high interest rates. Islamic finance could help support the development of women entrepreneurship as only a small percentage of women are currently employed or own businesses. Initiatives aim to encourage women and girls to pursue careers in sectors like technology but they often face family pressure to choose more traditional paths. Islamic finance may
Article on women economic empowerment through Islamic financing mechanisms in Uzbekistan
1. 25ยฉ
1st
May 2019
SPECIAL
REPORT
Murod Khusanov is a
consultant at the OECD
Anti-Corruption
Network. He can be
contacted at murod.
khusanov@gmail.com.
As the government strives to attract
investments, it has chosen the path of
political and economic reforms while
being challenged by a high level of
corruption and the lack of judicial
independency and sound private
property protection mechanisms.
Another problematic area is the
๏ฌnancial sector, which is overregulated
and mostly dependent on state in๏ฌows
and is now also on the market for
private capital, while banks are now
preparing for IPOs and reviewing their
risk-management policies in order to
comply with international standards.
As there is a demand for money in๏ฌows,
international ๏ฌnancial institutions have
increased their activities in the country
by enlarging their project portfolios.
In the meantime, the International
Islamic Trade Finance Corporation has
signed a framework agreement with the
government on a US$100 million deal to
open a line of ๏ฌnancing for local banks,
following the application of Uzbekistan
to join the organization. Asia Alliance
Bank was the ๏ฌrst bank in Uzbekistan
to sign a US$9 million agreement for a
Murabahah ๏ฌnancing mechanism in June
last year.
According to Khusan Khasanov, a ๏ฌeld
representative with the IDB, though
there is high demand for Islamic ๏ฌnance
tools, there are still considerable gaps in
terms of knowledge in the community
on the particularities of Islamic ๏ฌnance.
Islamic ๏ฌnance is already available
through a US$350 million portfolio
of the IDB in addition to a number of
leasing companies and investment funds
through Murabahah and Ijarah ๏ฌnancing.
These tools are often good alternatives
to the traditional ๏ฌnancial tools available
in the sector that are overwhelmingly
represented in the state with 82% of total
sector assets accumulated. High interest
rates (on average 22%) following the
Central Bank of Uzbekistanโs re๏ฌnancing
rate of 16% and overregulation in the
banking sector remain as the major
obstacles for banks to outreach SMEs.
In addition, the shadow nature of
the economy pushes SMEs toward
less regulated non-banking ๏ฌnancial
institutions where the interest rates
exceed 30%.
Islamic ๏ฌnance could also make
considerable positive impact on the
development of women entrepreneurship
in the country. As explained by Gulnora
Makhmudova, the chairwoman of
the Business Women Association of
Uzbekistan, there is undeveloped
potential for women entrepreneurship
in the country considering that only
44% of the total employable female
population are actually employed and
mostly in social sectors and that only
29% of all entrepreneurs are women.
Businesswomen are greatly represented
in the textile industry but are also
emerging in the agricultural sector that is
focused on products for export.
The problem exists at the family level
where parents play a decisive role in
choosing the future direction of their
children, especially girls. This is a two-
fold problem, ๏ฌrstly priority is often
given to sons in the family when it comes
to education, and secondly girls are
pressured to choose social professions.
This is represented in the statistics
from the United Nations Development
Program showing that in comparison
to industry (16.5%), transport and
communications (10.4%) and economics
and law (19.3%) university graduates,
women are better represented in
education (52.9%) and healthcare (43.9%)
professions. This also explains the bigger
share of businesses in biotech led by
women, and also the bigger share of
female brain drain abroad in this sector.
There are a number of initiatives to
engage young girls in the technological
sector and one of the programs is the
TechWomen initiative. Saida Yusupova,
a technovation regional ambassador,
reveals that the aim of the program
is to encourage young girls to start
careers in information technology, and
also help them to elaborate and further
develop their business ideas through an
acceleration program. She says that girls
are often challenged by parents when it
is time to pick a profession. Girls who
succeed in the technological sector are
often those who get support from their
families.
Modern Uzbekistan is opening up to
international capital and choosing the
path of liberalizing its economy,
encouraging entrepreneurship by easing
the way of doing business and attracting
more foreign direct investment. And in
this process, unleashing womenโs
potential could be a determinative factor
in these developments and surely there is
also a role for Islamic ๏ฌnance to play.
How Islamic inance plays a role in women
entrepreneurship in Uzbekistan
On the 14th
September 2018, Uzbekistan โ a post-Soviet country in Central Asia โ issued its ๏ฌrst-ever eurobonds
with a value of US$1 billion. This marks the previously isolated countryโs opening-up to foreign capital with
a plan for another eurobond sale in 2020, according to Finance Minister Jamshid Kuchkarov. The sale followed
the assignment of a long-term issuer rating of โBB-โ by Fitch Ratings, stating institutional weakness and high
dependence on natural resources as the main challenges to overcome. MUROD KHUSANOV writes.