During last years, the financial market of Uzbekistan has undergone a number of important changes, particularly, in accordance with the Development Strategy of New Uzbekistan for 2022-2026, it is planned to expand financial resources in the economy by bringing the stock market turnover from $200 million to $7 billion in the next five years, and to complete the transformation processes in commercial banks with a state share.
In an interview with our magazine, the Minister of Economy and Finance of the Republic of Uzbekistan Sherzod Davlyatovich KUDBIEV answered a number of questions concerning the current state and prospects for the development of the financial market of our country.
– Ordering and regulating the financial market is a very formidable task. How do constantly changing trends, new trends and products that expand the range of financial instruments affect the activities of the regulator?
– As you know, the concept of the financial market is extremely broad, it covers the stock, currency and insurance markets, the banking sector and the others. The Ministry of Economy and Finance plans to carry out large-scale reforms to create simple and convenient conditions for the population in a number of areas, including the development of securities and insurance markets. The development of the securities market in our country, its state regulation, coordination of the activities of its participants, especially reliable protection of the rights and interests of investors are important for the growth of the financial market.
Currently, according to the relevant instructions of the Head of State, sales volumes, market capitalization, the number of issuers of securities are increasing on the local stock market, new types of products are entering the market. This, in its turn, gives the competent state authority an incentive to strengthen control over the local stock market. For example, the Korean Stock Exchange (KRX – Korean Exchange) has provided a TMS (Total Market Surveillance) system. When trading securities through this system, it becomes possible to identify and verify suspicious transactions, as a result of which the experience and skills of the Ministry’s employees increase, as well as the amount of work with paper documents is reduced.
The insurance market is also an important area of the financial market, and the development of the business environment and the growth of incomes of the population increase the demand and need for insurance service. Currently, citizens and entrepreneurs are provided with preferential bank loans in various directions. This is directly related to insurance, that is, the loans themselves, the projects carried out on these loans, the equipment purchased, foreign investments, construction, production and services projects are not carried out without insurance. Whereas, it leads to an increase in the volume of insurance services. If you look at the statistics of the last five years, in 2017 the volume of total insurance premiums was 0.3% of GDP or 28.4 thousand Uzbek sums per capita, and by the end of 2022 this figure was 0.7% of GDP or 173 thousand Uzbek sums per capita (6-factor increase).
This, of course, requires continuous improvement of legislation on insurance activities. Therefore, the Law “On Insurance Activities” was adopted in a new edition, the licensing procedure became electronic, and a very good base was created for the provision of insurance services in electronic form.
However, there are still a number of issues that need to be resolved in the insurance sector, including the creation of a single marketplace in it, an increase in the types of insurance services, and an increase in public confidence. An increase in demand for insurance services requires a stable financial position of insurance organizations and a high level of capitalization. Nowadays, a program for 2023-2026 is being developed, aimed at further developing the insurance market, meeting the demand of the population for high-quality insurance services, increasing the level of capitalization of insurance organizations, regulating the insurance market and fully digitalizing the processes of providing insurance services.
– Is there an active transformation of commercial banks with a state share into modern institutions now? Why is it so important today to privatize banks and reduce the state’s share in their management?
– Currently, there is a need to take operational measures for the widespread introduction of fintech technologies into the banking system based on modern service solutions, ensuring information security, as well as reducing the influence of the human factor in the provision of financial services. Therefore, the following main directions should be listed in the privatization of banks:
● to increase the efficiency of the banking system by creating equal competitive conditions in the financial market, lending on the basis of market conditions, reducing the dependence of banks on state resources, providing convenient and simple banking services to the population, creating a modern and efficient infrastructure and automating its activities, as well as phasing out functions not inherent in banking activities;
● to ensure the financial stability of the banking system by improving the quality of the loan portfolio and risk management, following a moderate increase in lending volumes, maintaining a balanced macroeconomic policy, improving corporate governance and attracting international managers with practical experience, using technological solutions to assess financial risks;
● reduce share of the share in the banking sector through a comprehensive transformation of commercial banks with a state share, the introduction of modern banking standards, information technology and software products, the sale of a package of state shares in banks to potential investors on a competitive basis, as well as the simultaneous reform of commercial banks and enterprises with a state share.