Anna Romanova, Credit Ratings Analyst at Finvizier Consultancies, explains where the demand for private credit is already forming in Uzbekistan and what it means for investors.
Private credit represents commercial debt financing that exists outside the traditional channels of bank lending, syndicated debt financing, and public debt capital markets. Under this mechanism, the lenders are non-bank financial institutions (including private credit funds), and the borrowers are commercial enterprises, including small and medium-sized enterprises (SMEs), which are typically characterized by higher risk for banks or insufficient scale for public debt financing.
The global growth of private debt financing following the 2008–2009 global financial crisis was driven by a combination of demand from borrowers, primarily SMEs, and the expansion of non-bank capital supply against the backdrop of tighter banking regulations. As a result, according to the quarterly report of the Bank for International Settlements (BIS), the total volume of outstanding loans increased from approximately $100 billion to over $1.2 trillion as of March 2025, while total assets under management by private credit funds, including dry powder (unallocated capital), have already reached over $2.5 trillion.
Indeed, private debt is viewed by many experts today as a crucial element in diversifying corporate borrowing: according to J.P. Morgan Private Bank estimates, this type of financing accounts for about 9% of all corporate loans.
Over its existence, private debt financing has altered the structure of the global debt market, partially replacing traditional bank financing, which has lost some competitiveness partly due to stricter banking regulations.
Simultaneously, private debt has expanded the global credit market by adding enterprises for which the debt market was previously inaccessible due to the higher risk profile of such borrowers. Thus, the private debt financing market is becoming increasingly large-scale today: according to Morgan Stanley’s forecast, its volume could reach $5 trillion by 2029.
Uzbekistan: Starting Position and Growth Points in Financial Architecture
Uzbekistan’s financial system, currently undergoing a phase of large-scale market reforms, maintains a model dominated by bank financing today. According to the IMF Financial Sector Assessment Program (FSAP) report (June 2025), as of the end of 2024, commercial banks account for 94.9% of the financial system’s assets, with state-owned banks forming the institutional foundation of the sector, accumulating around 65.4% of all banking assets. Such architecture ensures system stability and allows resources to be concentrated for the implementation of state tasks.
The scale of the banking sector ensures high market saturation indicators by regional standards. The ratio of domestic credit to the private sector to GDP is frequently used as an indicator. In 2024, according to World Bank data, this figure in Uzbekistan reached 33.2%, which significantly exceeds similar values in Kazakhstan (27.6%) and Kyrgyzstan (23.2%).
A significant portion of banking liquidity is traditionally directed toward financing state-owned enterprises and implementing priority state programs. Under these conditions, independent private business, despite the growth in lending indicators, faces limited access to “long” money and high competition for capital. It is this market feature—priority service for strategic enterprises and large borrowers—that creates a natural demand for the development of private debt financing, capable of becoming a key alternative source of financial resources for the real sector.
Legal Infrastructure: Why It Is Important and Where the Potential Lies
For the establishment of a private debt market, the predictability of creditor rights protection is critically important. Uzbekistan’s legislative framework regarding reorganization appears well-developed: it regulates four types of procedures and establishes deadlines and the order of interaction with different groups of creditors. In particular, the interests of dissenting creditors during the approval of a judicial reorganization plan are protected by the “no worse off than in liquidation” principle.
However, according to EBRD assessments, Uzbekistan, like other Central Asian countries, needs to continue working on improving the reorganization system. The diversity of procedures provided by law, although dictated by the best intentions, requires additional adaptation for user convenience, which may hinder the application of these mechanisms in practice.
In the pre-trial reorganization procedure, the law does not provide for an automatic moratorium on the collection of creditors’ claims and does not guarantee the priority of new financing. In this regard, the EBRD notes that current practice does not yet provide special incentives that could encourage the debtor and creditors to conclude out-of-court restructuring agreements.
That is why improving solvency recovery mechanisms can be interpreted not only as a “problem” but also as a specific improvement agenda that directly expands the potential of private debt financing: effective restructuring mechanisms reduce risks and increase the attractiveness of lending without excessive reliance on collateral.
Future Demand: From MSMEs to Infrastructure (PPP)
The private debt market in Uzbekistan possesses significant growth potential driven by high structural demand. According to IFC data, micro, small, and medium-sized enterprises (MSMEs) generate over 50% of Uzbekistan’s GDP. Furthermore, according to the National Statistics Committee, in 2024 the share of small business entities in total employment amounted to 74.5%, in total imports—49.8%, and in exports—34.1%. Such a role of small business, including in foreign trade, supports potentially high demand for specialized debt instruments (trade finance, working capital), often associated with the need to manage currency risks or link to currency flows.
Simultaneously, a financing deficit persists: according to World Bank Group estimates (based on IFC SME Finance Forum data), MSME demand for credit resources is about $13 billion, while the financing gap is estimated at $6–7 billion. This deficit is unlikely to be fully closed by traditional institutions alone, which forms a structural niche for more flexible debt financing instruments, the significance of which increases as centralized and concessional financing mechanisms are liberalized and optimized.
Another potential source of demand could be Public-Private Partnership (PPP) projects. In a number of PPP models, the state ensures the predictability of payment flows through contract payments and other support mechanisms, while the private partner attracts the necessary capital, including debt financing.
According to IMF estimates based on official data, by the end of 2024, the PPP portfolio reached $31.1 billion (about 27% of GDP), and Presidential Decree No. PP-308 approved a list of planned PPP projects for 2025–2030 with a total volume of about $30.2 billion: 33%—transport, 28%—energy, 17%—utility infrastructure, 16%—education, and 5%—healthcare. Financing such projects may include senior project debt instruments, as well as mezzanine and bridge loans, which increases structural flexibility and accelerates the financial closing of deals.
The Role of International Financial Institutions in Private Debt Development
An important link between the global trend and the local market is the participation of international financial institutions (IFIs). The EBRD, IFC, and ADB act as a powerful catalyst for market development. The scale of their involvement is confirmed by figures: cumulative EBRD investments in Uzbekistan as of September 30, 2025, amounted to €5.357 billion, and the ADB has committed financing totaling over $5.41 billion over the last five years.
However, the contribution of IFIs is not limited to providing capital—it also lies in its qualitative structuring. A key mechanism here is indirect financing of SMEs through local banks in the national currency. This approach reduces the currency risk for borrowers, which would otherwise limit the inflow of funds.
Another key function of IFIs is risk mitigation for private investors. In individual transactions, IFIs assume part of the risk through blended finance mechanisms, for example, by providing first-loss coverage or subordinated debt. Such participation can improve the credit quality of senior tranches, making them more acceptable to private funds. Additionally, IFI participation is generally perceived by the market as a signal that the project has undergone due diligence.
Finally, IFIs contribute to the institutional building of the market by setting high standards as a necessary condition for financing. For instance, they require companies to implement ESG approaches, including corporate governance practices, environmental and social policies, as well as the disclosure of relevant information. This process contributes to the transformation of local companies into “institutional quality” assets that meet the standards of global funds. Thus, IFIs perform a catalytic function, creating the basic conditions—capital, risk mitigation mechanisms, and reporting standards—necessary to attract private creditors.
What Will Drive the Market in Uzbekistan
The success of establishing a private debt market in Uzbekistan will depend on the synergy of three factors: further diversification of the financial system, improvement of solvency recovery mechanisms, and the realization of structural demand from MSMEs and PPPs. In this process, IFIs are capable of acting as a practical catalyst, providing not only capital but also risk mitigation mechanisms, structuring standards, and information disclosure standards. This will strengthen trust from private investors, ensure access for MSMEs and PPP projects to more diverse and flexible credit products, and accelerate the formation of a modern financial ecosystem in the country.
Source: Kursiv