Private debt, a form of financing outside the banking system, has rapidly developed globally since the financial crisis of 2008–2009, becoming a vital source of funding for small and medium-sized enterprises (SMEs). This type of financing provides opportunities to lend to businesses that are considered high-risk by banks or lack access to public debt markets.
Globally, the size of this sector is forecasted to reach $1.2 trillion by 2025, and it is expected to grow to $5 trillion by 2029. Uzbekistan's financial system remains predominantly bank-centric, with 94.9% of all assets belonging to banks by the end of 2024. State-owned banks account for 65.4% of this share.
According to the World Bank, the ratio of private sector domestic credit to GDP in Uzbekistan stands at 33.2% in 2024, surpassing many neighboring countries in the region. However, prioritization of state-owned enterprises and strategic projects limits financing opportunities for private businesses.
Therefore, the private debt market could become an essential financial resource in Uzbekistan. In this context, ensuring creditors’ rights, improving legislation, and developing new mechanisms hold significant importance.
International financial institutions, including the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), and the Asian Development Bank (ADB), play a crucial role in developing the private debt market. Beyond providing capital, these institutions contribute to risk management and the establishment of standards.
Micro, small, and medium-sized enterprises (MSMEs) in Uzbekistan have distinct financial needs, and the development of this market provides them with a vital financial resource. In 2024, MSMEs account for over 50% of the country’s GDP and 74.5% of total employment.
Additionally, public-private partnership (PPP) projects could contribute to increasing demand for private debt. By the end of 2024, the PPP portfolio in Uzbekistan reached $31.1 billion. Projects in transport, energy, utilities, education, and healthcare offer significant opportunities to attract private debt instruments.
In conclusion, the private debt market could play a pivotal role in diversifying Uzbekistan's financial system and financing the real sector. Success in this area would depend on the involvement of international financial institutions, improvements in legislation, and strengthening corporate governance standards, ultimately contributing to further economic development.
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