S&P Warns of Risks for Uzbek Banks from Rising Consumer Credit

According to S&P Global Ratings, the banking sector in Uzbekistan is experiencing significant growth in consumer credit and microloans, which is reshaping the structure of credit portfolios. This aggressive lending growth, coupled with increasing competition, including the entry of foreign players, is exerting pressure on the quality of banking assets.

In response to this surge, the regulator took action in 2023 to curb the excessive expansion of retail lending. As a result, the share of retail loans decreased from 50% to approximately 20% in 2024. Despite these regulatory steps, the overall trend of expanding unsecured consumer and small business lending remains strong as banks seek higher profit margins.

Another challenge facing the Uzbek banking sector is the high concentration of assets in state-owned banks, which account for about 70% of total banking assets. The planned privatization program is expected to require substantial efforts to increase the attractiveness of these banks to foreign investors.

Looking ahead, one of the key issues for Uzbek banks over the next two years will be the low level of financial inclusion and insufficient household incomes. These factors will continue to shape the lending and risk management strategies of the country’s banks.