Tashkent, Uzbekistan (UzDaily.com) -- On 14 September 2021 in the Ministry of Economic Development and Poverty Reduction of the Republic of Uzbekistan, the signing ceremony of the Agreement on the allocation of a convertible loan to Uzpromstroybank in the amount of US$75 million by the International Finance Corporation (IFC) was held.

IFC loan aimed at climate finance and increased lending to small and medium-sized enterprises (SMEs) in Uzbekistan will support the bank's further privatization process. IFC financing, denominated in Uzbek soums, will provide the bank with access to long-term financing in local currency, limited in the market due to the COVID-19 pandemic, and will help transform the bank with the possibility of further converting the IFC loan into bank shares.

Part of the financing for the project will go towards lending to SMEs, while 50 percent of the loan will be used to finance the projects with climate impact, allowing the bank to expand its green banking program.

This agreement became a logical continuation of the diligent work of the parties carried out in accordance with the Decree of the President of Uzbekistan dated May 12, 2020 #5992 "On the strategy of reforming the banking system of the Republic of Uzbekistan for 2020-2025" and the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated March 29, 2021 #161 "On measures for further transformation of the joint-stock commercial bank" Uzpromstroybank "and its subsequent privatization with the participation of the International Finance Corporation", which indicates the need to reform the banking sector in the Republic of Uzbekistan through a comprehensive transformation of commercial banks with a share of the state, technologies and software products, the sale of the state block of shares of banks on a competitive basis to investors with the appropriate experience and knowledge, as well as the parallel reform of commercial banks and enterprises with state shares.

“IFC welcomes Uzbekistan's determination to attract private investment to the country's financial sector. Our funding is aimed at helping Uzpromstroybank prepare for privatization and become a standard-setting bank for SME lending and green finance. This initiative is in line with IFC's strategy to support green growth by stimulating investment and identifying opportunities to help Uzbekistan achieve its climate goals and build a greener and more sustainable future,” said Makhtar Diop, IFC's Managing Director at the Agreement Signing Ceremony.

"This agreement was the result of our hard work with the IFC, carried out in accordance with the Decree of the President of Uzbekistan dated May 12, 2020 #5992" On the strategy of reforming the banking system of the Republic of Uzbekistan for 2020-2025" and the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 29 March 2021 #161 "On measures for further transformation of the joint-stock commercial bank" Uzpromstroybank "and its subsequent privatization with the participation of the IFC".

IFC's funds, denominated in Uzbek soums, will expand the bank's capabilities in lending to investment projects in national currency, support of the bank's efforts to reduce loans in foreign currency in the loan portfolio, and also help achieve its goals as part of the privatization preparatory process. It is planned that the IFC funds will be directed to lending to small and medium-sized businesses, as well as to finance green projects, "said Sakhi Annaklichev, Chairman of the Board of Uzpromstroybank.

Since 2018 Uzpromstroybank works closely with the IFC on preparation for privatization by strengthening the bank's corporate governance practices, revising business processes, commercializing its operations, improving the risk management system, and helping the bank to develop green banking.

After diagnosing and building a client-centered business development model, the third stage of transformation is currently underway, where a new business model of the bank is being implemented with the renewal of the IT system and related infrastructure. This process began as a pilot project in the branches of the Bank in Bukhara region and will continue until the end of 2021 with a phased implementation in all branches across the country.

Also, in June, a mandate letter was signed between the Ministry of Finance, Uzpromstroybank and the European Bank for Reconstruction and Development, providing for the participation of this international financial institution in the pre-privatization transformation of Uzpromstroybank through the provision of a convertible credit.