Tashkent, Uzbekistan (UzDaily.com) — In 2024, Uzbekistan’s banking sector maintained financial stability despite an overall easing of financial conditions, according to a report published by the Central Bank of Uzbekistan (CBU).

This stability was supported by favorable conditions in both the banking system and the external financial environment, reduced pressure on the foreign exchange market, and high capital adequacy levels. Alongside monetary market stability, these factors helped alleviate financial stress.

However, the report highlights growing risks associated with household lending, which are contributing to rising financial losses—even though loan balances remain relatively low in concentration. As household borrowing increases and the share of consumer loans rises, the number of indebted borrowers is also growing.

The average debt burden for individuals, taking into account all financial obligations, has reached 34%. Notably, around 40% of all loans are held by borrowers whose Debt Service-to-Income (DSTI) ratio exceeds 50%, signaling elevated vulnerability.

Special attention is drawn to the mounting risks in the microcredit sector. Both the number of microloan recipients and the total volume of disbursed microloans are rising at a rapid pace, with balances becoming increasingly concentrated. In several banks with a high share of non-performing microloans, reserves to cover bad debts remain insufficient, exacerbating financial strain.

Results from a macroprudential stress test of banking sector solvency suggest that by the end of 2027, the Tier 1 and total regulatory capital adequacy ratios could decline by 5.6% and 8.1%, respectively—potentially falling below mandated thresholds. This indicates the potential for losses in the banking sector under adverse economic conditions.

On the liquidity side, macro stress testing shows no major short-term concerns. The maturity mismatch between assets and liabilities in the national currency has narrowed, and the share of net cash inflows linked to high-liquidity assets is expected to grow by year-end.

Nevertheless, some banks remain exposed to high deposit concentration risk. A significant share of total deposits is held by a small number of large depositors, heightening vulnerability in the event of large-scale withdrawals.

The report also notes the positive impact of the CBU’s tightened regulations on auto loans. These measures have improved household debt profiles, and stabilization in car sales has helped narrow the gap between market prices and fundamental values.

In summary, while Uzbekistan’s banking sector remains broadly stable, the Central Bank warns that rising household indebtedness and microcredit risks are emerging as key financial vulnerabilities that require close monitoring and proactive policy responses.