Competition intensifies in the banking sector
Tashkent, Uzbekistan (UzDaily.com) -- Experts from the Institute for Forecasting and Macroeconomic Research (IPMI) assessed the level of competition in the banking sector of the Republic of Uzbekistan.
To do this, on the basis of the Herfindahl-Hirschman index (HHI), a concentration indicator was calculated that characterizes the level of competition. According to the values of this indicator, markets are divided into 3 groups:
highly concentrated (1800-HHI-10000);
moderately concentrated (1000-HHI-1800);
low concentrated (HHI-1000).
To calculate HHI, the shares of commercial banks in the country by assets, loans and deposits in their overall structure were used (based on monthly statistics by banks for January 2017 - April 2022).
The level of concentration of the banking sector by assets decreased (as of 1 January 2017 - 1122.2, as of 1 April 2022 - 986.9). That is, competition in the banking services market is intensifying.
If at the beginning of 2017 the volume of assets of the country's commercial banks amounted to 84.1 trillion soums, then as of 1 April of the current year - 449.5 trillion soums (increase 5.3 times). Also, during the period under review, the volume of loans increased by 6.5 times, and deposits - by 4.1 times.
So, if as of 1 January 2017, the share of 3 banks (NBU VED, Uzpromstroybank, Asakabank) accounted for 49.4% of all assets of the banking system, then as of 1 April 2022, their share decreased to 44.7%.
HHI on loans of the banking sector decreased from 1238.8 to 1115.9 and is gradually approaching the lower limit of the "moderately concentrated markets" range.
HHI on deposits of the banking sector decreased from 811.7 to 727.1. The banking services market is low concentrated.
In the Development Strategy of New Uzbekistan for 2022-2026. it also envisages the completion of transformation processes in commercial banks with a state share, bringing the share of the private sector in the assets of the banking system to 60% by the end of 2026.
The results of the assessment of the concentration of the banking sector of the Republic of Uzbekistan: every year the competition between banks increases. The measures taken to reduce the participation of the state, attract the private sector and foreign investors will help improve competitive conditions and further develop the country's banking sector.