October 6, 2023
Decree No. PD-306 “On measures of financial and institutional support of small business development” was signed
On 14.09.2023, the President of the Republic of Uzbekistan signed Decree No. PD-306 “On measures of financial and institutional support of small business development” (hereinafter referred to as “the Decree”). The purpose of the adoption of this Decree is to fulfill the priority tasks defined in the framework of the open dialog of the President of the Republic of Uzbekistan Shavkat Mirziyoev with entrepreneurs on 18.08.2023.
In accordance with the Resolution, it is resolved to:
- To implement – the Comprehensive Program of Continuous Support of Small Business from 2023 to 2026 (hereinafter referred to as the Program).
- To establish the circle of persons who are eligible to send online applications to the “Small Business Assistance Center” LLC (hereinafter referred to as the Center) for participation in the Program.
- To establish measures of financial and advisory support for small businesses from 01.10.2023.
Below is a detailed overview of the above changes.
6 trillion soums and 1.2 billion dollars will be allocated from the state budget and funds of international financial institutions for the implementation of the Program.
For the purpose of effective implementation and continuous improvement of the Program, the Business Development Bank (hereinafter referred to as the “Bank”) was selected as the main base bank. It is the legal successor of the Joint-Stock Commercial Bank “Kishlok Kurilish Bank” in terms of property, financial and other obligations. Starting from 01.10.2023 until the end of 2024, the Ministry of Finance and Economy (hereinafter referred to as “the Ministry”) has been instructed to increase the authorized capital of the Bank to 3 trillion sums. Moreover, the Ministry is imposed to:
- re-assign to the Bank the funds of credit lines allocated to JSCB “Kishlok Kurilish Bank” with a total value of 544 billion soums as subordinated debt.
In order to implement the Program, the Bank shall also:
- takes measures to establish, coordinate the activities, and cover the expenses of the Small Business Development Fund (hereinafter referred to as the Fund);
- provides material and technical support in the processes from the study of small businesses to the stable establishment of their financing and production activities;
- introduces a system of simplified lending to small businesses until the stable establishment of their financing and production activities;
- introduces the practice of business mortgages, develops master plans of territories, and mortgages objects connected to communications and infrastructure;
- provides practical assistance and organizes free legal services to entrepreneurs on business plans, financial reporting, export-import operations, property valuation, use of insurance and notary services, and document execution;
- creates and ensures the functioning of the system “Business 24/7” – “Single Window” for the continuous provision of banking and consulting services to entrepreneurs on the issues of market conditions and business organization;
- in cooperation with the Fund, to ensure, by the end of 2023, the involvement of qualified foreign specialists and experts for each region in the areas related to the evaluation and selection of projects, business training, promotion in foreign markets, and improvement of the centers’ activities.
Moreover, within the framework of the Program implementation, the Bank is granted the right to independently carry out the following procurement procedures and conclude direct contracts through a selection committee consisting of qualified specialists in accordance with the regulations approved by the Supervisory Board of the Bank:
- engaging international law and audit companies, investment consultants and banks, advanced foreign and domestic educational institutions, highly qualified foreign experts and consultants;
- concluding an agreement with companies engaged in supplying informatization devices, software, and ATMs.
Online applications for participation in the Program can be submitted by:
- Individual entrepreneurs, dekhkan farms, self-employed persons, craftsmen, home-based workers, non-state educational organizations and small business entities providing permanent employment for three or more people who have been operating for at least one year;
- Legal entities and individuals who have successfully implemented their business projects under family entrepreneurship programs and have a positive credit history.
The selection procedure for the above-mentioned small business entities is implemented as follows:
- The initiators send applications and they undergo scoring evaluation with the assistance of commercial banks.
- Directly in the field, assistant khakims hold meetings with entrepreneurs who have passed the scoring assessment. Further, with the assistance of commercial banks, on the basis of the approved questionnaire, they study the compliance of the application with the established criteria, and a preliminary list of initiators is formed.
- Groups for evaluation and selection of projects, based on the assessment of business skills and viability of business plans of the initiators included in the preliminary lists, select promising projects, which depending on the period of activity, cash turnover, and number of employees are divided into categories.
- The centers organize training and issue certificates to successful applicants.
- Commercial banks, the Fund, and the centers provide the following forms of financial and advisory support to the selected projects:
- allocation of loans;
- provision of leasing services;
- provision of payment by installments;
- equity participation;
- allocation of grant funds;
- provision of consulting services.
- The Centers and commercial banks shall monitor the implementation of the respective business plans and take measures to implement, in accordance with the established procedure, the contributed share after achieving the target indicators.
The following measures are established within the framework of financial support of the Program:
- Allocation of loans of up to 1.5 billion soums, for the establishment or expansion of entrepreneurial activity for up to 7 years, including a grace period of up to two years, on a revolving basis – for working capital for up to 3 years with an annual rate exceeding the main rate of the Central Bank by 4 percentage points, and (or) provision of leasing for the purchase of fixed assets. At the same time, it is envisaged to provide loans of up to 100 million soums without collateral, loans of up to 150 million soums – with lowering the collateral requirement to 50 percent;
- Lending of fixed assets worth up to 1.5 billion soums – with the condition of payment in installments for up to 7 years;
- Contribution of up to 20 percent, but not more than 1 billion soums in the form of empty state property and land plots, equipment, buildings and structures, other types of tangible assets in the amount of up to 20 percent, but not more than 1 billion soums to new, as well as existing projects to expand production of small businesses that have been operating for more than 24 months, whose working capital for the last 12 months amounted from 1 billion soums to 10 billion soums, providing permanent jobs for at least 10 people;
- Allocation of up to 2 billion soums of grant funds within the framework of state scientific programs for projects of commercialization of innovative developments, as well as high-tech start-up projects.
The following measures have been established in the direction of providing advisory support to the Program:
- On obtaining licenses, permits, and certificates, customs and tax administration, registration of expert-import operations and contracts;
- On participation in public procurement, acquisition, or leasing, as well as the design of land plots, buildings, and structures;
- On existing privileges and preferences, other privileges and opportunities to support entrepreneurship.
In the course of ensuring the implementation of the Program, the Ministry has a number of obligations. It was determined that it is responsible for uninterrupted provision of the Program with necessary financial resources. Also the Ministry together with the Ministry of Agriculture, JSC “Halk Bank” and JSCB “Microcreditbank” within a month should submit to the Cabinet of Ministers of the Republic of Uzbekistan draft legal acts on the following directions:
- Implementation of at least one project based on the systems of “aggregator”, and “cooperation”, providing for the creation of a chain from the cultivation of products on land areas allocated for farming with the right to lease, in each district specialized in horticulture, to its sale;
- Creation of “schools of homeworkers” together with experienced homeworkers to provide comprehensive assistance to homeworkers and their involvement in the authorized capital of these schools.
It should be noted that in order to implement a unified state policy on the development of small and medium-sized businesses and coordinate the activities of public administration bodies, local khokimiyats, commercial banks, the Fund and centers it was decided to create in the structure of the Ministry – Department of analysis, support for the development of small and medium-sized businesses and coordination of state policy in the field.