07/27/2020
For the first time in Uzbekistan, a “Banking Activity Index” has been developed, officially announced by the Center for Economic Research and Reforms late last week.
According to the new index, Kapitalbank ranked first, while Poytaxtbank came in last. The study evaluated 27 commercial banks, which were categorized into three groups: large state-owned banks, competitive banks, and centralized banks.
Rauf Salahodzhaev, economist and senior research fellow at Westminster International University in Tashkent, shared his thoughts with the journal Economic Review regarding the ranking, ways to reduce state involvement in the banking sector, and suggestions for improving the index going forward.
– For the first time in Uzbekistan, a Banking Activity Index has been developed. What is your opinion on this initiative?
– The introduction of such indices and rating systems brings several positive effects. Firstly, rankings allow for a comprehensive monitoring of the efficiency of institutions, organizations, or even entire sectors — in this case, the banking system. Indices are particularly valuable when a single indicator cannot capture the full complexity of an industry’s performance. Secondly, they serve as useful tools for researchers whose goal is to study not only the banking sector itself but also its broader impact, such as on economic growth. Therefore, this is undoubtedly a positive step.
– According to the index, commercial banks tend to provide better services to businesses and the public compared to state-owned banks. The index also highlights the dominant role of the state in the banking system, which may have created a sort of “Peter Pan syndrome,” leaving some banks underdeveloped. Why is this the case?
– This situation is not unique to Uzbekistan. It is quite common in many developing countries, including those in the CIS and Southeast Asia. In these regions, we often observe similar patterns.
Large state-owned banks tend to have a sector-specific focus and work closely with one particular industry. This leads to a mono-sector development trend among public banks. In contrast, commercial banks primarily serve the private sector and must operate efficiently to meet the needs of a diverse clientele, resulting in higher service quality.
It’s also essential to consider the overall level of a country’s economic development. The banking system often evolves in step with the broader economic policy and long-term national goals. Most state-owned banks in Uzbekistan are currently undergoing a structural transformation — a process that mirrors the ongoing transformation of the national economy. Therefore, we can expect to see significant improvements and qualitative changes in the banking sector over the next five years.