In a centrally controlled finance sector environment like Uzbekistan, gradual easing of constraints is the appropriate approach. A project such as this one can be successful in easing the constraints to local currency cash loans, loan terms, and the capacity of participating commercial banks for MSE lending. However, it cannot address other constraints identified at appraisal such as restrictions on dollar-denominated cash loans, and those encountered during implementation, such as restrictions on microcredit organizations and cash balances of banks. Incremental measures aimed at easing constraints and eventually dismantling credit market distortions need to be included in the project design.
Second Small and Microfinance Development Project