IFC and Ipak Yuli Bank launch a $100 million risk-sharing facility for small businesses in Uzbekistan
The International Finance Corporation (IFC) has deployed its catalytic first-loss guarantee program in Uzbekistan for the first time. Ipak Yuli Bank partnered on the deal, using IFC guarantees to finance small businesses with the local currency equivalent of about $100 million.
Facility details
The Catalytic First-Loss Guarantee (CFLG) program acts as financial insurance for the bank. IFC assumes a maximum risk of $18 million. This amount consists of two tranches: half is backed by a counter-guarantee from the International Development Association’s Private Sector Window (IDA PSW), and the other half covers the senior tranche for Ipak Yuli Bank.
With a guarantee against the loss of the first $18 million in case of borrower defaults, the bank can safely issue loans for the remaining $82 million. The total loan portfolio under the program will reach $100 million in soums.
Alongside the financial coverage, IFC will advise the bank on updating its product line for micro, small, and medium enterprises (MSMEs).
Country and market
Small and medium businesses account for over 50% of Uzbekistan’s GDP. Yet the sector faces a severe funding shortage. Unmet credit demand from MSMEs is estimated at roughly $10.5 billion. Banks often restrict lending to microenterprises due to high risks and entrepreneurs’ lack of hard collateral.
Why it matters
The deal shows how international institutions are changing their funding approach in Central Asia: instead of directly allocating credit lines, they are deploying risk-mitigation tools.
A risk-sharing facility with an international institution allows local banks to test credit products for difficult segments without taking a direct hit to their own capital.
What’s next
Successfully implementing the program at Ipak Yuli Bank could pave the way to scale this tool. Lowering risks through such mechanisms can attract other institutional investors to Uzbekistan’s financial sector and stimulate syndicated lending, including for fintech companies working with small businesses.