Representing one of the world's fastest growing credit union movements, 12 representatives from Uzbekistan's Central Bank arrived at WOCCU's Madison, Wis. headquarters late last month to explore best practices and other strategies.
Led by Central Bank Deputy Director Sardor Normukhamedov, the regulator team recently developed a specialized department to regulate the former Soviet satellite country's credit unions.
WOCCU began credit union development efforts in Uzbekistan in 1998, assisting with policy development framework at first. In 2002, the first credit union law was passed with the assistance of WOCCU and guidance from its Model Law for Credit Unions publication. The country's first three credit unions formed that same year.
Today, Uzbekistan is home to 111 credit unions that serve more than 153,000 members. The institutions hold US$140 million in assets.
"This is a success story for WOCCU and exactly what we like to see," said Dave Grace, WOCCU vice president of association services. "Despite being only an eight-year-old movement, Uzbekistan's credit unions have excellent capital, very little delinquency and an extremely strong structure. They're helping bring a solid middle-class tier to the country's economy."
In 2009, assets held by Uzbekistan's credit unions grew 74%, placing it among the fastest-growing systems in the world. Much of the success of Uzbekistan's credit unions appears to be in their ability to address the growing public demand for affordable, easily accessible financial services, according to Normukhamedov.
"Credit unions have become so popular because they are responding to people's needs," the central bank executive said. "Credit unions have developed their own market, paying higher interest on savings and providing more immediate access to loans. Banks offer those same services but not quite as easily."
The biggest challenges facing Uzbekistan's credit unions currently are similar to those in other developing countries. Lack of credit union access to deposit insurance, the clearing and settlement system, card networks and liquidity sources will make further growth challenging, Grace said. Despite their existing strengths, the country's credit unions will need greater liquidity in order for the system to expand, he added.
Fortunately, access to those services may be easier to come by than in other countries. The relationship between credit unions and banks in Uzbekistan is a positive one, with each industry gaining from having a well-defined market.
"Banks and credit unions have a good relationship," Normukhamedov said. "There is a healthy competition between the two markets."