Uzbekistan Banks See 1.8 Trillion UZS Rise in Problematic Loans, Impacting Startup Financing

In the first quarter of 2026, Uzbekistan's banking system experienced a notable increase in its total loan portfolio, which expanded by 19.3 trillion Uzbek soums (UZS) to exceed 623.3 trillion UZS. However, this growth was accompanied by a significant rise in problematic loans, which increased by 1.8 trillion UZS, reaching nearly 19.9 trillion UZS. The data was released by the Central Bank of Uzbekistan.

State Banks Drive Credit Growth but Face Rising Non-Performing Loans

The surge in problematic loans was primarily driven by state-owned banks, whose credit portfolios grew by 11.1 trillion UZS during the same period. This growth was particularly evident in Agrobank (+5.44 trillion UZS), Milliybank (+2.63 trillion UZS), Xalq Bank (+1.95 trillion UZS), and Aloqabank (+1.89 trillion UZS).

Conversely, some banks witnessed a decline in their loan portfolios, including SQB and Asakabank, reflecting uneven credit distribution across the banking sector.

Among non-state banks, Hamkorbank, Hayot Bank, and Kapitalbank showed active loan portfolio growth, while TBC Bank and Orient Finans Bank saw reductions in their lending activities.

"Despite the increase in problematic loans, the overall share of non-performing loans decreased from 3.19% to 2.99%, owing to the rapid expansion of the total credit portfolio," said a banking sector analyst.

Problematic loans rose mainly in state banks by 1.46 trillion UZS, with the largest increases observed in SQB, Aloqabank, and Asakabank. Meanwhile, some banks like Ipoteka Bank managed to reduce non-performing loans by 316 billion UZS. However, Anor Bank and Garant Bank experienced growth in problematic loan volumes.

Implications for Tech Startups and the Innovation Ecosystem

The rise in problematic loans within state banks could have reverberating effects on the broader economy, especially the venture capital and startup ecosystem in Uzbekistan. Banks serve as crucial financiers for early-stage tech startups and innovation-driven enterprises that often depend on accessible credit for R&D, scaling, and operational expenses.

An increase in non-performing loans may tighten credit conditions, prompting banks to adopt more cautious lending strategies. This can limit startups' access to necessary funding, slow down innovation, and reduce the attractiveness of Uzbekistan for venture capital investments.

Additionally, state-owned banks dominate credit provision, so their financial health directly influences the availability of capital for emerging companies. With problematic loans increasing notably in these banks, there is a potential risk of reduced lending appetite or stricter credit terms, which could stifle the growth of the tech sector.

On the other hand, some non-state banks continue to expand their lending portfolios, indicating pockets of opportunity for startups seeking alternative financing sources. This dynamic may encourage startups to diversify their funding avenues beyond traditional state banks.

Overall, the banking sector's credit trends underscore the need for continued financial reforms and risk management improvements to maintain a favorable environment for venture capital activities and startup growth in Uzbekistan.