Tashkent, Uzbekistan (UzDaily.com) -- Experts from the Institute of Macroeconomic and Regional Research (IMRI) analyzed trends in the level of competition in the banking system of Uzbekistan for the period from May to October 2023.

To determine the level of competition in the banking system, CR (concentration coefficient) and HHI (Herfindahl-Hirschman index) were used. Based on the level of competition, markets are divided into 3 groups: low, medium and high.

For information: CR from 70% to 100%, HHI from 2500 to 10000 units. - the level of competition is low if the CR indicator is from 45% to 70%, HHI is from 1500 to 2500 units. - the level of competition is average if CR is less than 45% and HHI is less than 1500 units. - the level of competition is high.

The calculation used the main performance indicators of all commercial banks operating in Uzbekistan in the period from May to October 2023, including the volume of assets, deposits and loans.

Assets. As of 1 October 2023, the volume of assets of commercial banks of the republic amounted to 615.8 trillion soums, an increase of almost 8.7% compared to 1 May 2023. As of 1 October 2023, the HHI index, calculated by assets, amounted to 907 units. This, in turn, indicates that the level of competition in the banking system in the republic’s asset market is increasing.

Loans. The value of the HHI index of loans granted to economic entities decreased from 1031 to 985 for the period from 1 May to 1 October 2023. As of 1 May 2023, the volume of credit deposits of commercial banks amounted to 413.4 trillion soums, while as of 1 October, this figure reached 451.6 trillion soums, or increased by 9.2 percentage points. During this period, the share of loans issued by private banks in the total volume of loans of the banking system increased from 18.5% to 28%, and the share of the three largest state-owned banks decreased from 46.1% to 44.8% during the period under review. This shows that market mechanisms are increasingly being introduced into the banking system.

Deposits. The HHI index for deposits decreased from 703 units. up to 669 units from May to October of this year, which means an increase in the level of competition between banks in the deposit market. During this period, the volume of deposits in commercial banks increased significantly, amounting to 221.3 trillion soums as of 1 October, or increased by 7% compared to 1 May 2023. The significant increase in the volume of deposits indicates that interest rates on deposits remain attractive to the population, along with increased confidence in the banking system.

The improvement in competition in the banking system can be explained by the regulator’s easing of excessive requirements and restrictions on entry into the banking market and, as a result, the entry of a number of new local and foreign banks, as well as the popularization of online and mobile banking services, which are mainly provided by private and foreign banks.