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Car loan leverage in Uzbekistan exceeds recommended rate

Finance Materials 9 December 2019 14:40 (UTC +04:00)

BAKU, Azerbaijan, Dec. 9

By Fakhri Vakilov-Trend:

According to the estimates of the Central Bank of Uzbekistan, as of July 1, 2019, there were 85,000 car loan debtors in the country, Trend reports with reference to the bank.

The debt ratio reached 67.3 percent, which exceeds the recommended rate (50 percent).

The rapid growth in bank lending prompted the Central Bank to conduct a study, evaluating the ratio of the population's debt burden on bank loans.

As it was revealed, in the first half of 2019, the debt ratio was on average below the norm recommended in international practice.

However, at the same time, over the past 12 months, the debt burden of the population increased by 5.3 percentage points and now stands at 34.7 percent. This is the average share of the monthly income allocated by the borrower for loan repayments.

Having studied over 150,000 contracts, experts of the Central Bank found that in 35.3 percent of cases, the debt burden exceeds the recommended rate of 50 percent.

The most alarming situation was noted in the field of car loans, where rates exceeded 67.3 percent of contracts. The excess (55.4 percent) was also recorded in mortgage lending agreements, microcredit agreements (36.7 percent) and consumer lending agreements (24.8 percent).

As data shows, car loans account for a significant part of the debt burden of the population. There were 85,000 car loan debtors in Uzbekistan as of July 1, 2019. Over the past two years, this number has increased sharply: the number of debtors were 2.9 times less in 2018 and 12 times less in 2017.

The total number of unsecured car loans in the first half of the year was 4,519, which is 2.7 times more than in 2018, and 19 times more than in 2017.

Based on international experience, the Central Bank believes that this situation can significantly worsen the social and financial situation of the country's citizens. The regulator has prepared a draft document on the prevention of excessive debt burden of the population.

The bank noted that the changes will prevent an excessive increase in the debt burden of the population, but will not limit the ability of citizens to obtain loans.

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