The System for Reducing Poverty and Increasing Household Incomes Will Be Transformed
Uzbekistan
On September 3, a video conference chaired by President Shavkat Mirziyoyev was held to discuss taking poverty reduction and efforts to increase household incomes to a new level.
In recent years, poverty reduction, ensuring sources of income for the population and expanding economic opportunities in mahallas have become priorities of state policy. As a result, the poverty rate has fallen from 5.8% at the beginning of the year to 3.9%, while the number of people in need has declined from 2.2 million to 1.5 million. A total of 49 districts and 3,429 mahallas where work has been properly organized are becoming areas free of unemployment and poverty.
At the same time, significant differences in the effectiveness of work across regions were noted. Over the past three years, UZS 314 trillion in resources has been allocated to entrepreneurial projects in mahallas. For example, Sharof Rashidov and Karshi districts each received UZS 2.3 trillion in credit resources. In Sharof Rashidov district, these funds helped lift 30,000 people out of poverty, while in Karshi district living conditions improved for 13,000 people in need.
It was therefore decided that the mere allocation of credit will no longer be considered the final result. The effectiveness of each project will be assessed based on the number of permanent jobs created and the number of families that have gained a stable source of income.
The meeting also examined factors preventing results from being achieved locally. In particular, it was noted that not all assistant khokims and mahalla bankers have the necessary skills to develop business projects, properly select financial instruments and work with entrepreneurs from the development of an idea through to the launch of a business.
Over the past year, 15,000 of the 86,000 small enterprises established in the regions have ceased operations. Meanwhile, 62,000 citizens who received bank loans but were unable to establish sustainable businesses are now experiencing difficulties repaying them. It was therefore emphasized that people and entrepreneurs should be offered not only financial resources, but also comprehensive solutions covering sales, technology, professional skills, business planning and the development of sales chains.
Studies conducted in Khorezm region were cited as an example. In accordance with the President’s instruction, economic sector leaders spent two weeks studying the living conditions of 81,000 low-income people from 19,000 families in the region. The studies identified 12,000 unemployed people and 10,000 citizens with low incomes in these families.
At the same time, entrepreneurs in Khorezm region are looking for 4,000 workers for the construction sector, 3,000 for services and 2,500 for industry. It was noted that linking existing vacancies with opportunities for vocational training could increase the incomes of 10,000–15,000 people from low-income families.
It was also noted that 48,000 children are being raised in the low-income families studied. Youth leaders, assistant khokims and women’s activists were tasked with organizing additional clubs in schools, technical schools and training centers to help children from these families gain professions and modern skills.
In Khorezm region, more than 10,000 women from low-income families are engaged in childcare. In this regard, the need to expand opportunities for them to engage in income-generating work at home or within the mahalla was emphasized, as well as to create conditions for their return to the labor market by expanding access to preschool education for children.
It was emphasized that the analyses and conclusions drawn in Khorezm region apply to all regions, and a decision was made to introduce a fundamentally new system for reducing poverty.
Special headquarters headed by the khokim will now be established in every region and district. Banks, employment authorities and other organizations within the economic sector will work together with these headquarters to address employment and income growth directly on the ground. Regional, district and city khokims, together with their economic teams, will devote three days a week directly to poverty reduction and employment.
A key feature of the new system will be the transfer of a significant share of financial resources and decision-making powers to the district level. District headquarters will receive powers to manage concessional credit resources for the development of family and youth entrepreneurship.
Currently, UZS 1.37 trillion in resources is available for family entrepreneurship and UZS 450 billion for youth entrepreneurship. District headquarters will be able, taking into account local conditions and the specifics of individual projects, to determine who receives a loan and in what amount, as well as set the loan term and adapt the repayment schedule to the nature of the business.
Lending, leasing, factoring, collateral, insurance, working-capital financing and other financial instruments will be applied according to the specifics of each entrepreneurial project. It was emphasized that because income is generated over different periods in agriculture, trade, services and other sectors, financing terms should be adapted accordingly.
Additional opportunities will be created for projects based on cooperation. If a lead entrepreneur establishes cooperation with 10 families, they will be able to obtain an unsecured loan of up to UZS 500 million. Cooperation with 100 families will make it possible to obtain up to UZS 5 billion.
Initiatives from people in need who have overdue payments in their credit history will also be assessed individually. Concessional financing will be made available for promising projects.
UZS 240 billion from the Poverty Reduction Fund, UZS 100 billion from the Employment Fund and UZS 760 billion allocated under the three “notebooks” will be transferred to district headquarters. In addition, UZS 300 billion in resources from the Entrepreneurship Development Company earmarked for compensation payments through the end of the year will also be directed through these headquarters.
Thus, a total of UZS 3.2 trillion in resources will be transferred to the districts, with the main criterion being the achievement of concrete results from these funds.
A new approach will also be introduced to adapting financing mechanisms to rapid changes in the economy. The Ministry of Economy and Finance and the Central Bank will improve lending, subsidy and compensation mechanisms on a quarterly basis, taking into account regional potential, business conditions and market requirements.
At the same time, particular attention will be paid to strengthening the capacity of assistant khokims and bankers in mahallas. The performance of assistant khokims in 8,992 mahallas will be reassessed based on effectiveness and initiative.
Within two months, a special training center involving foreign specialists will be established. Assistant khokims and mahalla bankers will be trained in project preparation, business-model calculations, selection of financing instruments and work with entrepreneurs. A decision was also made to send specialists who achieve the best results to China, Japan and Türkiye for professional development and to provide additional incentives to exemplary employees.
The meeting also reviewed the system for developing entrepreneurial infrastructure. From now on, districts will become direct customers for entrepreneurial infrastructure projects, with the necessary funds sent directly to local areas. District headquarters will also be authorized to transfer design, construction and quality control to the private sector.
Under the new approach to poverty reduction policy, social protection mechanisms will also be improved. The National Agency for Social Protection has been instructed to review by the end of the year the criteria for including people in need in the Social Register.
A transition is planned to a multidimensional assessment system that takes into account not only household income, but also chronic illnesses, disabilities, large families, family members working abroad and other social factors.
Although the national poverty rate has fallen to 3.9%, the average rate among families with children under the age of three is 6.5%. In this regard, a system will be introduced to enable parents caring for children to obtain work and a stable income at home or directly within the mahalla.
Working mothers from families included in the Social Register will receive benefits from the Social Insurance Fund until their child reaches the age of one. For low-income families whose members are unable to work, the practice of providing social packages that create a passive source of income will continue. UZS 300 billion has been allocated for these purposes this year, and about half of the 11,000 families that received such support have significantly increased their incomes.
Starting next year, expenses for children from families included in the Social Register to attend public and private kindergartens, study at training centers, use public transport and live in university dormitories will be reimbursed through a voucher system. The voucher will be issued for 12 months and will remain valid even after the family is removed from the Social Register.
The meeting set targets to provide 350,000 people with permanent jobs by the end of the year, increase the incomes of another 1 million people and lift 230,000 families out of poverty.
Specific mechanisms and action algorithms are to be developed for each area, with responsible officials identified down to the mahalla level. Specific guidelines will be prepared for employees working directly with the population, taking into account the approaches of countries with significant practical experience in poverty reduction, including China.
Under the new system, primary responsibility and resources will be transferred to local levels. The priority will be to turn every opportunity in each mahalla into a job and source of income, while working individually with every family in need based on its circumstances and potential.
At the same time, significant differences in the effectiveness of work across regions were noted. Over the past three years, UZS 314 trillion in resources has been allocated to entrepreneurial projects in mahallas. For example, Sharof Rashidov and Karshi districts each received UZS 2.3 trillion in credit resources. In Sharof Rashidov district, these funds helped lift 30,000 people out of poverty, while in Karshi district living conditions improved for 13,000 people in need.
It was therefore decided that the mere allocation of credit will no longer be considered the final result. The effectiveness of each project will be assessed based on the number of permanent jobs created and the number of families that have gained a stable source of income.
The meeting also examined factors preventing results from being achieved locally. In particular, it was noted that not all assistant khokims and mahalla bankers have the necessary skills to develop business projects, properly select financial instruments and work with entrepreneurs from the development of an idea through to the launch of a business.
Over the past year, 15,000 of the 86,000 small enterprises established in the regions have ceased operations. Meanwhile, 62,000 citizens who received bank loans but were unable to establish sustainable businesses are now experiencing difficulties repaying them. It was therefore emphasized that people and entrepreneurs should be offered not only financial resources, but also comprehensive solutions covering sales, technology, professional skills, business planning and the development of sales chains.
Studies conducted in Khorezm region were cited as an example. In accordance with the President’s instruction, economic sector leaders spent two weeks studying the living conditions of 81,000 low-income people from 19,000 families in the region. The studies identified 12,000 unemployed people and 10,000 citizens with low incomes in these families.
At the same time, entrepreneurs in Khorezm region are looking for 4,000 workers for the construction sector, 3,000 for services and 2,500 for industry. It was noted that linking existing vacancies with opportunities for vocational training could increase the incomes of 10,000–15,000 people from low-income families.
It was also noted that 48,000 children are being raised in the low-income families studied. Youth leaders, assistant khokims and women’s activists were tasked with organizing additional clubs in schools, technical schools and training centers to help children from these families gain professions and modern skills.
In Khorezm region, more than 10,000 women from low-income families are engaged in childcare. In this regard, the need to expand opportunities for them to engage in income-generating work at home or within the mahalla was emphasized, as well as to create conditions for their return to the labor market by expanding access to preschool education for children.
It was emphasized that the analyses and conclusions drawn in Khorezm region apply to all regions, and a decision was made to introduce a fundamentally new system for reducing poverty.
Special headquarters headed by the khokim will now be established in every region and district. Banks, employment authorities and other organizations within the economic sector will work together with these headquarters to address employment and income growth directly on the ground. Regional, district and city khokims, together with their economic teams, will devote three days a week directly to poverty reduction and employment.
A key feature of the new system will be the transfer of a significant share of financial resources and decision-making powers to the district level. District headquarters will receive powers to manage concessional credit resources for the development of family and youth entrepreneurship.
Currently, UZS 1.37 trillion in resources is available for family entrepreneurship and UZS 450 billion for youth entrepreneurship. District headquarters will be able, taking into account local conditions and the specifics of individual projects, to determine who receives a loan and in what amount, as well as set the loan term and adapt the repayment schedule to the nature of the business.
Lending, leasing, factoring, collateral, insurance, working-capital financing and other financial instruments will be applied according to the specifics of each entrepreneurial project. It was emphasized that because income is generated over different periods in agriculture, trade, services and other sectors, financing terms should be adapted accordingly.
Additional opportunities will be created for projects based on cooperation. If a lead entrepreneur establishes cooperation with 10 families, they will be able to obtain an unsecured loan of up to UZS 500 million. Cooperation with 100 families will make it possible to obtain up to UZS 5 billion.
Initiatives from people in need who have overdue payments in their credit history will also be assessed individually. Concessional financing will be made available for promising projects.
UZS 240 billion from the Poverty Reduction Fund, UZS 100 billion from the Employment Fund and UZS 760 billion allocated under the three “notebooks” will be transferred to district headquarters. In addition, UZS 300 billion in resources from the Entrepreneurship Development Company earmarked for compensation payments through the end of the year will also be directed through these headquarters.
Thus, a total of UZS 3.2 trillion in resources will be transferred to the districts, with the main criterion being the achievement of concrete results from these funds.
A new approach will also be introduced to adapting financing mechanisms to rapid changes in the economy. The Ministry of Economy and Finance and the Central Bank will improve lending, subsidy and compensation mechanisms on a quarterly basis, taking into account regional potential, business conditions and market requirements.
At the same time, particular attention will be paid to strengthening the capacity of assistant khokims and bankers in mahallas. The performance of assistant khokims in 8,992 mahallas will be reassessed based on effectiveness and initiative.
Within two months, a special training center involving foreign specialists will be established. Assistant khokims and mahalla bankers will be trained in project preparation, business-model calculations, selection of financing instruments and work with entrepreneurs. A decision was also made to send specialists who achieve the best results to China, Japan and Türkiye for professional development and to provide additional incentives to exemplary employees.
The meeting also reviewed the system for developing entrepreneurial infrastructure. From now on, districts will become direct customers for entrepreneurial infrastructure projects, with the necessary funds sent directly to local areas. District headquarters will also be authorized to transfer design, construction and quality control to the private sector.
Under the new approach to poverty reduction policy, social protection mechanisms will also be improved. The National Agency for Social Protection has been instructed to review by the end of the year the criteria for including people in need in the Social Register.
A transition is planned to a multidimensional assessment system that takes into account not only household income, but also chronic illnesses, disabilities, large families, family members working abroad and other social factors.
Although the national poverty rate has fallen to 3.9%, the average rate among families with children under the age of three is 6.5%. In this regard, a system will be introduced to enable parents caring for children to obtain work and a stable income at home or directly within the mahalla.
Working mothers from families included in the Social Register will receive benefits from the Social Insurance Fund until their child reaches the age of one. For low-income families whose members are unable to work, the practice of providing social packages that create a passive source of income will continue. UZS 300 billion has been allocated for these purposes this year, and about half of the 11,000 families that received such support have significantly increased their incomes.
Starting next year, expenses for children from families included in the Social Register to attend public and private kindergartens, study at training centers, use public transport and live in university dormitories will be reimbursed through a voucher system. The voucher will be issued for 12 months and will remain valid even after the family is removed from the Social Register.
The meeting set targets to provide 350,000 people with permanent jobs by the end of the year, increase the incomes of another 1 million people and lift 230,000 families out of poverty.
Specific mechanisms and action algorithms are to be developed for each area, with responsible officials identified down to the mahalla level. Specific guidelines will be prepared for employees working directly with the population, taking into account the approaches of countries with significant practical experience in poverty reduction, including China.
Under the new system, primary responsibility and resources will be transferred to local levels. The priority will be to turn every opportunity in each mahalla into a job and source of income, while working individually with every family in need based on its circumstances and potential.
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