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Informal credit institutions in transition countries: a study of urban money lenders in post-communist Uzbekistan

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  • Kobil Ruziev
  • Peter Midmore

Abstract

Research on informal financial institutions in transition economies is scant. This study investigates behaviour of urban money lenders in Uzbekistan. Money lending in Uzbekistan is a relatively new business which emerged mostly in response to targeted demand from fellow entrepreneurs during transition. We find that their lending behaviour is more stringent than suggested by previous studies of rural money lenders. They always require collateral, do not engage with the poor and avoid lending for consumption purposes. Their lending is short-term and targeted on specific business opportunities which enjoy healthy cash flows and offer quick returns. They have limited outreach from serving networks of connections within small geographical localities. Since they rely exclusively on their own resources for loanable funds, they often have to ration their loans. They actively use all available information and instruments to reduce default risks. Although borrowers live in closer geographical proximity to lenders in urban areas, they are also engaged in various heterogeneous activities and are more self-reliant with respect to the local community, which reduces the accuracy of money lenders' assessment of the character of borrowers as well as of their ability to repay.

Suggested Citation

  • Kobil Ruziev & Peter Midmore, 2014. "Informal credit institutions in transition countries: a study of urban money lenders in post-communist Uzbekistan," Post-Communist Economies, Taylor & Francis Journals, vol. 26(3), pages 415-435, September.
  • Handle: RePEc:taf:pocoec:v:26:y:2014:i:3:p:415-435
    DOI: 10.1080/14631377.2014.937107
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    References listed on IDEAS

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    1. Kobil Ruziev & Peter Midmore, 2015. "Connectedness and SME Financing in Post-Communist Economies: Evidence from Uzbekistan," Journal of Development Studies, Taylor & Francis Journals, vol. 51(5), pages 586-602, May.
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    Cited by:

    1. Dvouletý Ondřej & Čadil Jan & Mirošník Karel, 2019. "Do Firms Supported by Credit Guarantee Schemes Report Better Financial Results 2 Years After the End of Intervention?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-20, January.
    2. Uduakobong Inyang, 2022. "Risks to credit access in a developing economy:Focus on household characteristics and the choice of credit in the Niger Delta Region of Nigeria," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(2), pages 228-240, March.
    3. Pelkmans, Mathijs & Umetbaeva, Damira, 2018. "Moneylending and moral reasoning on the capitalist frontier in Kyrgyzstan," LSE Research Online Documents on Economics 84409, London School of Economics and Political Science, LSE Library.

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