Microsoft Word econ 2004 16. doc

3.2 Non-bank Financial Institutions 
The formation of specialized NBFIs began in 1995 at the instigation of both the 
government and the private sector. These institutions included the Business Fund 
for financing small and medium sized business enterprises, the state insurance 
companies “Madad” and “Uzbekinvest”, UzAIG (joint venture of AIG and NBU), 
and a number of private insurance and investment companies. Unfortunately, the 
information available on this sector is very limited and there is no statistical data at 
all.
Since their establishment, the success of insurance companies has been 
controversial. On the one hand, the range and quality of services has steadily 
improved, but on the other hand, most of the insurance companies found 
themselves in financial difficulty at some point. The most ambitious project – a 
joint venture of the renowned AIG Corporation and National Bank of Uzbekistan 
(UzAIG) - has been in financial distress for a number of years. 
One of crucial difficulties in assessing the activity of non-bank financial 
institutions is the absence or significant lack in regulations of this sector. There is 
no requirement to publish their financial statements in the local press (as for 
example in case of banks). Indeed, the accounting standards of NBFI’s have not 
yet been reformed and are lacking in accuracy and presentation. 

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There were no significant attempts in Uzbekistan to reform the pension system. 
The single pension fund remains state-run and no private pension institutions have 
been created. 
In late-1996, a new type of financial institution was created in Uzbekistan, called 
the Privatisation Investment Fund (PIF). Under this PIF scheme, it was envisaged 
to sell 30 percent of the shares of about 300 large enterprises to investment funds 
in a first implementation phase. It was further expected that in a second phase, 
shares of 300 more enterprises would be sold. Progress in implementing the 
scheme has been substantially slower than originally expected, although more than 
80 investment funds and management companies have been established, and about 
200,000 individuals have bought shares in PIFs. The number of PIFs and volume 
of their transactions have been steadily decreasing in recent years due to the fact 
that performance of partially privatised enterprises has been (with very few 
exceptions) very poor and consequently profitability of the PIF was low or 
negative. This resulted in sharply reduced interest in the PIF’s activity among the 
investors. 

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