Development of SME and increasing income of the population through Islamic financing

Abstract

The level of financial inclusion in Uzbekistan remains low: the majority of households and firms, rather than using formal finance, save and borrow informally, and few use digital finance products. Both indicate the high cost of finance as the top reason for not using it. Secondly, households, which are mostly Muslim, declare that religious reasons prevent them from using formal finance, as only conventional finance is available. Unlike households, firms report that complex application procedures and high collateral requirements are the second and third most important reasons for not using formal finance. The purpose of this paper is to examine the short-run and the long-run relationships between Islamic banking development and economic growth in the case of Uzbekistan.