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growth was taken as the dependent variablebecause when firms and all types of
access to credit as the independent variable. Findings of results showed that
small firms’ growth, in our case employment growth does not depend on access
to creditin Chile. However, most reviews of the literature suggest a positive
relationship between these two.
In my opinion, this would work in developing
countries rather then developed ones, and Chile is recognised as a developed
country. To have a clear idea of what factors influence firm growth, more data
needs to be checked.
Reference
1.
Chittenden, F., Hall, G. and Hutchinson, P. (1996). Small firm growth, access to capital
markets and financial structure: Review of issues and an empirical investigation. Small Business
Economics, 8(1), pp.59
–
67. doi:10.1007/bf00391976.
2.
Mcpherson, M.A. ed., (2010). Access to Finance and Small Enterprise Growth: Evidence
from
East
Java.
The
Journal
of
Developing
Areas.
Available
from:
https://www.researchgate.net/publication/236828867_Access_to_Finance_and_Small_Enterpri
se_Growth_Evidence_from_East_Java [Accessed 17 Oct. 2022].
3.
Story, R. (n.d.). Small Business Growth, Finance and Innovation Rod Story. Available
from:
https://curve.carleton.ca/system/files/etd/798336d1-d875-4d3e-9705-
1663ffeaad53/etd_pdf/7586639572b7c062cc388161c397c650/story-
smallbusinessgrowthfinanceandinnovation.pdf [Accessed 10 Oct. 2022].
THE IMPACT OF THE DIGITAL ECONOMY ON FINANCIAL
INFRASTRUCTURE
Gulyamova Gulshahnoz Sabirovna
Associate Professor of
University of World Economy and Diplomacy
Studying the experience of advanced countries in introducing innovations
and modernizing the economy, and developing digital technologies is extremely
relevant. In this regard, the concept of financial innovation becomes particularly
relevant. The very nature of financial innovation is inextricably linked to the fact
that the approach to financial products, instruments and mechanisms is
changing. Innovations may be radical, and the market may not respond
adequately to their appearance. Innovations can be incorrectly applied or
implemented, and then they activate crisis situations and increase systemic risks
in all spheres of economic life.
It should be noted that none of the definitions is able to fully cover the entire
diversity of innovations, since, as noted above, they can exist in various aspects
of the financial activities of companies. Innovations can affect a wide range of
operational activities and elements of the corporation, but above all: financial
management, marketing, company strategy, business processes and models,
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organizational structure and technology. However, defining financial innovation
allows us to determine a vector for further research.
The system-forming definition of financial innovation, which was given at
the International Economic Forum in 2012, according to which they create
competitive advantages and also contribute to the generation of additional
income. However, it should be noted that in the course of various discussions this
definition has been clarified several times.
Exactly Industry 4.0. largely determines the colossal change in the role of
innovation in the modern world. The transition to a new technological order,
according to experts, is associated with a complete transformation of business,
which uses automated systems, cloud computing, and big data.[1]
Today, value creation occurs not only at the time of production, but also at
the stage of idea development, as well as at the time of implementation and after-
sales service, in other words, throughout the entire life cycle of the product or
service being created.
The development of telecommunications, the Internet, the enormous
increase in computing power, as well as the improvement of various information
channels, have been able to provide an interactive system in which technologies,
production and information networks coexist, forming the digital economy.
The contribution of the digital economy to the GDP of OECD countries in
2017 compared with the same measurement in 2010 suggests that economies of
countries that do not digitally transform and have not invested enough in
innovation risk falling further behind the leaders.[2]
According to BCG, the share of the digital economy in developed countries
accounts for 5.5%, and in developing countries
–
4.9%. The growth potential for
business contained in the development of the digital economy is enormous.
According to WEF estimates, by 2025 the global economy will produce up to 30
trillion. dollars of income. At the same time, the following industries will become
the leaders in profitability: logistics, telecommunications, consumer goods,
electricity, automotive industry, health, insurance and banking.
At the same time, various factors will determine the innovative
development of industries. Some of them are common to all sectors of the
economy, some are applicable in narrow areas, but they all move the economy
forward and create added value.
Digital transformation, which leads to the creation of new business models
that meet the needs of modern consumers, is impossible without sufficient
technological equipment. Key elements of the fourth industrial revolution
contribute to the generation of additional income without financial innovation
affecting the processes, competencies and business models of companies in the
digital economy.
Moreover, according to specialists from the Higher School of Economics,
GDP growth in high-tech, knowledge-intensive industries due to digitalization is
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already very significant. The ICT s
ector generates up to 3% of the country’s GDP,
while its growth is almost twice as fast as the reference values.[6]
This is why it is so important to research and develop financial innovations
for companies operating in the digital economy.
According to the World Bank, the share of knowledge embodied in
technology and innovation accounts for 70 to 85% of the country's GDP, which,
of course, is large-scale. This is also noted by the head of the department of
science and technology of the Ministry of Education and Science of Uzbekistan,
Sergei Matveev: “In the modern world, the price of knowledge increases sharply,
and the price of resources gradually falls. In modern technological products the
“intellectual” component of the pr
ice is about 80%.
According to Accenture, when assessing the importance of financial
innovation, more than half supported the key importance of technology in
business, which improves the financial results of companies. The core and engine
of financial innovation are financial technologies (hereinafter referred to as
FinTech). Financial innovation and financial technology are not identical; the
second definition can be a special case of the first.[7]
Today, it is FinTech that is driving the transformation of financial
institutions into a digital format. Many financial technologies form the
infrastructure of financial innovation; their distinctive feature is that they are
aimed at creating additional value by increasing income or reducing costs.
During the period from 2019 to 2021, total investments in FinTech in the
world amounted to more than $100 billion, while the trend is obvious, the
growth totaled about 500%. In the field of financial technologies, a significant
breakthrough is planned not only in the volume of investments, but also in the
degree of penetration of FinTech into the financial market. According to a PwC
study, the degree of innovation development from the introduction of FinTech is
already from 10 to 90%. Traditional financial institutions are recognizing the
disruptive nature of FinTech to their business and are partnering with new
financial services to improve operational efficiency and meet customer demands
for more innovative services. In fact, funding is moving away from venture
capitalism and towards larger investments.
According to research based on data from PwC's DeNovo platform, funding
for FinTech startups has increased at a compound annual growth rate (CAGR) of
41% over the past four years to about $42 billion in 2022. Financial innovation
is changing the competitive landscape and reshaping boundaries of the financial
services industry.
Overall, FinTech is one of the fastest growing sectors of the last 10 years,
driven by those who develop and/or implement new technologies to change the
traditional functioning of financial institutions. FinTech has largely created
problems for large banks and traditional financial institutions. A simple example
of this violation can be found in a number of mobile applications that offer
trading of goods without charging users for the transaction.
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Uzbek market for financial innovations is experiencing significant
difficulties in attracting capital in the context of the economic and political
climate, as well as sanctions from Western investors. However, venture capital
still accounts for more than 50% of total investment in financial innovation.
Uzbek FinTech startup market is characterized by raising funds through
crowdfunding and various business accelerators. For example, in Uzbekistan,
several projects worth $3 million were invested with the help of the Starta
Accelerator, another $1 million from the Target Global FinTech Opportunity
Fund, more than 300 thousand. $US from IIDF and Sequoia Capital. At the same
time, Uzbek technology giants almost do not make deals at the early stages,
preferring to buy ready-made solutions that will immediately bring a certain
added value, while at the same time, as already noted in another feature,
government agencies that provide up to 31% of FinTech spending in Uzbekistan.
A significant amount of state participation was able to provide a certain
financial innovation environment (infrastructure) in Uzbekistan, but in the
future it will also be necessary: advanced training of personnel, a built system of
relationships with private business and entrepreneurs, the creation of a
sufficient legal framework, without conflicts, promoting development of the
FinTech market in Uzbekistan.
Comparing the structure of the front for the development of financial
innovations, we can talk about the similarity of priorities at the Uzbekistan and
international levels; the main difference is manifested in approaches to
technology development. The world is accumulating knowledge and innovation,
but in Uzbekistan the emphasis is on specific solutions, since it seems difficult to
obtain adequate funding.
The past few years, the financial market has changed dramatically due to
financial innovation. Despite the fact that the market is in a growth stage, these
niches are the most attractive for start-ups. The development of the FinTech
market in the world is uneven and directly depends on the penetration of these
services. According to EY, whose specialists periodically update the penetration
rating of fintech services, the leading countries are China, India, Russia and
Uzbekistan. Currently, new tools have been developed in the field of
international finance: online banking and electronic payments.
To summarize the above, we can conclude that FinTech is technology-based
financial innovation, which refers to new financial products, financial services or
financial models created by transforming and innovating traditional financial
services or businesses using the latest advanced technologies such as big data,
cloud computing and artificial intelligence. In addition, financial innovation is
driving continued innovation in global financial services, as well as changing
business models and user expectations for financial services. Finally, the rise of
the digital economy has enabled service providers to provide innovative services
using new technologies, lowering the threshold for consumers to access financial
services and helping to create a more equitable social environment. Over the past
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few years, various startups as well as traditional financial institutions have been
actively developing fintech.
References
1.
Vinogradova N.A. Integral index of regional development // Regional economics: theory
and practice.
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2016.
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No. 2 (425).
2.
Kazmina A.D. Financial technologies and features of the digital economy during the
fourth industrial revolution // Young scientist.
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2019.
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No. 7.
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pp. 26-29.
3.
Komarov A.V., Martyukova V.M. Fintech as an effective tool for creating innovations in
financial markets // Financial Economics.
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2019.
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No. 2.
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pp. 168-171.
4.
Khotinskaya G.I. Systemic transformations in industry markets (on the example of the
financial market) // Finance.
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5.
Khotinskaya G.I., Parushin E.B. FINTECH: technologies of the future or a trap for
investors? // Financial life.
–
2019.
–
No. 3.
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pp. 78-83.
6.
EY. Global FinTech Adoption Index 2019.
–
7 pp. - [Electronic resource].
–
Access mode:
https://www.ey.com/en_gl/ey-global-fintech-adoption-index
7.
KPMG. Pulse of FinTech 2019.
–
[Electronic resource].
–
Access mode:
https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/02/pulse-of-fintech-h2-672019.pdf)
8.
International reports of the OECD. -
[Electronic resource].
–
Access mode:
https://www.oecd.org/internet/oecd-digital-economy-outlook2017-9789264276284-en.htm
DOES INTEREST RATE AFFECT NON-PERFORMING LOANS? EMPIRICAL
EVIDENCE FROM COMMERCIAL BANKS IN UZBEKISTAN
Isakov Olmas Kuchkarovich
Lecturer and PhD candidate in Economics
Westminster International University in Tashkent
Abstract.
This study investigates non-performing loans (NPL) and credit risk
in Uzbekistan's commercial banking sector, focusing on the period post-2016. Using
dynamic panel approach, bank-specific and macroeconomic factors have been
included in the econometric model to estimate their effects on NPL. According to
STATA results, loan-deposit ratio, GDP growth and loan interest rates have positive
impact on NPL. On the other hand, banks with foreign ownership experience lower
rate of NPL compared to local banks.
Since the beginning of 2017, the volume of loans have been increasing
significantly. As of July 1st, 2024, the total outstanding loans in commercial
banks of Uzbekistan amounted to 494 trillion Uzbek soums [1] which comprises
approximately 44% of the GDP of Uzbekistan. Significant expansion of loans to
greater population and improvements in financial inclusion are associated with
higher NPL ratio in credit portfolios. While this ratio was fluctuating between 2%
and 3% until the end of 2020, it started increasing during the pandemic period
reaching as high as 6.2% during mid 2021 (See Picture 2.5). This can be partially
explained by the fact that many households faced financial troubles during
