INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 03,2025
Journal:
https://www.academicpublishers.org/journals/index.php/ijai
page 779
MECHANISMS OF FINANCIAL SUPPORT FOR SMALL BUSINESSES AND THEIR
EFFECTIVENESS
A.Karimov
Associate Professor of the Department of Management and Digitalization
at the non-state higher educational institution "University of Business and Science."
Bustanova Nilufar Abdusamatovna
Senior lecturer of Andijan State Technical Institute
telephone:+998 91 610-39-49
Abstract:
The effective functioning of financing mechanisms is of great importance for the
sustainable development of small business and private entrepreneurship. Therefore, the analysis
of existing financing instruments, the assessment of their effectiveness, and the search for ways
to improve them are urgent tasks.
Key words:
entrepreneurship, import, export, innovation, environmental resources, efficiency,
information services, credit.
Introduction.
Today, small business and private entrepreneurship play a decisive role in the
economic development of any country. In Uzbekistan, this sector accounts for 54.9% of GDP
and employs more than 78% of the working-age population[1]. In recent years, the government
of Uzbekistan has been carrying out large-scale reforms to develop small business and private
entrepreneurship. By reducing state programs, tax benefits, and administrative barriers, a
favorable environment for entrepreneurial activity is being created.
The effective functioning of financing mechanisms is of great importance for the
sustainable development of small business and private entrepreneurship. Therefore, the analysis
of existing financing instruments, the assessment of their effectiveness, and the search for ways
to improve them are urgent tasks.
The purpose of the study is to analyze the mechanisms of financing small business and private
entrepreneurship in Uzbekistan.
Methods
Small business is an important component of the economy of any country, and its
sustainable development serves to create jobs in society, develop innovations, and increase the
income of the population. However, small businesses often face the problem of a shortage of
financial resources. Therefore, mechanisms of financial support for small businesses are of great
importance. This essay analyzes the methods of financial support for small businesses and their
effectiveness.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 03,2025
Journal:
https://www.academicpublishers.org/journals/index.php/ijai
page 780
Loans issued by commercial banks are one of the main tools for supporting small
businesses. Today, bank loans are one of the important tools for ensuring economic development
and financial stability. Current expenses of the enterprise, intended by entrepreneurs through
loans for conducting and expanding business activities, acquiring fixed assets or expanding
production capacities.
1. Forms of financial support for small businesses
The state allocates grants and subsidies to support small businesses. This financial
assistance is aimed at stimulating entrepreneurs and solving socio-economic problems.
Venture capital is important for financing new and innovative business projects. This
mechanism is suitable for startups and high-risk projects. There is a system for issuing
microcredits on favorable terms for small businesses. Microfinance organizations allocate
low-interest loans for the development of small businesses.In addition, in order to expand
access to loans, a system of guarantees for small businesses by state and commercial
organizations has been established. At the same time, insurance services are offered to
protect businesses from financial risks.
In Uzbekistan, $1.7 billion has been allocated to support small businesses in 2023-2026.
From October 1 of this year to the end of 2026.
Results
Share of small business and private entrepreneurship %
Indicators
2020
2021
2022
2023
Main sources of financing for small
businesses
Bank loans
Microfinancing
and microloans
State grants and
subsidies
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 03,2025
Journal:
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page 781
1
2
3
4
5
GDP
54,8
54,1
52,8
43,7
Industry
27,9
27,4
26,0
28,4
Construction
72,5
72,5
71,5
76,6
Occupancy
74,5
74,5
73,9
74,1
Export
20,5
20,0
29,6
25,3
Import
51,7
45,3
49,4
48,4
As can be seen from the data in the table above, the share of small business and
entrepreneurship in the gross domestic product has had a downward trend over the past three
years, the main reason for which is the increase in the number and share of medium and large
business entities in our country.
As a result of the analysis, the following was revealed:
1. Subsidies, concessional loans, and grants allocated by the state to support small businesses
are causing a certain increase.
2. It has been established that the annual interest rates on loans issued by commercial banks
sometimes create difficulties for entrepreneurs.
3. The number of entities that have expanded their business within the framework of financial
support programs has increased, but bureaucratic obstacles still exist.
Discussion
The results show that financial support mechanisms have a positive impact on the
development of small businesses. However, some problems, including difficulties in obtaining
loans and high interest rates, are limiting the activities of entrepreneurs. It is also necessary to
strengthen public-private partnerships to increase the effectiveness of financial support programs.
Of course, in the development of entrepreneurial activity, along with the legal basis, its financial
support is also important. During the dialogue, it was announced that 10 percent of entrepreneurs
will invest in financing projects of business entities, and the remaining 90 percent will be
directed by the newly created "Business Development Bank" and the state. This is a great
incentive for entrepreneurs and creates a wide platform for the implementation of their initiatives.
On June 12, 2023, the Decree of the President of the Republic of Uzbekistan "On
Measures Aimed at Establishing Mutually Beneficial Cooperation with Business Entities in
Poverty Reduction" was published. Based on this legal document, the program "20 thousand
entrepreneurs - 500 thousand qualified specialists" will be implemented in our country. A total of
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 03,2025
Journal:
https://www.academicpublishers.org/journals/index.php/ijai
page 782
1 billion US dollars in loans will be allocated for the implementation of the program in 2023-
2024.[5] In this case, in 2023, a credit line equivalent to 100 million US dollars will be opened
from the Fund for Reconstruction and Development to commercial banks to finance the projects
of business entities included in the program.
1 trillion soums will be allocated from the funds provided for financing projects within
the framework of family entrepreneurship development programs. Loans of 200 million US
dollars will be attracted from international financial institutions. Credit line funds to commercial
banks for 10 years.
It should be noted that a number of benefits and preferences are applied in this process. In
particular, until January 1, 2025, when entrepreneurs hire citizens included in the "Unified
Register of Social Protection," entrepreneurs will be granted a benefit from property and land
taxes if they have paid these citizens at least one minimum wage monthly for at least one year,
provided employment, and they constitute at least 20 percent of the total number of employees.
Also, when hiring citizens and calculating wages for each month in an amount not less than 1
minimum wage, personal income tax paid on monthly wages is returned to the employer from
the republican budget (up to 2 times the BRV for each employee) and is applied to them with a
50 percent reduction in the social tax rate.
Effectiveness of Financial Support
The effectiveness of financial assistance can be assessed based on the following criteria:
• The level of job creation - how many new jobs were created as a result of allocated financial
resources.
• Impact on business profitability - indicators of financial stability and profitability of small
businesses.
Return on investment - the economic efficiency of invested funds and the period of profit.
• Loan repayment rate - timely repayment of issued loans.
• Impact on the local economy - the contribution of small businesses to regional economic
development.
The following strategies are important for increasing the effectiveness of financial support:
1. Simplification of loan terms - allocation of low-interest and long-term loans for small
businesses.
2. Effective use of financial resources - training of entrepreneurs in financial management and
business plan development.
3. Development of public-private partnership - expansion of investment and grant programs.
4. Stimulation of innovative projects - development of special financial programs for technology
businesses and startups.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 03,2025
Journal:
https://www.academicpublishers.org/journals/index.php/ijai
page 783
5. Strengthening the monitoring system - improving the system of control and assessment of the
activities of enterprises that have received financial assistance.
Conclusion
The effectiveness of financial support for small businesses depends on the correct allocation of
allocated resources. The effectiveness of financial assistance can be increased by creating jobs,
ensuring the financial stability of businesses, and developing the local economy. Effective
management, public-private partnership, and the development of a monitoring system ensure
sustainable growth of small businesses.
References:
1. State Committee of the Republic of Uzbekistan on Statistics. (2023). Statistics of small
business and private entrepreneurship. Tashkent.
2. Rahimova, M. (2023). Financing of small business in Uzbekistan: problems and solutions.
Economics and Innovative Technologies, 15 (2), 45-52.
3. Khudoyberganov, S. (2022). Effectiveness of state support programs for entrepreneurship in
Uzbekistan. Finance, 8, 12-18.
4. Smith, J., & Jones, R. (2023). Modern Mechanisms of Small Business Financing in
Developing Countries. Journal of Finance and Economics, 12(4), 78-92
5. FAMILY
BUSINESS
IN
UZBEKISTAN:
OBJECTIVE
NECESSITY
OF
DEVELOPMENT, ORGANIZATIONAL AND LEGAL ASPECTS
6. BN Abdusamatovna International Journal of Education, Social Science & Humanities 12 (5),
423-427
