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SOME ASPECTS OF IDENTIFYING CREDITWORTHINESS IN
CORPORATE LOANS IN UZBEKISTAN
Alisher Asatullaev
The Banking and Finance Academy
of the Republic of Uzbekistan
https://doi.org/10.5281/zenodo.13762610
Credit and equivalent operations are allocated to the customer who has a
deposit account in the bank, according to his written application (order) on the
basis of the contract and in compliance with the general principles of crediting.
In some cases (financially stable, positive credit history and constant cash flow
to customers, as well as for financing projects included in Government
programs), lending through a secondary account opened at a Bank branch can
be carried out only with the permission of the Main Bank's Credit Committee.
Loans by the bank are repayable (with the obligation to repay the loan), term
(for a certain period), solvency (based on the payment of fixed interest
payments on the loan received), security (based on the provision of security for
the requested loan funds) and purpose (based on the business plan, for a specific
purpose) allocated on the basis of conditions.
The organization of bank lending in different countries is based on the
regulatory and legal documents of the state. That is, it indicates the need for
banks to take into account customer and bank requirements, regulatory
documents of the Central Bank, as well as national historical banking affairs.
In our opinion, the deposit base of the commercial banks of our republic is
insufficient due to the existence of problems in attracting voluntary savings of
the population and business entities to banking institutions.
Lack of long-term resources in banks is the main factor preventing
improvement of long-term lending practices of commercial banks. A simple and
realistic way to solve this problem is to get a loan from the Central Bank by
pledging liquid assets.
But obtaining resources from the Central Bank by commercial banks by
pledging liquid assets is not relevant for Russian banking practice. Because the
existence of the Stabilization Fund in Russia does not create the need for the
Government to increase the volume of public debt by issuing securities.
For banks in developing countries, short-term loans are preferable to
long-term investment loans, characterized by high profitability and low risk. The
main macroeconomic factor that prevents the development of project financing
is the lack of a state investment policy and a policy in the field of updating the
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main production funds and strengthening the innovative production potential of
the country. The creditworthiness of economic entities is represented by a
number of indicators (Figure 1).
Figure 1. Indicators representing the creditworthiness of legal entities
1
- coverage coefficient;
- liquidity coefficient;
-coefficient of provision of funds (autonomy).
Also, the dynamics of availability of working capital, profitability and
indicators of turnover of working capital are also of special importance.
Assessment of creditworthiness of economic entities is carried out on the
basis of balance sheet and profit and loss reporting. In addition, statistical,
analytical and other data are used when necessary during the determination of
creditworthiness.
After finding the coefficients determining the client's creditworthiness, he
is divided into classes according to the granting of credit. The following table
shows the classes of creditworthiness of customers.
Enterprises included in the first class are granted credit on general terms.
They can be given blank loans or be offered certain benefits.
Second-class enterprises are also credited on general terms. They are
given certain benefits (beyond credit) when certain additional conditions are
met. When concluding a contract with such enterprises, additional control
measures are agreed upon.
Table 1
1
Done by the author
Coverage
ratio
Liquidity
ratio
Autonomy
ratio
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Credit eligibility requirements by grade
2
№ Indicators
Class 1
Class 2
Class 3
1. Coverage ratio
C
r
≥ 2,0
2,0 ≥ C
r
≥ 1,0
1,0 ≥ C
r
0,5
2. Liquidity ratio
L
r
≥ 1,5
1,5
L
r
≥1,0
1,0 ≥ L
r
0,5
3. Autonomy ratio
A
r
≥ 60%
60%
L
r
≥30% 30%
L
r
15%
Enterprises included in the third class are considered to have a low level of
creditworthiness and can be given credit only on the basis of collateral. Loans are
not granted to enterprises rated below the third class.
According to the order of the credit department, a loan account is opened for
the company receiving the loan in the accounting and operational department.
Depending on the type of business entity, a loan account is opened on the
corresponding balance sheet.
The commercial bank should have constant information about the activities
of the clients it serves, analyze its creditworthiness, the state of payment
discipline, that is, establish a "data bank". In the process of lending, the borrower
should focus on fulfilling the terms of the loan agreement, making effective use of
the loan, returning it on time and in full, and maintaining close contact with the
borrower during the entire period of using the loan. For this purpose, the client's
business financial situation, how it fulfills its obligations regarding the delivery of
products that do not comply with the concluded contracts, production volumes,
wasteful expenses and losses, transaction costs, profit, the dynamics of the
increase of its working capital, stocks of goods and materials, and the situation of
circulation of working capital is analyzed.
Reconstruction of the lending mechanism of commercial banks in
Uzbekistan has become one of the important directions of the economic policy of
the independent state. The urgency of introducing scoring methods is the rapid
growth of demand for consumer credit in recent years; the credit policy of
commercial banks and the increase in cases of non-return of given loans; increase
in the loan portfolio of commercial banks; decrease in the level of activity of
commercial banks in the field of consumer credit; the level of formation of credit
bureaus in the country is at the first stage; high risk level of banks in the consumer
and mortgage loan market; explained by the high cost of implementing their own
software structure in the analysis of the customer's solvency, etc.
2
Done by the author on the basis of economic literatures
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The client's ability to receive a loan is the main assessment object in the
world banking practice in determining the purposes and forms of their loan in
credit relations.
Today, there are several ways to assess a client's creditworthiness, which
differ from each other in the amount and method of indicators used as an
organizational structure in the overall assessment of clients. But they can be
distinguished by the main state of use at the national level (Figure 2).
c
o
r
p
o
r
a
t
3
4
In conclusion, it can be said that it should be paid attention to valuation risks in
corporate loans to eliminate the identified shortcomings and reduce the risks
arising in the future in the corporate loans systems.
3
Done by the author
4
Done by the author
Method of
determining solvency
Scoring method
Underwriting
Determining the borrower's ability and willingness to repay the amount
requested by the borrower based on the terms of the loan agreement
Assessing the risks associated with lending to this organization
Determining the amount of credit that can be granted and its terms
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References:
1.
Decree of the President of the Republic of Uzbekistan dated May 12, 2020
No. PF-5992 "Strategy for reforming the banking system of the Republic of
Uzbekistan"//National database of legal documents – lex.uz
2.
Bankovskie korporativnыe kreditы: osnovnыe prinsipы i vozmojnosti
dlya biznesa // Stati.Ru – https://nauchniestati.ru/spravka/bankovskie-
korporativnye-kredity/.
3.
Trifonov D. A., Korshunova S. V. Sovremennыe problemы bankovskogo
korporativnogo kreditovaniya v Rossii //Ekonomika i biznes: teoriya i praktika.
– 2016. – №. 12. – S. 49-52.
4.
Parshin A. B., Nosova T. P. Korporativnыy kredit. vliyanie korporativnogo
kreditovaniya na natsionalnuyu ekonomiku. //VESTNIK ALTAYSKOY AKADEMII
EKONOMIKI I PRAVA. – S. 281-289.
5.
Nicholas Garvin, David W Hughes and José-Luis Peydró. The Role of
Collateral in Borrowing. // Economic Research Department, Reserve Bank of
Australia; Massachusetts Institute of Technology; Imperial College London,
ICREAUniversitat
Pompeu Fabra-CREI-BarcelonaGSE, CEPR. Research
Discussion Paper 2021-01. P. 46.
6.
Abdikarimova
D.
KREDIT
BOZORIDA
GAROV
TA’MINOTIDAN
FOYDALANISH ZARURATI VA XORIJ TAJRIBASI //Iqtisodiyot va taʼlim. – 2023. –
T. 24. – №. 1. – P. 143-147.
7.
The official website of the Central Bank of the Republic of Uzbekistan –
www.cbu.uz
