Uzbekistan, one of Central Asia’s major economies, is placing itself and the centre of growing regional trade by reintroducing factoring services to its banks. On behalf of Trade Finance Global (TFG), Madina Nurmatova, Project Manager at IFC, spoke to Foziljon Ulashev, Director of the Small and Medium Businesses Department at Aloqa Bank JSCB, at the ‘Exploring Receivables and Payable Finance conference,’ hosted by FCI, IFC, and the Central Bank of the Republic of Uzbekistan. They delved into the role of the factoring industry in boosting Central Asian trade. 

Factoring: the road to trade

As mandated by a decree announced in August, Uzbek banks are now required to offer factoring services, which allow clients to sell their outstanding invoices and access immediate cash flows. This is crucial for small and medium enterprises (SMEs) wishing to export to neighbouring countries, as it allows them to enter the world of trade while minimising risk, uncertainty, and long waiting times. 

Factoring services provide much-needed lifelines for SMEs, explained Ulashev: “the amount that the clients received through factoring services allows them to ensure the continuity of the subsequent manufacturing processes, to refill their working capital, to increase the scale of production, to make payments to the subsequent entities down the value chain”. Without factoring, businesses will have much longer turnaround times and will struggle to expand their operations or diversify. 

This will not only boost SMEs in Uzbekistan but is expected to have an important impact on trade around the region. Central Asia, a long-neglected area in the shadow of China and the oil-rich Middle East, is having a renaissance as investors look to its large, untapped client base and growing economy. However, regional trade remains much lower than it could be, due to poor infrastructure and historically high barriers to trade: moves like Uzbekistan’s factoring push will be key to bringing the region forward and attracting foreign investment. 

Aloqa Bank’s innovation

Aloqa Bank is at the forefront of the growing factoring industry in Uzbekistan, which promises to reshape regional trade finance by reintroducing services that cater to the fast‐paced needs of SMEs. 

With a factoring market potential estimated at almost $2 billion, the new digital factoring service is aimed at unlocking liquidity quickly and efficiently. Factoring provides immediate funding for businesses with tight margins and contributes to reducing recorded debts, increasing the turnover of money within the economy.

Since the decree this summer, Uzbek banks have rushed to improve and modernize their factoring services. The bold regulatory move has encouraged banks like Aloqa Bank to innovate, launching an online platform that allows business clients to submit electronic applications for factoring. The process is entirely digital, eliminating the need for physical visits to bank branches and cumbersome paperwork—a vital upgrade for SMEs operating on tight schedules.

The bank’s online platform is integrated with external systems that automatically review key documents such as invoices, contracts, and reconciliation statements. This technological integration helps determine the payor’s solvency through a scoring analysis guided by pre-set stop factors. The system then decides if the factoring service can be provided, issuing contracts and acknowledgement forms to both the vendor and the payor electronically. As a result, the turnaround time for financing is remarkably short.

“The convenience of factoring services for the business entities is in the absence of a need for additional documents, [the] short time of getting the financing processed, [and that entities are not required to provide additional collaterals,” said Ulashev.

This rapid processing is critical for SMEs that need to secure funds swiftly to maintain production continuity, expand operations, or simply manage cash flow gaps. Factoring services offered by Aloqa Bank come with flexible terms—up to 30 days at a discount rate of 2.5% and up to 90 days at a discount rate of up to 8%. In 2024, the project facilitated about $1.5 million in trade; it is projected that in 2025, over $23 million worth of trade will be financed with this service. 

Switching on digital trade finance

Such aggressive targets align with broader economic reforms in Uzbekistan, aimed at opening the country up to trade and attracting foreign direct investment that will be crucial for sustained growth. The country has been actively implementing market-oriented reforms since 2017, including liberalising the exchange rate, reducing import tariffs, and simplifying business regulations.

The shift toward digital trade finance solutions in Uzbekistan is supported by a broader government push to modernize the financial sector. Initiatives to improve transparency, reduce bureaucratic hurdles, and integrate digital tools into everyday banking operations are part of the ongoing reform agenda. It is hoped this will turn Uzbekistan into the region’s financial hub, leading innovation and providing services to businesses from across Central Asia. 

As the factoring market develops, competitors and fintech companies are also entering the space, driving innovation and further improving service delivery. Although the Central Asian market is still in its early stages compared to mature economies, the aggressive targets set by banks like Aloqa Bank illustrate a clear vision for the future of trade finance in Uzbekistan. With the government’s backing and the increasing digital literacy of local businesses, the new era of digital factoring is poised to make a significant impact on the Uzbek economy.

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The reintroduction of factoring services in Uzbekistan is set to be an important step in increasing regional trade and is emblematic of a wider effort by Uzbekistan to modernise the country’s financial sector and place it as a leader of regional innovation. The digital factoring program by Aloqa Bank represents a critical step in encouraging SME growth and boosting trade. 

With clear government support, robust technological integration, and a focus on maintaining strong business relationships, the new platform is set to play a vital role in supporting national and regional economic growth for a long time.