Banking Sector Development in Uzbekistan: A Case of Mixed Blessings?

Using grass-roots-level data, this article analyzes factors that contribute to the current backwardness of the Uzbek banking sector. The study attempts to show that despite considerable progress achieved in terms of modernizing payments systems, embracing international accounting standards, and establishing a two-tier banking system, not much improvement has been made in terms of financial intermediation in the country. It argues that the Uzbek government's post-independence policy of not dismantling the old style of monetary management, which was prompted by the need to prevent the economy from dramatic reduction in output and employment, has outlived its usefulness and should now be reformulated to promote a banking system able to cope with the needs of a market-based economy.