Central Bank urges lenders to weigh social impact when accepting sole homes as loan collateral

Central Bank urges lenders to consider social impact when taking sole homes as collateral

The Central Bank has issued recommendations calling on commercial banks to take borrowers’ interests and the potential social consequences into account when accepting an individual’s only permanent home, where they and their family live, as loan collateral.

In such situations, banks were advised to first carefully assess the borrower’s ability to repay the loan, refrain from making the property’s value and liquidity the main basis for lending, and, where possible, consider other forms of security.

In a statement, the Central Bank said lenders should primarily determine whether a client can repay a loan, and that the value of the pledged home should not be the decisive factor in approving credit.

Before a contract is signed, clients must be clearly informed that if the loan is not repaid, their only home could be foreclosed on and sold. If an individual pledges their sole residence to secure another person’s or a business owner’s loan, the home can be seized if the debt is not paid, even though the individual did not take out the loan themselves.

Once a debt arises, banks are advised to review the borrower’s financial situation and consider restructuring the loan or other ways of settling the arrears before moving to enforcement.

The Central Bank’s 2025 financial inclusion report found that 29% of bank borrowers in Uzbekistan have more than one loan, with an average of 1.7 loans per borrower.

In the first half of 2026, banks’ total non-performing loans came close to 23 trillion soums. State-owned banks issued more than 70% of the loans that later became problematic.