Developing a risk-based stress testing framework for microfinance banks in Uzbekistan: A SVAR approach

Farrukh Nematov
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Farrukh Nematov: The Central Bank of Uzbekistan

No 12-2026, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper develops a risk-based stress-testing framework for emerging microfinance banks using a structural vector autoregressive (SVAR) approach. The model captures the dynamic transmission of key macroeconomic shocks, including economic activity, monetary policy, and exchange-rate movements, to supervisory-relevant banking indicators, including nonperforming loans, capital adequacy, and lending behaviour. The empirical analysis focuses on identifying macro-financial transmission channels that are particularly relevant for supervisory stress testing in newly established banking segments. Impulse response functions are used to derive baseline and adverse macroeconomic scenarios and to evaluate how shocks propagate to banking-sector risk indicators over time. The results highlight the important role of external and monetary shocks in shaping asset quality and capital resilience, underscoring the relevance of macro-financial linkages for the supervision of microfinance banks. The framework proposed in this study provides a transparent and operational tool for translating macroeconomic disturbances into supervisory risk indicators and supports the implementation of risk-based supervision as the microfinance banking sector develops in Uzbekistan.

Keywords: stress testing; SVAR; macro-financial linkages; microfinance banks; exchange rate shocks; capital adequacy; non-performing loans (search for similar items in EconPapers)
JEL-codes: C32 E44 E58 F31 G21 G28 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2026-04-21
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mfd
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