CAN DIGITAL TRANSFORMATION EXPAND THE BOUNDARIES OF THE EARNINGS POTENTIAL OF COMMERCIAL BANKS? EVIDENCE FROM UZBEKISTAN
Keywords:
digital transformation, commercial banks, profitability, ROA, ROE, Uzbekistan, fintech, intangible assetsAbstract
his paper examines whether digital transformation has expanded the earnings potential of commercial banks in Uzbekistan, using official data from the Central Bank of Uzbekistan (CBU), IMF Financial Sector Assessment Program (FSAP) reports (2025), World Bank Global Findex surveys, and Visa country insights (2023). The analysis covers the period 2017–2025, focusing on key profitability indicators (return on assets [ROA], return on equity [ROE], net interest margin share), cost-to-income ratios, and digital metrics such as remote banking users and account ownership.
Data show rapid digital penetration: remote banking users grew from approximately 2 million in 2017 to 14.5 million in 2021 (a 43% increase during the COVID-19 year) and reached 74.18 million by October 2025 (CBU data via secondary reports). Account ownership among adults rose from 23% in 2011 to 44% in 2021. Profitability indicators fluctuated: aggregate ROA stood at 1.9% in 2017, peaked at 2.6% in 2023, and fell to 1.4% in 2024; ROE followed a similar pattern (17.1% in 2017 to 9.2% in 2024). Cost-to-income ratios declined from 69.4% in 2018 to around 42% in 2020–2021 before rising again (IMF, 2025).
Using descriptive trend analysis and period comparisons (pre- and post-2020 digital acceleration), the study finds that periods of strong digital growth coincided with temporary efficiency gains and ROA recovery after the 2021 dip, consistent with cost reductions from remote channels and new fee-based revenues. However, state-owned commercial banks (SOCBs), which dominate 62% of assets, continue to show lower profitability (ROA 0.1% in 2024). Limitations include the absence of bank-level digital adoption data for formal panel regression and the confounding effects of preferential lending and macroeconomic shocks. The paper contributes to the literature on digital banking in transition economies by providing the first structured, data-driven assessment for Uzbekistan. It suggests that digital transformation supports—but does not independently guarantee—expanded earnings potential amid ongoing structural reforms.
References
1. Central Bank of the Republic of Uzbekistan. Various statistics (payment systems, banking sector). cbu.uz (accessed via official reports, 2023–2025).
2. International Monetary Fund. (2025). Republic of Uzbekistan: Financial Sector Assessment Program – Financial System Stability Assessment. IMF Country Report No. 25/145.
3. Visa. (2023). Unlocking the Benefits of Digital Payments: Insights from Uzbekistan.
4. World Bank. (2021). Global Findex Database.
5. World Bank. (various). Financial Sector Assessment and project documents.
6. Additional peer-reviewed sources on emerging-market digital banking (e.g., Banna & Alam, 2021; Phan et al., 2020) for comparative context.
