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Kazakhstan's bank reports inadequate financial resources

Government programs face inadequate financial support from secondary financial institutions.

State-affiliated programs face potential financial shortages, according to lower-tier banking...
State-affiliated programs face potential financial shortages, according to lower-tier banking institutions.

Kazakhstan's bank reports inadequate financial resources

Stream of Complaints: Second-tier Banks Struggle with Funding for State Programs

Small and medium-sized businesses in Kazakhstan are facing a predicament as second-tier banks are grappling with a scarcity of funds for state programs. This issue has led to a dwindling interest in these programs, according to Total.kz.

The National Chamber of Entrepreneurs, "Atameken," disclosed that during the first quarter of the year, banks have set aside 3 billion tenge for subsidies and 1.8 billion tenge for guarantees. However, each bank has a requirement of at least one billion tenge for new projects, creating a noticeable funding gap.

The chamber of entrepreneurs emphasized that due to this funding shortage, clients who had initially received preferential loans are now obligated to repay their credit without the benefit of interest subsidies.

"Another issue at hand is known as a poor credit history. On behalf of businesses, we propose to allow clients with a poor credit history, as recorded in the first credit bureau, a three-year window to qualify for preferential loans, provided they meet the financing conditions," suggested Deputy Director of the chamber of entrepreneurs, Beisen Zholboldiev.

Bank representatives confirmed their readiness to consider projects from such clients under specific conditions, namely if they have settled their outstanding debts, possess adequate collateral, and their ability to repay is confirmed.

Zholboldiev notes that entrepreneurs are growing frustrated due to spending months waiting for a bank decision, only to be denied. This situation results in both financial and moral losses for businesses, thereby dampening the interest of small and medium-sized enterprises in state programs.

Additionally, the chamber of entrepreneurs has urged banks not to delay the assessment of businesses' projects. The protracted procedure, including the preparation of documents according to the bank's requirements, can take anywhere from 3 to 8 months.

Underlying Economic Challenges

This funding crisis in second-tier banks is rooted in several economic challenges, including reduced income from the National Fund, which has been impacted by lower oil prices. Moreover, the global economic scenario, including tariff conflicts and fluctuations in energy prices, has generated uncertainty that affects investor confidence and potentially limits banks' access to external funding.

Potential Solutions

Although specific solutions geared towards addressing insufficient funding for second-tier banks have not been explicitly outlined in the current initiatives, broader economic and financial reforms aim to stabilize the financial environment. These include financial support tools for businesses, an action plan by the government, and regulatory adjustments focused on consumer lending and macroprudential policies. These measures are intended to help banks manage risks more effectively, potentially alleviating the funding crunch.

  1. The funding gap in second-tier banks for state programs is causing small and medium-sized businesses to lose interest in these programs, according to Total.kz.
  2. Beisen Zholboldiev, Deputy Director of the National Chamber of Entrepreneurs, suggests allowing businesses with poor credit histories a three-year window to qualify for preferential loans, as long as they meet financing conditions.
  3. Bank representatives acknowledge their readiness to consider projects from businesses with poor credit histories, provided they have settled their outstanding debts, have adequate collateral, and their ability to repay is confirmed.
  4. The lingering issue of insufficient funding in second-tier banks is rooted in several economic challenges, including reduced income from the National Fund due to lower oil prices and global economic uncertainty affecting investor confidence and access to external funding.

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