The Evolution of Microfinance in Kazakhstan

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Friday, August 27, 2021
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USAID’s Assistance with Introducing Microcredit

Natalya Prezhebylskaya was just 11 years old in 1976, when her family moved to Kazakhstan from Russia. She studied to be an appraiser in Astana and earned a bachelor’s degree with honors. In 1999, Natalya joined KMF, a microfinance organization, as a credit analyst. Today, at 56, she is the Head of KMF’s Taldykorgan branch.

Microfinance, also known as microcredit​, involves making credit available to small businesses, self-employed, and low-income individuals or groups who otherwise would lack access to formal banking services.

In the early years following Kazakhstan’s independence from the Soviet Union, the country experienced a recession and the economy struggled to create jobs, curb inflation, and reduce poverty. While formal banking services existed, banks almost exclusively lent to large firms with the collateral to secure loans.

USAID’s programs in Central Asia began shortly after the region’s independence from the Soviet Union, a partnership now nearly in its third decade. In the initial years, USAID programs focused on an economic transition towards market-based economies, including helping Kazakhstan develop and implement the laws, regulations, and infrastructure necessary to establish capital markets.

Microfinance is meant to help underserved, low-income, and unemployed individuals access credit. To unleash its potential in Kazakhstan, USAID helped to develop the country’s first-ever microcredit program in 1996.

USAID collaborated with the Government of Kazakhstan to create new regulations enabling non-banking financial organizations to provide small working-capital loans, introducing the formerly unknown concept of non-collateralized microlending in the country.

This led to the establishment of KMF, the first microfinance lending institution in Kazakhstan, in 1997. “KMF offered small loans to underserved individuals and groups, often groups of up to five individuals, known to one another, serving as guarantors for each other. The loans were up to $100 per individual in the group,” says Natalya. Recognizing the success of group lending and its positive impact on small-and-micro enterprises, KMF expanded its operations to rural Kazakhstan. “Rural residents needed loans to breed livestock and invest in farming,” adds Natalya.

Since the 2000s, KMF opened 12 branches across Kazakhstan, 114 satellite offices in towns and rural areas. Currently, KMF has a total of 170 satellite offices across the country. As of July 2021, KMF has 220,000 active clients, nearly 60 percent are female, and 68 percent are from rural Kazakhstan. “Women are better borrowers, they are more disciplined with loan repayment,” notes Natalya.

“Today, we are the largest microfinancing company in Kazakhstan. Yet, microfinance represents a mere 1.5 percent of the total loan market. Ninety-eight percent of the market is held by banks and online lenders. While we’re proud of how much we have grown, we see a lot more potential,” says Natalya.

USAID is continuing its support for the industry by working with KMF in support of lending that enhances regional trade in targeted sectors such as horticulture, transport and logistics, and tourism. Since 2017, over $3.8 million has been made available to borrowers in these sectors.

Reflecting on their journey since the 1990s, Natalya notes, “Looking back, I would have never imagined where we are today. We have 1,900 employees, we’re online, we have employed information systems, we have mobile experts that go to customer’s homes to help them access credit.” She adds, “We couldn’t have done this without USAID’s timely assistance during the crucial, formative years. Our employees received training, we benefited from international expertise brought to Kazakhstan, and of course, the funding to get us off the ground.”

Natalya is very proud of KMF and the meaningful work they do. “I know that we make loans accessible and affordable to people, especially female entrepreneurs in rural areas. When asked what she hopes to achieve in the years to come, Natalya says, “I want us to make it possible for every female in the country, no matter where she is, to have access to credit.”

Last updated: January 18, 2022

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