Kursiv.kz: Kazakhstanis are increasingly using the services of MFIs because of the easy availability of loans

Microfinance institutions (MFIs) as an alternative to bank lending are becoming increasingly popular in Kazakhstan. The main argument in favor of the MFI: loan processing without a large number of documents, if the client requires a not very large amount of money. Today, more than 150 microfinance organizations operate in the country. Kursiv Research found out the main financial indicators of the sector and made the rating of MFIs on various criteria.

And throughout the world as a whole, and in Kazakhstan in particular, there are now a lot of possibilities to receive money on credit - through a bank, a microfinance organization or an online lending company. In practice, it often turns out that the conditions for obtaining a loan in a bank are much tougher than in other financial organizations. This concerns the requirements for the presence of a whole list of documents, the assessment of solvency, the borrower's credit history, the time limit for consideration of the application, and it takes a lot of time to get the loan itself. For the reasons listed above, citizens often prefer to contact alternative bank organizations.

Separately, it is worth noting that companies operating online and providing, at first glance, favorable loan terms, are for the most part not MFIs. Only those companies that officially have the words “ Microfinance Organization ” in their name and have permission to conduct their activities on the part of the regulator, the National Bank of the Republic of Kazakhstan, can be considered microfinance organizations .

Experts from the microfinance organization KMF told “Italics” about how MFOs differ from banks and how they resemble each other.

Both MFIs and banks are required to enter into loan agreements only in writing. But there are differences between treaties. First, they are regulated by various independent laws: on “Microfinance Organizations” and “On Banks and Banking Activities”.

Secondly, microcredits are issued only in national currency, while their size can not exceed 8 thousand monthly calculation indicators (MCI for this year - 2525 tenge). In 2019, the highest amount that a client can receive in the MFI of Kazakhstan is 20.2 million tenge.

More than half of the total microloans are provided for business purposes, said the director of the Association of Microfinance Organizations of Kazakhstan, Yerbol Omarkhanov. Therefore, he is sure, it can be argued that the activities of microfinance organizations are aimed at developing entrepreneurship.

Also, microfinance organizations provide microcredit services in those remote regions of the country where second-tier banks are not widely represented or completely absent.  

In Kazakhstan, as of January 1, 2019, 157 microfinance organizations were registered, whereas in the same period of 2018 there were 149. According to the National Bank of Kazakhstan, as of the same period of the current year, only one company from all MFIs did not meet the requirements of the regulator prudential standards in terms of the size of the estimated equity capital.

The total assets of the sector in 2018 amounted to 286.55 billion tenge, which is 52% more than at the end of 2017.

Top-10 microfinance organizations in terms of assets included KMF, Toyota Financial Services Kazakhstan, BIK-Finance, Arnur Credit, Yrys, OnlineKazFinance, Asian Credit Fund, Shinhan Finance, RIC Kyzylorda, ERG Microfinance.

We have identified five leaders in 2018 for various financial indicators.

Volume of assets

The first place in terms of assets was taken by the KMF company with assets of 129.22 billion tenge against 96.81 billion tenge the year before last. The main influence on the increase in the company's assets was the growth of the net loan portfolio, explained in the organization.

Second place - at Toyota Financial Services Kazakhstan. The company's assets in the analyzed period reached 35.45 billion tenge, an increase of 54.3% from the level of 22.98 billion tenge in 2017.

The three leaders are closed by BIK-Finance, whose assets at the beginning of the year were equal to 30 billion tenge. Other indicators, including loans issued, the company's liabilities and profits for the year 2018 were equal to zero. Equity capital also amounted to about 30 billion tenge. At the beginning of 2018 in the list of companies registered with the regulator "BIK-Finance" was not yet.

The fourth line is based on the MFO “Arnur Credit” founded in 2001, headquartered in Shymkent. Its assets amounted to 14.77 billion tenge, which is 72.9% higher than the year before last. At the end of 2017, the company had assets of only 8.54 billion tenge.

The fifth place in the rating was taken by the Yrys limited liability partnership established in the Turkestan region. The company is a subsidiary of Regional Investment Center Ounttik LLP and Entrepreneurship Service Center. It closes the top five of the largest microfinance organizations in 2018 in terms of the amount of assets. Thus, the total assets of the LLP amounted to 10.29 billion tenge, having decreased only slightly compared with the results of 2017.

Among the top 10 leaders in terms of assets, there are those companies (despite their place in the rating), whose assets declined compared to the same period in 2017. These include Yrys and ERG Microfinance microfinance organizations. Thus, their assets decreased by 3.1% and by 22.2% for the year, respectively.

How many loans did the MFI issue?

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In 2018, microfinance organizations lent KZT 219.11 billion. At the end of 2017, the companies were less active and the volume of their loans amounted to about 159.96 billion tenge. MFIs showed a trend of 37%, due to several reasons, including an increase in the number of such organizations.

In addition, MFIs provide lending requirements based on increased demand, as explained by the director of the Association of Microfinance Organizations.

The top ten IFIs on loans issued include: KMF, Toyota Financial Services Kazakhstan, Arnur Credit, Yrys, OnlineKazFinance, Asian Credit Fund, Shinhan Finance, Riz Kyzylorda, ERG Microfinance, AccordCapital ".

The largest number of microloans in the past year was issued by the MFI "KMF", the amount of loans which amounted to 117.39 billion tenge, an increase of 34.5% compared with 2017.

According to representatives of the company, the growth of the loan portfolio at KMF was achieved thanks to an extensive regional network of the organization, an individual approach to evaluating each client’s business and optimizing the management structure of the branches and the head office.

Next to MFI KMF is Toyota Financial Services Kazakhstan, which last year issued loans totaling 30.61 billion tenge, which is almost 3.8 times less than the leader in this indicator. The company was able to increase the volume of microloans provided, as compared with the results of 2017, by 63%.

“Arnur Credit” increased the volume of loans in the same period by 73.7% to 12.08 billion tenge, which allowed the company to occupy the third line of our rating.

On the fourth and fifth place of the rating on this indicator are located the financial organizations Yrys and OnlineKazFinance. The “Yrys” MFO also applies to those organizations from the top 10 MFOs of our rating, in which the amount of loans issued has decreased in comparison with the results of 2017. In addition to the “Yrys” MFO, which recorded a 8.5% reduction in loans, ERG Microfinance (-9.9%) and Accord Capital (-18.4%) were included in the list of such organizations.

Yerbol Omarkhanov noted that the largest growth was observed in OnlineKazFinance (from 547 million to 5706 million tenge), RIC Kyzylorda (from 1,427 million to 3481 million tenge), MiG Credit Astana (from 596 million to 1372 million tenge) and Altyn Credit (from 0 to 679 million tenge).

MFI commitments

The total liabilities of all microfinance organizations grew over the year by 39.4% - from 127.18 billion to 177.31 billion tenge.

56.4% of all total liabilities of the sector accounted for one of the companies - KMF. The MFI had liabilities in the amount of 100 billion tenge at the end of last year, although a year ago this figure was significantly lower and equated to 76.41 billion tenge. The main share in the liabilities of KMF was occupied by the loan portfolio.

Toyota Financial Services Kazakhstan also increased its liabilities, an increase of 57.7% - from 19.55 billion to 30.84 billion tenge.

In addition, the top five major microcredit companies include Arnur Credit, Online KazFinance and the Asian Credit Fund.

Thus, “Arnur Credit” increased its liabilities for the year by 107.2% to 10.51 billion tenge.

In terms of percentage growth, OnlineKazFinance experienced a very big jump - the company managed to increase its liabilities by 1057.8% over the year, from 0.45 billion to 5.2 billion tenge.  

The liabilities of the Asian Credit Fund grew during the period under review by 27.2%, to 4.55 billion tenge.

Of the dozens of large companies in terms of this indicator, negative growth rates were observed in the MF Yrys (-8%), AccordCapital (-22.5%) and Kaz Credit Line (14.8%).

Equity

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The total capital of microfinance organizations in the country in 2018 amounted to 109.24 billion tenge , which is 78.2% more than in 2017. The increase in the number of such organizations, as well as actions on the part of the owners themselves, can partly be considered the reason for the growth of equity capital.

The largest MFI in terms of equity in the past year were "BIC-Finance" of KMF, "Yrys", "Toyota Faynanshl Services Kazakhstan", "Arnur Credit», ERG Microfinance, «Shinhan Finance", "RIP" Kyzylorda ", " BiEnKey Finance Kazakhstan "and " MiG Credit Astana ".

Thus, 79% of the total aggregate capital of microfinance organizations accounted for 10 large MFOs of Kazakhstan. BIC-Finance accounted for 27.5% of the total aggregate capital, another 26.7% - the share of KMF.

Final financial results

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For microfinance organizations, the past year was quite profitable - companies managed to increase their profits by 69%. Thus, over the year, retained earnings increased from 9.82 billion to 16.59 billion tenge . Profit growth Erbol Omarkhanov associated with an increase in the volume of microfinance payments to MFIs.

KMF earned more than half of all profits, it accounted for 10.04 billion out of 16.59 billion tenge, or 60% of all earned income. The remaining 6.55 billion tenge is distributed among other companies operating in Kazakhstan.

Representatives of KMF explained that net profit increased due to an increase in revenues from the growth of the loan portfolio, a reduction in the cost of attracting new loans and an increase in the efficiency of using operating expenses.

Among the landmark events of last year for the company - the market leader, it is possible to note the receipt of 5.9 billion tenge for financing entrepreneurs through an Asian Development Bank loan in April 2018. According to the terms of the agreement, KMF has directed these funds to lend to micro, small and medium-sized enterprises, to replenish working capital and to acquire and modernize fixed assets.

In the same period, KMF received $ 82 million - the largest syndicated loan in the history of the MFI market - from the International Finance Corporation IFC. The funds were provided by KMF for three years in several tranches in the national currency in the equivalent of about 27 billion tenge, which eliminates currency risks for KMF clients.

In second place with retained earnings of 1.2 billion tenge was Toyota Financial Services Kazakhstan, which nevertheless managed to increase it during the year slightly more than doubled - from 0.58 billion to 1.21 billion tenge.

The third place in terms of profit was Finbox, which earned about 0.9 billion tenge, which is 60.5% more than in the previous analyzed period.

“Arnur Credit” profit increased by 38.6% to 0.8 billion tenge, and this ensured the MFI in fourth place in our rating.

ERG Microfinance, which ended the year with financial indicators of retained earnings of 0.6 billion tenge, became the fifth.

In addition to the above-mentioned MFOs, “1 Credit”, Asian Credit Fund, Shinhan Finance, Inkar & S, Yrys are in the top ten in terms of profitability.

In conclusion, the expert of the Association of Microfinance Organizations noted that the Kazakhstani sector of microcredit is developing steadily within the framework of established legal norms. So, at the end of 2018, a resolution of the Board of the National Bank of the Republic of Kazakhstan adopted a list of mandatory conditions for a microcredit agreement. All loan agreements of MFIs must comply with the requirements of the authorized body aimed at respecting the rights of borrowers and protecting their interests. For violation of these requirements, MFIs are liable in accordance with legislation.

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