The regulator may allow large MFOs to transform into banks

This possibility will be considered in the medium term.

In 2020, more than 3.5 thousand entities left the microfinance sector, including pawnshops, credit partnerships and other lending entities. Currently, 998 organizations work in this sector, the aggregate portfolio of microcredits exceeds 1 trillion tenge. This was announced by Madina Abylkassymova, Chairperson of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan, during her speech at the CFO Summit 2021, an correspondent reports.

Last year, the regulator thoroughly "took up" the microfinance organizations (MFIs) and carried out a number of reforms.

So, since January 1 of this year, licensing of microfinance activities has been introduced, qualification requirements have been raised, as well as prudential standards.

“If earlier the non-bank lending sector was fragmented and non-transparent, there were violations of the rights of borrowers, unreasonably high interest rates on loans, now all organizations operate on the same principles,” the head of the agency said.

All entities are required to comply with restrictions on interest rates, borrowers' debt burden ratios, and requirements for the content of loan agreements. They are also required to comply with AML / CFT procedures, generate financial and regulatory reports, and provide information on loans issued to credit bureaus.

In addition, increased demands are now being placed on the major participants and executives in these organizations. In particular, it is an impeccable business reputation, absence of outstanding convictions and corruption crimes.

All this was done to "prevent the activities of unscrupulous organizations, ensure the stability of the market and protect consumers."

“For the further development of the market, portfolio subsidies for microcredits to SMEs are envisaged under the state program“ DKB-2025 ”. In addition, a concept for the development of microfinance organizations in the regions has been developed, providing for the creation of regional MFOs for lending to start-up entrepreneurs under the Bastau Business project within the framework of the Enbek state program, Madina Abylkassymova said.

These measures are a reference to international experience in which “the main thrust of microfinance is poverty alleviation by facilitating and expanding the access of entrepreneurs and citizens to financial resources in order to develop micro-businesses and provide employment”.

The head of the agency pointed out that in the medium term, it is planned to take measures to develop the microfinance market. They will be aimed at expanding sources of funding for MFOs, increasing public access to microfinance services through the use of new technological solutions. The possibility of transforming large MFOs into banks will also be considered.

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