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Kazakh small loans programme brings banking to the people
5th anniversary of EBRD programme that has revolutionized lending procedures
The European Bank for Reconstruction and Development is this week celebrating the fifth anniversary of the launch of its Kazakhstan Small Business Programme, whose achievements include giving 60,000 borrowers the chance to develop their own businesses and training more than a third of the loan officers working in the country’s banking system.
The vast majority of loans under the programme – about 84 percent – are extended in the regions of Kazakhstan outside of the capital and business centre, Astana and Almaty, respectively. Moreover, the programme aims to double to 300 the number of lending outlets by the end of 2004, mainly through the spread of its system of Express Micro Loans of under $2,000, which are processed within 24 hours. The programme is currently lending some $20 million to more than 3,500 clients each month.
Anyone visiting a market in a Kazakh city can see for themselves how bank branches offering loans to micro and small businesses are mushrooming, precisely where borrowers need them, to finance their activities on the spot, David Hexter, Deputy Vice President of the EBRD, told a ceremony in Almaty. Borrowers range from market traders to computer centres, from garment makers to cattle breeders.
That and the fact that the repayment rate on these loans is over 99 percent are excellent examples of how banking can be brought to serve people where they need it and when they need it, without relaxing the stringent credit criteria that sound banking always demands, Elizabeth Wallace, EBRD Director for Small Business, added.
The programme was launched by the EBRD and the Kazakh government in 1998 to foster the development of small and medium sized enterprises (SMEs) and operates through seven Kazakh partner banks which on-lend the money to end users in the trade, production, service and agricultural sectors. Cumulative disbursements total over $350 million. The smallest-ever loan was just $40. Apart from micro loans, the programme also makes loans of up to $200,000 to larger borrowers, but more than 70 per cent of loans are less than $5,000.
The government of Kazakhstan originally provided a sovereign guarantee to cover the first $72.5 million disbursed under the programme, but subsequent funds have been lent to partner banks as pure commercial risk.
The European Union, the United States and Japan have contributed substantial donor funds to help defray the costs of spreading the programme throughout the branch networks of banks and providing training for loan officers and other bank staff.
The programme’s partner banks are Almaty Merchant Bank, Bank CentreCredit, Bank Turan Alem, Halyk Savings Bank of Kazakhstan, Kazkommertsbank, Temir Bank and Tsesna Bank.
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