National Bank of Kazakhstan is no longer interested in soft loan programs

According to Galymzhan Pirmatov, head of the National Bank of Kazakhstan, his agency is going to proceed with the process of quitting national soft loan programs and won’t take part in such programs in the future.

The official noted that the intention of the National Bank to downplay its role in the national financial programs is part of a broader process of decreasing the role of the government in financing the economy. This is an important pivot for the bank, which wants to focus on its prior tasks. Any further participation of the regulator in soft loan programs is risky for price stability, Pirmatov believes.

He said that in 2021 the regulator stopped financing five out of seven easy lending programs. These closed programs had a combined budget of $5.7 billion.

«We still participate in two national financial programs. One of them is the 7-20-25 program. It was extended on November 26, 2022, by the president. The second program is the Economy of Simple Things, which is aimed at replacing imported goods with products produced inside the country. The program is set to be completed at the end of this year. The National Bank doesn’t plan to continue participating in soft loan projects in the future,» Pirmatov highlighted.

The National Bank is going to focus on promoting better conditions and incentives for businesses. Financial institutions should provide them with the necessary funds on market conditions. The regulator has already arranged with the government and the Agency for Regulation and Development of the Financial Market. The three sides signed an agreement on the coordination of macroeconomic measures to gradually decrease state support tools for entrepreneurs within the following five years.

Kazakhstan wants its financial market to become more competitive. The country has already allowed microfinance organizations to transform themselves into commercial banks and opened the way for foreign banks. They can easily enter the local market by opening representative offices in Kazakhstan. This particular measure was part of the membership agreement with the WTO. In addition, the National Bank is going to implement Open API and Open Banking technologies to provide different financial institutions with equal opportunities. Also, the regulator will stimulate the creation of financial marketplaces, Pirmatov said.

The National bank and the cabinet have long been criticized for not doing enough to prevent the banking market to be monopolized by five big financial institutions. Currently, they control 65% of all banking assets combined. At the same time, legal requirements for new small or regional banks are too tough, according to MPs.