Endowments in Kazakhstan struggle because of immature legislation

ENU Endowment Fund was established on December 31, 2021, by alumni of L.N. Gumilyov Eurasian National University. The key goal of the endowment is to provide funds for major projects of the university in the most sustainable way. The fund has three main tasks. Firstly, it aims at beefing up its capital at the expense of donors. Secondly, it is pursuing an effective investment strategy. Thirdly, it is going to use its gains as a source of finance for the university. This money is necessary to support students in need and gifted students as well as facilitate startups and events by the university.

The mechanism of the endowment fund is a very effective way to provide universities with a long-term and stable source of finance for important programs in the sphere of education and science. For example, in the U.S. endowment funds account for 25-45% of all revenue American universities receive.

Over the past few years, the interest in endowment funds has been constantly growing in Kazakhstan among investors and experts. The main reason for this interest is the nature of the endowment, which is a highly effective instrument to provide a financial system with stability and sustainability and to support the development of social and cultural projects.

However, despite the constantly growing popularity of endowment funds in Kazakhstan, this tool is not as common in the country as other financing models like grants and subsidies. Low awareness about the work of endowments and their potential benefits for charity is one of the reasons why it is so. So far, there is no proper legislation concerning endowment funds in Kazakhstan and this question is still awaiting the relevant solution.

Nobody, except a small handful of people, knows how an endowment fund must be registered in Kazakhstan. When we were involved in the process of establishing the ENU Endowment Fund, we faced a range of obstacles. For instance, we couldn’t have opened a bank account as banks refused to let us. Almost all endowments in Kazakhstan report this problem. We tried to talk to a bank’s executives directly but it hasn’t helped. Apparently, banks consider an endowment as a troublemaker from the taxation point of view and don’t want to take responsibility.

There are no experienced managers who can work as executives in an endowment. Another big problem is low awareness about endowment funds among the population. People often do not know much about these entities and don’t trust them. On the other hand, there are no tax preferences for philanthropists that, of course, won’t help attract more investments.

All these problems have one cure. First of all, the government has to develop a full-scale legal base for endowment funds.

Secondly, once the national legislation is amended, all the state agencies responsible for control over cash flow in the country have to prepare detailed instructions for financial institutions on how endowment funds should operate and how to interact with them.

And thirdly, a nationwide information campaign advocating investments in the endowment is needed. It should be totally okay when highly-ranked officials, entrepreneurs and even regular people support an endowment. In turn, endowment funds must prove in their day-to-day work that they are trustworthy.