New banks may appear in Kazakhstan: regulator is going to soften requirements for attraction of deposits

The Agency for Regulation and Development of the Financial Market (ARDFM) of Kazakhstan is planning to amend the national legislation to facilitate new banks to enter the country’s market. The regulator is going to soften requirements for the attraction of deposits. As a result, three new banks may emerge in the country.

According to the draft of this new regulation, the regulator is going to amend several laws associated with the development of the financial market and the protection of the rights of those who consume financial services. As the regulator noted, not a single bank has emerged since 2010 (when Al Hilal Bank entered the market) in Kazakhstan because of the ban on attracting deposits for new banks within the first year of their operation. This ban is part of the law on banks and banking activity adopted in 2008. At the time, the risk of non-repayment of deposits was quite high.

«Today, this ban is nothing more than just another administrative barrier. Thanks to the risk-oriented supervision the risk of non-repayment of personal deposits is covered with the supervisory tools of the ARDFM. The regulator can identify and prevent any risk associated with the activity of financial institutions at a very early stage. With the help of these tools, the agency can ensure the financial stability of the entire sector. The protection of the rights and interests of deposit holders is also ensured by the mandatory participation of all commercial banks in the state system of deposit insurance,» the document says.

If the new amendments are adopted, two new banks will emerge in Kazakhstan within a year and one more bank will appear in two years, the AFRDM said. Public discussion of the amendments will last until July 10.

In May 2021, Madina Abylkassymova, the head of the agency announced that the regulator would allow large microfinance organizations (MFOs) to transform themselves into commercial banks.

In August 2021, Kursiv wrote that two MFOs KMF and Solva thought about such a transformation. In August 2022, KMF officially announced its intention to transform itself into a digital bank.

In July 2022, President Kassym-Jomart Tokayev signed a law allowing MFOs to go through the transformation process without suspending their day-to-day operations.

Abylkassymova made the first official statement about softening the requirements for new banks in November 2022 during the X Congress of Financiers of Kazakhstan. At the time, she said that the new rules would be adopted in 2023, the LS news agency reported.

In January 2023, Solva (formerly OnlineKazFinance) informed KASE about its intention to reorganize itself into Solva Bank. The sole owner of Solva is Fintechfinance, a microfinance organization. As of March 31, 2023, this company had several beneficiaries with shares of about 25%, including Boris Batin and Alexander Dunaev, the founders of ID Finance, a fintech group registered in Spain.

KMF was established in 1997 (at the time called the Kazakhstan Loan Fund) by the American corporation ACDI/VOCA. In 2008, the company was transformed into KMF-Demeu. In 2015, the company became a microfinance organization with a loan portfolio of $83.4 million. The company is focused on issuing micro-loans. As of December 31, 2022, KMF had 14 branch offices and 106 affiliates throughout Kazakhstan. Among the company’s shareholders are the corporate fund KMF-Demeu MultiConcept Fund Management S.A. (45.4%), Triodos Funds B.V. (12.08%), Triodos SICAV II (12.08%), the company’s management and employees (6.2%) and responsAbility SICAV (6.04%).

Nurlan Smagulov, the owner of Astana Group, also announced its intention to launch a new bank called Mybank.  However, in April 2023, the company suspended this project due to more important tasks on its agenda.