Government intends to protect regular borrowers in Kazakhstan

The Agency for Regulation and Development of the Financial Market (ARDFM) has prepared new rules for microcredits online. They will oblige microfinance organizations (MFOs) to implement two-factor authentication when registering new customers.

According to the new rules (entering into force on January 1, 2024), MFO must ensure that clients enter their accounts through two-factor authentication, including biometric identification. Moreover, a customer will be asked to pass two-factor authentication when a microloan is used for acquiring goods and services from an MFO’s partners.

Given that this industry is full of perpetrators who are looking for a chance to deceive good customers, these amendments are necessary, the authorities said.

Over the period from January to November 2022 alone, authorities reported about 2,800 cases of issuing sham loans in banks and MFOs, according to Rustem Dyusetayev, deputy head of the Center for Combating Cybercrime under the Ministry of Internal Affairs. As he noted, perpetrators used fishing links and illegal access to customers’ accounts to steal money.

As of April 1, 2023, the total portfolio of collateral-free consumer loans in Kazakhstan amounted to $17.3 billion, 30.1% more than in April last year. According to the First Credit Bureau (FCB), the average debt burden for 90% of borrowers (excluding 10% of borrowers with massive debts) reached $1,407 over this period (+7.4%). The number of unsecured consumer loans with overdue payments of 90 days or more (NPL90+) exceeded $2.2. billion (+32.9% over the year) as of April 1, 2023.

FCB statistics show that at the time, commercial banks accounted for 69.6% of the total amount of NPL90+ ($1.6 billion), with MFOs at 3.8% ($82.9 million). Other operators such as collections agencies accounted for the remaining debt of $621 million.