Kazakhstan: MFF: Small and Medium Enterprise Investment Program - Tranche 1

Sovereign Project | 44060-023 Status:

Summary

ADB is helping Kazakhstan provide affordable financing to small and medium-sized enterprises (SMEs). The program will support state-owned Damu Entrepreneurship Development Fund (Damu) in filling a gap in the market for medium-term, local currency-denominated finance. Through local banks, Damu will extend more affordable credit to SMEs with longer terms for their much-needed investments.

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Procurement Documents

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Project Name MFF: Small and Medium Enterprise Investment Program - Tranche 1
Project Number 44060-023
Country Kazakhstan
Project Status
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2689-KAZ: MFF: Small and Medium Enterprise Investment Program - Tranche 1
Ordinary capital resources US$ 150.00 million
TA 7634-KAZ: MFF: Small and Medium Enterprise Investment Program - Tranche 1
Technical Assistance Special Fund US$ 650,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming Effective gender mainstreaming
Description
Project Rationale and Linkage to Country/Regional Strategy
Impact

Project Outcome

Description of Outcome
Progress Toward Outcome

By the closing date of the loan, September 2013, the PFIs had provided on a cumulative basis T32.3 billion of SME loans, of which 27% funded new investments, 57% financed working capital, and 16% refinanced existing loans.

In total, Damu channeled 750 billion Tenge to SMEs (as per revision in July 2013, new MFF baseline is 388 billion in 2009).

Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)

As of September 2013, a total of 2,337 loans were disbursed by PFIs to 734 SME borrowers, using ADB proceeds. (for inconsistencies with Data indicators interpretation, refer to changes made to MFF DMF). The average amount lent to each SME borrower was T44 million ($290,000) and the average loan was T14 million ($90,000). Women were 30.5% of total SME borrowers.

Between 2012 and 2013 Damu approved 8 changes to its internal risk management processes and 6 changes to improve its corporate governance.

By the closing date of the loan, end September 2013, 30.5% of borrowers of Damu programs were women.

Geographical Location Kazakhstan

Summary of Environmental and Social Aspects

Environmental Aspects To ensure compliance with ADB's safeguard policy on environment, the selection criteria for PFIs include its internal environment and safeguard procedures. Any PFI not meeting these criteria will not be eligible to participate. Eligibility criteria for onlending will be limited to low risk SMEs whose environmental impacts are expected to be negligible and for which no environmental evaluation will be required. The Mission Team's assessment concludes that the financial intermediary's business activities have minimal or no adverse environmental and social impacts or risks, and are unlikely to generate involuntary resettlement impacts and impacts on Indigenous People, and therefore the Project is treated as a category C project. There will be no adverse impact on involuntary resettlement and no involuntary land acquisition in any of the Project financed under this facility and in all the tranches. Lessons learned on environmental management from ADB's experience with credit line through the private sector operations will be built into the Project design.
Involuntary Resettlement No social safeguards are triggered by the project. No activities are planned in disputed areas. The Project will not finance any investments involving land acquisition or involuntary resettlement of people anywhere in Kazakhstan. The loan covenants covering all tranches for this MFF loan will ensure that projects that will be financed will have no adverse impact on indigenous peoples and no involuntary land acquisition and resettlement. This FI loan is treated as category C.
Indigenous Peoples The loan covenants covering all tranches for this MFF loan will ensure that projects that will be financed will have no adverse impact on indigenous peoples and no involuntary land acquisition and resettlement. Therefore, this FI loan is treated as category C.
Stakeholder Communication, Participation, and Consultation
During Project Design The European Bank for Reconstruction and Development (EBRD) actively supports SMEs in Kazakhstan. EBRD programs fund international advisers who provide capacity building and training for SMEs and support to rural SMEs to improve their operations, enter new markets, and gain access to financing. The United States Agency for International Development has supported programs that have provided extensive training on business and consulting essentials to mostly start-up entrepreneurs and nongovernment organization business service providers. EBRD has extended several credit lines to commercial banks to fund lending to SMEs. Their projects are sometimes supported by technical assistance (TA) to help banks introduce a credit scoring methodology and improve their SME lending policies. The World Bank has provided Kazakhstan with the Second Agricultural Post-Privatization Project ($96.1 million), which has a component for promoting sustainable rural microfinance. The International Finance Corporation promotes SME development through its debt and equity investments in banks that provide loans to SMEs. ADB coordinated closely with other development partners in preparing the investment program and MFF.
During Project Implementation Consultation with business associations and development partners (EBRD, WB, IFC) takes place as part of the review missions.

Business Opportunities

Consulting Services Under TA 7634-KAZ: Improving Capacity to Support SME Development, ADB engaged a qualified team of consultants in accordance with its Guidelines on Use of Consultants by ADB and Its Borrowers (2013, as amended from time to time). Seven individual experts and 1 consulting firm were recruited to implement the TA. A firm was hired to conduct a survey to clarify ongoing constraints to SME development and help define measures that Damu can implement to more effectively address such constraints. The TA commenced on 17 November 2011 and was completed on 31 December 2013.
Procurement As this is a financial intermediation loan, there is no procurement involved in this project, other than consulting services.

Responsible Staff

Responsible ADB Officer Inmaculada Martinez Martin
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, CWRD
Executing Agencies
DAMU Entrepreneurship Development Fund
Kanat Sultangaziev
BMUKUSHEV@FUND.KZ
Gogol St., 111, Almaty Kazakhstan

Timetable

Concept Clearance -
Fact Finding -
MRM -
Approval -
Last Review Mission -
PDS Creation Date 10 Aug 2010
Last PDS Update 16 Sep 2015

Loan 2689-KAZ

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Nov 2010 21 Sep 2011 28 Sep 2011 21 Sep 2013 - 27 Jun 2014
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 350.00 Cumulative Contract Awards
ADB 150.00 04 Nov 2010 0.00 0.00 0%
Counterpart 200.00 Cumulative Disbursements
Cofinancing 0.00 04 Nov 2010 150.29 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - Satisfactory - Satisfactory

TA 7634-KAZ

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
04 Nov 2010 17 Nov 2011 17 Nov 2011 30 Jun 2012 31 Dec 2013 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
650,000.00 0.00 0.00 0.00 0.00 0.00 650,000.00 04 Nov 2010 599,040.40

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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