ASTANA, KAZAKHSTAN ) – The Asian Development Bank (ADB) has approved a $200 million equivalent loan to provide much-needed financing in local currency to micro, small- and medium-sized enterprises (MSMEs) in Kazakhstan.
“The funds will help finance working capital and productive investments of MSMEs and boost lending to women entrepreneurs, especially in regions outside Astana and Almaty,” said Giovanni Capannelli, ADB Country Director for Kazakhstan. “Supporting MSMEs growth is essential to make the Kazakhstan’s economy not only more competitive and diverse, but also more resilient to adverse external factors.”
The loan will be channeled through the Damu Entrepreneurship Development Fund, a government-owned agency mandated to provide loans and guarantees to MSMEs through qualified microfinance organizations and local banks. The ADB loan will be provided in tenge to reduce currency-related risks of financial institutions and their borrowers.
In addition to the loan, ADB will provide a technical assistance grant of $500,000 financed by the Government of Luxembourg through the Financial Sector Development Partnership Special Fund to help improve the credit risk management of selected financial institutions and expand financing opportunities for MSMEs.
Lack of access to finance is a key constraint to MSME growth in Kazakhstan. In 2015, there were 1.1 million MSMEs registered in the country including individual entrepreneurs, small enterprises, and medium-sized enterprises. While MSMEs contribute to more than 25% of the country’s gross domestic product, only 19% of them have ever received a bank loan. Insufficient documentation, poor credit history, and issues with property titles for collateral tend to be hampering MSME access to finance. As a consequence, most MSMEs still fund their investments through retained earnings and borrowings from relatives and friends.
ADB support will allow MSMEs to access financing which is needed to maintain operations, invest in productive technologies, and grow business, thereby contributing to job protection, economic stability, and diversification under the current challenging conditions. These objectives are aligned with the government’s plan of supporting entrepreneurship and increasing the contribution of MSMEs to 50% of GDP by 2020.
Since joining ADB in 1994, Kazakhstan has received around $4.9 billion in sovereign and nonsovereign loans, and guarantees for agriculture and irrigation, education, finance, transport, water supply and sanitation sectors.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.