Kazakhstan: Small and Medium Enterprises Investment Program - Tranche 2

Sovereign Project | 44060-024 Status: Closed

Summary

ADB is helping Kazakhstan provide affordable financing to small and medium-sized enterprises (SMEs). The second tranche of the multitranche financing facility will help state-owned Damu Entrepreneurship Development Fund provide medium-term financing to SMEs through local banks. It will also help promote greater access to credit for women entrepreneurs.

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Project Name Small and Medium Enterprises Investment Program - Tranche 2
Project Number 44060-024
Country Kazakhstan
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3093-KAZ: Small and Medium Enterprises Investment Program - Tranche 2
Ordinary capital resources US$ 122.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming Effective gender mainstreaming
Description This is the second Tranche of a Multitranche financing facility (of $500 million) to support SME lending. Tranche 2 is funded through a loan to Damu ($150 million equivalent in local currency) from ADB's ordinary capital resources, guaranteed by the Republic of Kazakhstan. Tranche 2 is supporting Damu implement the government's Action Plan to increase access to medium term finance for SMEs. ADB's loan is used for lending to qualified SMEs through selected participating financial institutions (2 commercial banks).
Project Rationale and Linkage to Country/Regional Strategy

A prosperous SME sector is a major creator of employment and innovation. SMEs in Kazakhstan are more responsive and adaptable than larger enterprises and are ultimately a key to the country''s long-term economic growth and poverty reduction. A number of government initiatives have been taken to address the barriers faced by SMEs including the state Roadmap for Business 2020 and the Accelerated Industrial-Innovative Development of Kazakhstan. With a narrowly based economy concentrated on extractive industries, the goal is to diversify the production base and give prominence to development of the SME sector, in particular its expansion and diversification.

Access to finance for SMEs is a key constraint for growth. The project is increasing the supply of long term SME credit.

Impact Sustained job creation and economic growth

Project Outcome

Description of Outcome SMEs have increased access to medium term credit on a sustainable basis
Progress Toward Outcome

Performance target and indicator: Under Damu programs, SME lending increased to KZT800 billion (by end 2015).

Status: Damu reports that as of 1 March 2016, Damu's SME lending portfolio amounted to KZT1,228.6 billion.

Implementation Progress
Description of Project Outputs

1. Medium-term financing to SMEs

2. Improved financial sector outreach, with a focus on women entrepreneurs

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

Output 1, performance targets and indicators:

By end-2016

- SME loan accounts opened by PFIs increased to 3,500.

- SME loans by PFIs increased to KZT50 billion.

- At least 24% of PFI borrowers are women entrepreneurs.

Output 2, performance targets and indicators:

By end- 2016

- The share of women entrepreneurs who are supported within the framework of the development of Damu Business Services remains at 46%.

- Not less than 50% of new loans are provided outside the cities of Almaty and Astana.

Status: As of 31 May 2016, the PFIs had disbursed KZT32 billion ($175 million equivalent) to 376 borrowers through 1,286 loans, of which 51% funded working capital, 22% funded new investments, 19% refinanced existing loans, and 8% funded a combination of new investments and working capital. More than half of the volume went to the trade sector (56%), followed by services (23%). By location, 34% of the volume of funds was provided in Almaty and Astana cities with the remaining 66% going to the other 14 regions. A total of 1,049 new jobs were created. The average loan size was KZT32.19 million ($175,000). The average interest rate was 14.17%. The average tenor was 29 months, with 63% of the loans provided up to 1 year, 27% of the lending provided between 1-3 years, 9% between 3-5 years, and the remaining 1% for over 5 years. Women's businesses were 34% of total borrowers (127 women SMEs) and 28% of total number of loans (357 loans).

Geographical Location Kazakhstan

Safeguard Categories

Environment FI
Involuntary Resettlement FI-C
Indigenous Peoples FI-C

Summary of Environmental and Social Aspects

Environmental Aspects The project has been categorized as FI in accordance with ADB s Safeguard Policy Statement (2009). Safeguards due diligence has been conducted to assess potential environmental and social risks and impacts associated with qualified PFI s likely future portfolios, along with their commitment and capacity for environmental management. Tranche 2 under the MFF will be treated as Category B for environment safeguard components based on ADB s Safeguard Policy Statement (SPS), 2009. Damu and each of the PFIs will have in place or establish an ESMS to be maintained as part of its overall management system to meet Kazakhstan national laws and norms and ADB s safeguards requirements. Each PFI that receives proceeds of a loan under the Facility is required to submit to ADB: (i) a copy of its ESMS to be used in implementing this loan for ADB approval prior to submitting its first withdrawal application; and (ii) asemi-annual report on its compliance with its ESMS. The PFIs will prepare and submit semi-annual environmental monitoring reports on the implementation status of their ESMS to ADB.
Involuntary Resettlement For involuntary resettlement, tranche 2 is treated as C, unlikely to generage impacts on involuntary land acquisition, and resettlement.
Indigenous Peoples Tranche 2 is treated as C, unlikely to generate impacts on indigenous peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design The European Bank for Reconstruction and Development, International Finance Corporation, United States Agency for International Development and the World Bank have supported SME development in Kazakhstan through (i) capacity building to improve operations, enter new markets and access finance; (ii) training to nongovernment organization business service providers; (iii) technical assistance to help banks introduce credit scoring and improve SME lending policies; and (iv) FILs to and equity investments in banks that provide loans to SMEs. ADB has worked closely with these partners, mindful of lessons on the need to mitigate foreign exchange and tenor mismatch risk, the importance of developing the local bond markets, and issues related to PFI ownership and control.
During Project Implementation During the project implementation ADB will keep close consultation with the active development partners (EBRD, USAID, World Bank etc.) to keep abreast on the development of Kazakhstan's financial and SME sectors, local bond markets, and on issues related to PFI ownership and control.

Business Opportunities

Consulting Services There is no procurement of services under Tranche 2
Procurement There is no procurement of goods and works under Tranche 2

Responsible Staff

Responsible ADB Officer Martinez, Inmaculada
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
[email protected]
Gogol St., 111, Almaty Kazakhstan

Timetable

Concept Clearance -
Fact Finding -
MRM 18 Oct 2013
Approval 13 Dec 2013
Last Review Mission -
Last PDS Update 23 Sep 2016

Loan 3093-KAZ

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
13 Dec 2013 29 Oct 2014 25 Nov 2014 28 Dec 2015 28 Jun 2016 09 Nov 2016
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 122.00 Cumulative Contract Awards
ADB 122.00 13 Dec 2013 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 13 Dec 2013 122.00 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - Satisfactory - Partly satisfactory - Satisfactory

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.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


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