Kazakhstan : Supporting Resilience of Micro, Small, and Medium-Sized Enterprises Finance Project
The proposed financial intermediation loan to the Republic of Kazakhstan for the Supporting Resilience of Micro, Small, and Medium-Sized Enterprises (MSMEs) Finance Project will provide local currency credit to sustain operations of and employment by MSMEs during the current economic slowdown. The technical assistance attached to the loan will strengthen credit origination and management of selected participating financial institutions to better serve MSMEs.
Despite robust economic growth in the recent past, Kazakhstan''s economy remains vulnerable to external shocks because of its limited and declining economic diversification. The economy is highly dependent on extractive industries. Sustained and balanced growth will depend on economic diversification into higher productivity and value-added activities, and this is at the top of the government's agenda. MSMEs are seen as key actors in these transformation efforts.
Project Details
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Project Officer
Song, Dai Chang
Central and West Asia Department
Request for information -
Country/Economy
Kazakhstan -
Modality
-
Sector
- Finance
Related Projects
| Project Name | Supporting Resilience of Micro, Small, and Medium-Sized Enterprises Finance Project | ||||||||
| Project Number | 49076-005 | ||||||||
| Country / Economy | Kazakhstan |
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| Project Status | Closed | ||||||||
| Project Type / Modality of Assistance | Loan Technical Assistance |
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| Source of Funding / Amount |
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| Strategic Agendas | Inclusive economic growth |
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| Drivers of Change | Gender Equity and Mainstreaming Governance and capacity development Partnerships Private sector development |
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| Sector / Subsector | Finance / Small and medium enterprise finance and leasing |
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| Gender | Effective gender mainstreaming | ||||||||
| Description | The proposed financial intermediation loan to the Republic of Kazakhstan for the Supporting Resilience of Micro, Small, and Medium-Sized Enterprises (MSMEs) Finance Project will provide local currency credit to sustain operations of and employment by MSMEs during the current economic slowdown. The technical assistance attached to the loan will strengthen credit origination and management of selected participating financial institutions to better serve MSMEs. Despite robust economic growth in the recent past, Kazakhstan''s economy remains vulnerable to external shocks because of its limited and declining economic diversification. The economy is highly dependent on extractive industries. Sustained and balanced growth will depend on economic diversification into higher productivity and value-added activities, and this is at the top of the government's agenda. MSMEs are seen as key actors in these transformation efforts. |
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| Project Rationale and Linkage to Country/Regional Strategy | Currently, MSMEs play only a minor role in Kazakhstan''s economy. In 2013 the output of registered MSMEs represented 26% of gross domestic product (GDP) and employed 32% of the workforce, well below its peer countries. Due to small scale, lack of experience and coordination failures, MSMEs make less use of business support services, which are important to improve firms' productivity and competitiveness. MSME clusters or networks facilitate access to these support services, but public-private coordination is still crucial. Although Kazakhstan''s competitiveness is ranked 50 (out of 144 countries), indicators on business networks quality and supporting industries are particularly weak. Incentives are often needed to encourage collective investments to internalize the positive spillovers of cluster linkages. Country SME demand for medium-term credit alone over the next three years is estimated at over $5 billion, and access to finance is ranked as one of the main impediments to business development. SME loans-to-GDP ratio were 8.1% in 2014, down from 10.0% in 2009. Lending to SMEs dropped from over 21% of total bank loans in 2008 to less than 13% in 2014. Increased deposit dollarization and weak performance of the interbank market makes medium-term tenge refinancing expensive. A large portfolio of non-performing loans accentuates the risk aversion of banks, on top of the traditional scale and information asymmetries that drive up the cost for SME lending. Of Kazakhstan's 17 million people, 46% live in rural areas and depend to a large degree on agriculture. This segment is traditionally served by microfinance organizations (MFOs). MFOs serve less than 9% of households, well below international comparison countries, and their total lending was equivalent to 1.2% of total commercial bank lending. |
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| Impact | The impact will be a sustained contribution of MSMEs to Kazakhstan's GDP, which is aligned with the government's objectives of supporting entrepreneurship and the contribution of MSMEs to the non-oil economy and employment under a challenging macro environment |
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| Project Outcome | |
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| Description of Outcome | Sustainable provision of loans to MSMEs maintained |
| Progress Toward Outcome | The outcome indicators referring to the PFIs overall portfolios, not just those funded by ADB loan proceeds, have exceeded the target of potential increase of 20% in terms of outstanding MSME loans, those disbursed outside Almaty and Astana and increase in the number of MSME borrowers. The piggy-backed KSTA 9214 completion date has been extended from May 2019 to May 2020. The TA has provided funding for the holding of regional workshops for MSME women entrepreneurs with our TA implementing partner - Atameken (National Chamber of Entrepreneurs). Also the TA has funded the internal field staff training requirements of Arnur Credit, a microfinance organization based in South Kazakhstan last June to July 2019. |
| Implementation Progress | |
| Description of Project Outputs | Financial inclusion sustained Efficiency of PFIs' lending to MSMEs improved |
| Status of Implementation Progress (Outputs, Activities, and Issues) | The PFIs to-date are in compliance with the performance targets regarding their financial stability. Ongoing are the PFIs' action plans on meeting the indicators on gender monitoring. Partial loan cancellation was processed during the last quarter of FY 2019 due to the slowing down of the economy and the short-term nature of the loan tenure. |
| Geographical Location | Nation-wide |
| 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 financial intermediary (FI) with respect to environment safeguards. |
| Involuntary Resettlement | The project has been categorized as FI (treated as C) in relation to involuntary resettlement. |
| Indigenous Peoples | The project has been categorized as FI (treated as C) in relation to indigenous peoples. |
| Stakeholder Communication, Participation, and Consultation | |
| During Project Design | Main stakeholders include the business community and they will be consulted, through focus groups and through the representative business associations, through project design. |
| During Project Implementation | The project will support the institutionalization of consultation mechanisms with the private sector, that will ensure participation of those at higher risk of exclusion such as informal businesses and women owned or managed MSMEs. |
| Business Opportunities | |
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| Consulting Services | Consultants under the technical assistance attached to the loan will be engaged by ADB in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). An estimated 12 person-months of international consultants and 20 person-months of national consultants will be required. For the current year of implementation, a minor change has been approved to include the engagement of a National Expert to finalize a diagnostic study of the microfinance financial institutions in Kazakhstan. |
| Procurement | Not applicable. |
| Responsible ADB Officer | Song, Dai Chang |
| 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 |
| Timetable | |
|---|---|
| Concept Clearance | 01 Jul 2015 |
| Fact Finding | 26 Jan 2016 to 03 Feb 2016 |
| MRM | 15 Jul 2016 |
| Approval | 27 Oct 2016 |
| Last Review Mission | - |
| Last PDS Update | 25 Mar 2020 |
Loan 3447-KAZ
| Milestones | |||||
|---|---|---|---|---|---|
| Approval | Signing Date | Effectivity Date | Closing | ||
| Original | Revised | Actual | |||
| 27 Oct 2016 | 13 Oct 2017 | 20 Nov 2017 | 20 May 2020 | - | 20 May 2020 |
| Financing Plan | Loan Utilization | ||||
|---|---|---|---|---|---|
| Total (Amount in US$ million) | Date | ADB | Others | Net Percentage | |
| Project Cost | 240.00 | Cumulative Contract Awards | |||
| ADB | 200.00 | 17 Jun 2022 | 152.01 | 0.00 | 100% |
| Counterpart | 40.00 | Cumulative Disbursements | |||
| Cofinancing | 0.00 | 17 Jun 2022 | 152.01 | 0.00 | 100% |
| Status of Covenants | ||||||
|---|---|---|---|---|---|---|
| Category | Sector | Safeguards | Social | Financial | Economic | Others |
| Rating | - | Satisfactory | - | Satisfactory | - | Satisfactory |
TA 9214-KAZ
| Milestones | |||||
|---|---|---|---|---|---|
| Approval | Signing Date | Effectivity Date | Closing | ||
| Original | Revised | Actual | |||
| 27 Oct 2016 | 17 Nov 2016 | 17 Nov 2016 | 18 May 2019 | 26 Oct 2021 | 01 Feb 2022 |
| Financing Plan/TA Utilization | Cumulative Disbursements | |||||||
|---|---|---|---|---|---|---|---|---|
| ADB | Cofinancing | Counterpart | Total | Date | Amount | |||
| Gov | Beneficiaries | Project Sponsor | Others | |||||
| 500,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 500,000.00 | 17 Jun 2022 | 206,303.60 |
| Status of Covenants | ||||||
|---|---|---|---|---|---|---|
| Category | Sector | Safeguards | Social | Financial | Economic | Others |
| Rating | - | Satisfactory | - | Satisfactory | - | Satisfactory |
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| Title | Document Type | Document Date |
|---|---|---|
| Kazakhstan: Supporting Resilience of Micro, Small, and Medium-Sized Enterprises Finance Project | Validations of Project Completion Reports | Apr 2022 |
Related Publications
| Title | Document Type | Document Date |
|---|---|---|
| Financial Inclusion for Micro, Small, and Medium Enterprises in Kazakhstan | Reports | Jan 2022 |
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