Kazakhstan: Developing Rural Financial Intermediation
Strategic context. The proposed knowledge and support technical assistance (KSTA) will support Agrarian Credit Corporation (ACC) to improve access to finance for agriculture sector entities (ASEs) and households in rural and remote areas. ACC is the key rural financial intermediation institution in Kazakhstan and is a subsidiary of KazAgro National Management Holding Joint Stock Company (JSC) (KazAgro).
Project Details
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Project Officer
Galiyev, Arystan
Central and West Asia Department
Request for information -
Country/Economy
Kazakhstan -
Sector
- Finance
Project Name | Developing Rural Financial Intermediation | ||||
Project Number | 52293-001 | ||||
Country / Economy | Kazakhstan |
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Project Status | Closed | ||||
Project Type / Modality of Assistance | 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 Knowledge solutions Partnerships Private sector development |
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Sector / Subsector |
Agriculture, natural resources and rural development / Agro-industry, marketing, and trade Finance / Inclusive finance - Small and medium enterprise finance and leasing |
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Gender Equity and Mainstreaming | Some gender elements | ||||
Description | Strategic context. The proposed knowledge and support technical assistance (KSTA) will support Agrarian Credit Corporation (ACC) to improve access to finance for agriculture sector entities (ASEs) and households in rural and remote areas. ACC is the key rural financial intermediation institution in Kazakhstan and is a subsidiary of KazAgro National Management Holding Joint Stock Company (JSC) (KazAgro).
The TA will assist ACC to implement its recently adopted long-term development strategy for 2017 2026 through (i) developing a comprehensive and actionable business plan, (ii) improving corporate governance, (iii) strengthening the institutional capacity, (iv) developing its environmental and social management system, and (v) providing expertise for strengthening credit unions and financial organizations in rural areas. The TA will review ACC's key business activities to prepare its business plan, including a comprehensive financial model with 5-year projections and a cost-benefit analysis, which will determine the company's vision and strategy in terms of operational focus areas, target clients, geographical outreach, product focus, and funding requirements. The TA will strengthen ACC's capacity to mobilize external finance, and to develop into a wholesale financial intermediary. The TA will also review the ongoing lending programs of some of the second-tier banks and provide recommendations on how to meet ASEs' needs for finance. The Asian Development Bank (ADB) country partnership strategy (CPS), 2017 2021, for Kazakhstan prioritizes, among others, a nexus of access to finance and inclusive growth addressing the availability of finance in rural and remote areas under its interconnected strategic pillars. The TA is included in ADB country operations business plan, 2019 2021 for Kazakhstan. |
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Project Rationale and Linkage to Country/Regional Strategy | Rationale. Limited access to finance is one of the major challenges faced by companies in the country. A key constraint to credit is an underperforming financial sector that insufficiently responds to the needs of the private sector, especially of the agriculture sector outside Almaty and Astana cities. Furthermore, an increasing vulnerability of the financial sector complicates the access to finance. Major issues include: (i) insufficient bank lending mainly caused by a large stock of non-performing loans, (ii) absence of basic financial services in remote areas, (iii) ASEs' poor financial condition and inability to provide movable collateral, (iv) poor financial literacy and information asymmetry across the industry, and (v) outdated information and communication technology and inadequate level of digitalization of the banking sector. Most ASEs are in remote rural areas, which are heavily vulnerable to external shocks. Micro, small and medium sized agribusiness entities are major source of income for local entrepreneurs and households, including women entrepreneurs. To date, credit unions (CUs) are the only existing source of finance for local agribusiness entities in remote areas, indicating the ASEs' limited access to finance. At the same time, ACC is the only source of lending for approximately 200 agriculture CUs. However, the current business model of CUs is suboptimal due to: (i) sole dependence on the ACC funding that depletes quickly, given existing demand and its inflexibility associated with bureaucratic procedures and improper timing when needed by recipients; (ii) inability of re-allocation of funds among those CUs that require immediate financing; and (iii) limited ability of CUs to establish their own funding basis through cash/savings operations, accepting deposits and additional contributions from CUs' members, as these activities require corresponding licenses from the National Bank of Kazakhstan, which is difficult and time-consuming. Consultations with the Ministry of Agriculture (MoA), KazAgro and ACC all confirmed the importance of expanded rural financial intermediation and support to credit unions as key development objectives, reflected in ACC's development strategy for 2017 2026. In this regard, the MoA is a policy regulator committed to improving agricultural sector performance; KazAgro is a national company responsible for implementing policy and state support to the sector; and ACC is financial intermediation arm of KazAgro, working directly with ASEs. |
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Impact | Accessible and effective system of agriculture financing that supports economic growth. |
Project Outcome | |
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Description of Outcome | Broadened access to finance for ASEs in rural areas. |
Progress Toward Outcome | |
Implementation Progress | |
Description of Project Outputs | 1. Improved business processes of ACC. |
Status of Implementation Progress (Outputs, Activities, and Issues) | |
Geographical Location | Nation-wide |
Summary of Environmental and Social Aspects | |
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Environmental Aspects | |
Involuntary Resettlement | |
Indigenous Peoples | |
Stakeholder Communication, Participation, and Consultation | |
During Project Design | |
During Project Implementation |
Responsible ADB Officer | Galiyev, Arystan |
Responsible ADB Department | Central and West Asia Department |
Responsible ADB Division | Kazakhstan Resident Mission |
Executing Agencies |
Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550, Philippines Ministry of National Economy Orynbor str., 8, House of Ministries, entr.7,010000 Astana, Kazakhstan |
Timetable | |
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Concept Clearance | 07 Nov 2018 |
Fact Finding | 18 Sep 2018 to 18 Sep 2018 |
MRM | - |
Approval | 25 Sep 2018 |
Last Review Mission | - |
Last PDS Update | 08 Nov 2018 |
TA 9650-KAZ
Milestones | |||||
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Approval | Signing Date | Effectivity Date | Closing | ||
Original | Revised | Actual | |||
25 Sep 2018 | - | 25 Sep 2018 | 30 Jun 2020 | 30 Jun 2022 | 18 Apr 2022 |
Financing Plan/TA Utilization | Cumulative Disbursements | |||||||
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ADB | Cofinancing | Counterpart | Total | Date | Amount | |||
Gov | Beneficiaries | Project Sponsor | Others | |||||
225,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 225,000.00 | 17 Jun 2022 | 100,851.91 |
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Tenders
Tender Title | Type | Status | Posting Date | Deadline |
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Environmental and Social Management System Specialist | Individual - Consulting | Closed | 24 Jun 2020 | 07 Jul 2020 |
Corporate governance and risk assessment | Individual - Consulting | Closed | 14 May 2019 | 20 May 2019 |
Organization Management & Strategy Development | Individual - Consulting | Closed | 21 Feb 2019 | 27 Feb 2019 |
Corporate governance and risk assessment | Individual - Consulting | Closed | 21 Feb 2019 | 27 Feb 2019 |
Organization Management & Strategy Development | Individual - Consulting | Closed | 21 Feb 2019 | 27 Feb 2019 |
Contracts Awarded
No contracts awarded for this project were found
Procurement Plan
None currently available.