As small and medium-sized businesses in the Kyrgyz Republic face an economic downturn, mobile phone technology and local banks are making access to finance easier.

Bishkek, Kyrgyz Republic — Low global commodity prices, recession in the Russian Federation, and a slowdown in demand from major trading partners—especially the People’s Republic of China: times are tough across Central Asia.

Average growth in gross domestic product (GDP) in the subregion fell to 2.9 percent in 2015 from 5.3 percent a year earlier. In March, the Asian Development Bank (ADB) forecast that average growth will slow further this year to 2.1 percent.

In the Kyrgyz Republic, micro, small, and medium-sized enterprises (MSMEs) have been hit hard by the downturn, and many are struggling to survive.

“Micro, small, and medium-sized enterprises are the core of the economy of the Kyrgyz Republic,” said Gulnara Shamshieva, General Manager of Bai Tushum Bank, which serves more than 32,000 small businesses in the country. “It is important to support them as they create jobs and help boost the economy.”

Mobile banking services help reach small businesses

In partnership with ADB, local banks are providing a lifeline to the country’s MSMEs which accounted for about 19 percent of employment and 39 percent of GDP in 2013.

In 2015, Bai Tushum Bank received a $10 million loan from ADB’s private sector department to extend medium- and long-term financing to MSMEs. Four years earlier, the Kyrgyz Investment and Credit Bank received a loan for the same amount. It has since more than doubled its number of small and medium-sized enterprise clients and has seen its rural business grow significantly.

In addition to expanding access to finance for small businesses, the banks are introducing innovative practices and developing new services that cater to the specific needs of the MSME sector. This includes the development of mobile banking services. Nearly everyone in the Kyrgyz Republic has a mobile phone—market penetration is 120 percent—but only 20 percent of people use banking services. More people are banking because services are now linked to their phone.

“Micro, small, and medium-sized enterprises are the core of the economy of the Kyrgyz Republic.”

Gulnara Shamshieva

“We wanted to use the opportunity to tap into the existing mobile phone services to expand our banking penetration, and provide financial services to those who are currently underserved,” said Bektur Aliev, Chief Banking Officer with Kyrgyz Investment and Credit Bank.

Mobile banking in the Kyrgyz Republic is mainly used to support home businesses, he said. The most popular business is the top-up of mobile phone load. The bank currently has 2,000 agents selling mobile phone load to customers. It also promotes mobile banking for remittances, bills payment, and merchant payments.

“Kyrgyz Investment and Credit Bank is the first bank to introduce mobile banking in the Kyrgyz Republic,” he said. “All our knowledge and experience on mobile banking will be shared with the central bank, which will advise other banks on how to deal with issues related to mobile banking, and may develop regulations on how to deal with the various risks. This way we can have some standards in managing the risks.”

Credit for debonair clients

Gulzhomal Anorkulovna, 34, is making the most of the new access to funds. Her salon, Azhar, which means beautiful in the Kyrgyz language, is a small and compact facility with two dressing tables and chairs for customers, and a water basin for washing hair.

Located in Bishkek’s Ak-Orgo district the salon is fitted into a repurposed steel shipping container. Ms. Anorkulovna recently bought it after two years of renting.

“My sister convinced me to take a loan from the Kyrgyz Investment and Credit Bank and buy this place after she saw that my business was doing very well,” she said. “I was nervous as I’ve never had any experience dealing with the bank before.”

With a reference from her sister, and using her house as collateral, Ms. Anorkulovna obtained a loan of 100,000 Kyrgyz som ($1,465) from Kyrgyz Investment and Credit Bank. After her monthly loan payments of 7,800 som and the salary of her two assistants, she makes a healthy profit and her business is growing.

“The service is good and affordable here,” said Rysbek Zhaparov, 55, an ambulance driver and regular customer. “I just need to pay 100 Kyrgyz som for a haircut. My children also come here for their haircuts now.”

As Bai Tushum Bank and Kyrgyz Investment and Credit Bank continue to build their client networks and extend mobile services, more entrepreneurs like Ms. Anorkulovna will have a better chance of weathering the economic downturn and building their business.

Ayun Sundari is a Communications Specialist in ADB’s Department of External Relations. Learn more about ADB’s work in the Kyrgyz Republic.