MICROCAPITAL STORY: Kazakhstan Prime Minister Calls for Schemes to Improve the Functioning of MicroCredit Organizations in Rural Areas; Appoints Deputy Prime Minister to Coordinate the Efforts

The Prime Minister of Kazakhstan, Karim Massimov, has called for schemes to coordinate the functioning of microlending systems in the rural areas of the country. According to a press release found on the state-run news agency, Kazakh National Information Agency (Kazinform), the Prime Minister appointed Umirzak Shukeyev, the Deputy Prime Minister of Kazakhstan, to coordinate the efforts. The PM has commissioned the Deputy PM to coordinate specifically the activities of the Ministry of Agriculture and the Kazakhstan based public entrepreneurship development fund, Damu. The release quoted the PM as saying that because several past decisions taken by the Government, with regard to microlending in the rural areas, had not yet translated to action, such measures for coordination were necessary.

The World Bank estimates that nearly 18 percent of Kazakhstan’s population lives below the poverty line. Although the landlocked nation achieved the first of its Millennium Development Goals (i.e. reduce, by half, the proportion of population living on less than one dollar a day) in 2004 by reducing its poverty rate from 35 percent to 16.1 percent, the United Nations reports that development has not proceeded at an equal pace throughout the country and that ‘poverty still persists in the rural areas’. According to the 2006 Regional Director of the United Nations Development Program (UNDP), Kalman Mizsei, the challenge for the Kazakhstan government is to promote economic diversification beyond the oil and mining sectors. To promote such diversification, he called for the need to develop the small and medium sector in Kazakhstan, which in turn was dependant on access to microfinance services.

According to the UNDP reportMicrofinance in Kazakhstan: an inclusive financial sector for all‘, the demand for microfinance in Kazakhstan greatly outstrips the supply. The report states that only 2 percent of poor people in Kazakhstan have access to microfinance services. The same point was also echoed by the Minister of Agriculture of Kazakhstan, Akhylbek Kurishbayev, in response to the Prime Minister’s call for coordinating microlending in the rural areas. Kurishbayev said that 47 percent of Kazakhstan’s population lived in the rural areas with 18 percent belonging to the ‘low income groups of population’ and that the microlending program through Damu covered only 4.3 percent of the rural population. Explaining the reason for the gap, the Minister stated that most Microfinance Institutions (MFIs) in Kazakhstan were located in district centers and hence were inaccessible to the villagers. He also added that the ‘lack of financing and under-development of the system of microlending in the rural areas’ resulted in a large portion of the rural population still being insulated from microlending. MicroCapital previously featured a summary on the performance of the microfinance industry in Central Asian countries, including Kazakhstan. More information on Kazakhstan’s performance can be found here.

Damu JSC is a public fund established in Kazakhstan in 2003 to support low income citizens of Kazhakstan in rural areas and promote small and medium size businesses through microcredit. Investors in the fund include the oil and gas project Karachaganak Petroleum Operating B.V. (KPO BV), Ural Oil and Gas LLC and the Kazakh based agriculture company Zernovaya Industriya (no website found). As of December 2006, Damu had 121 active borrowers with a total asset base of USD 297 k, a debt to equity ratio of 53.95 percent, a return on assets of 3.12 percent and a return on equity of 4.60 percent.

By Bharathi Ram, Research Assistant

Additional Resources:

Kazakh National Information Agency

World Bank: Kazakhstan Country Brief 2008

United Nations Development Program: Microfinance in Kazakhstan

MicroCapital.org:

July 9, 2008: PAPER WRAP-UP: Central Asia Benchmarking Report, 2006, Scott B. Gaul and Olga Tomilova

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