On April 1, 2021, the Agency for Regulation and Development of Financial Market released its standard review of the country’s financial sector as on February of the current year. The document contains nothing sensational, however, we have decided to look at it at a new angle.
Let us imagine young Kazakh citizens (ordinary folks without lucrative familial ties) with a degree in economics or technological studies engaged in doing small business (or getting ready to do so). The citizens who, due to all the things mentioned, have decided to examine the possibilities of getting a loan in one of the country’s banks.
In view of the task at hand, we will be analysing only one of the four sections of the review, namely, the one on the «Banking Sector».
At first, our imaginary hero will probably get excited about the information presented in the review (quoting) –
«In February 2021, the assets of the banking sector had grown by 696.5 bln tenge or by 2,2% up to 31995.4 bln tenge».
«Tier-two banks have a significant liquidity cushion amounting to about 15758 bln tenge or 49,3% of the assets of which about 12564 bln tenge are high-liquidity assets».
«As of March 1, 2021, the banking sector has a sufficient capital cushion. The stock capital adequacy ratio constituted 21,2% (with the minimal level of 7,5%, for systemically important banks — of 9,5%), the shareholders’ capital adequacy ratio constituted 26,1% (with the minimal level of 10%, for systemically important banks — of 12%) which, on average, surpasses the required norms in a significant way».
«Based on the results of the current February, the banks’ net profit constituted 194.3 bln tenge having grown by 29,2% against February 2020 (150.5 bln tenge). As of reporting day, the ROA constituted 2,61% (4.07% as of March 1, 2020), the ROE constituted 20,17% (31.59% as of March 1, 2020)».
Upon reading these paragraphs, our potential borrowers will immediately be filled with excitement and think of becoming bank clients. However, their optimism will grow thinner as they read the following (quoting) -
«As of March 1, 2021, the total volume of loans provided by banks constituted 14552.4 bln tenge having declined by 0,3% in February 2021».
«The volume of loans provided to legal bodied had declined by 0,1% to 6986.5 bln temge, loans provided to small businesses had grown by 0,7% to 25 57.8 bln tenge. In February 2021, the volume of loans provided to physical bodies declined by 0,5% to 7565.9 bln tenge».
«In February 2021, the weighted average interest rate on credits provided in the national currency to non-banking legal bodies constituted 11,5% (against 11,5% in January 2021), to physical bodies — 18,2% (against 18,5% in January 2021)».
Then, our imaginary heroes will start thinking and try to understand why Kazakh banks, having such significant available cash assets (15.8 trillion tenge), do not use them to provide loans to legal and physical bodies especially since they establish such high interest rates on credits? And our heroes will find no answer to this question.
So then, the young people desiring to start their own business will break up into three groups.
The first one will include those searching for ways to access banks and bank clerks in order to make a loan provision bargain. Best of all if the clerks turn out to be their friends or relatives.
The second group will include those comparing the interest rates and the terms of loan provision in the Kazakh and foreign banks thus becoming more and more convinced of the necessity to leave the country.
Finally, the third group will be comprised of those who’ve given up and continue surviving as they did before.
As a result, everything will go on as usual. It is when Akorda and the Library, instead of making private commercial banks do what they are supposed to do (in other words, serve as intermediaries between those with cash surplus and those who need cash resources) are observing the situation with indifference.
We have written on this subject a number of times providing in-depth explanations why the interests of few people and elite clans that own Kazakh banks are much more important for Nursultan Nazarbayev and his allies than the national interests of the country. In this case, however, we are looking at the situation through the eyes of the young Kazakhs who, generally, do not care why exactly they have little chance to obtain business loans at a sensible or an even reduced interest rate. What’s important to them is the realisation that this door is closed.
However, as we know, nothing passes without consequences. And this category of young people will, eventually, leave the country since, today, emigration is the most sensible and safest way to not only survive but lead a normal life and secure a better future for the children.
While Akorda and the Library will be left with those who chose to stay.
