On the Role of Microfinance in Business Lending

As of today, microfinance organizations (MFOs) and credit partnerships (CPs) occupy a significant position in the financial sector as lenders to small and medium-sized enterprises (SMEs). Owing to their wide territorial presence and understanding of the specifics of doing business in the regions, MFOs and CPs play an important role in providing businesses with access to financial resources, stimulating entrepreneurial activity, increasing employment, and supporting the development of entrepreneurship at the local level.
The speed and simplicity of providing credit resources, the active use of digital service technologies, together with extensive outreach, make it possible to expand clients’ access to the product range of organizations engaged in microfinance activities (OMFAs), as well as to meet the credit needs of micro, small, and medium-sized enterprises for business development, especially in remote areas and rural settlements. By instruction of the Head of State, since 2020 entities engaged in microfinance activities have been brought within the regulatory perimeter of the Agency for Regulation and Development of the Financial Market. Since 2020, the regime of registration accounting (previously applicable only to MFOs) has been extended to CPs and pawnshops (PSs), and since 2021 all microfinance market participants have been included in the regulatory perimeter. In order to ensure proper regulation and prevent unfair practices by microfinance market participants, the regulator, represented by the Agency, has been implementing measures to enhance the transparency of MFOs’ and CPs’ activities, including through licensing.
To regulate and improve the transparency of microfinance sector participants, the Agency has carried out systematic work to bring them into the regulatory perimeter, establish unified requirements, and standardize processes. These measures have made it possible to form a stable and transparent operating model for the sector. As of today, 897 entities carry out microfinance activities, including 215 MFOs, 209 CPs, and 473 entities operating as pawnshops. Within the current regulatory environment, the microfinance sector continues to make a significant contribution to economic development. In particular, MFOs and CPs are key participants in business lending within the microfinance sector, providing entrepreneurs with necessary financial resources, especially in the regions.
Taking into account their role in business lending, the Agency has implemented a set of measures aimed at further stimulating the financing of entrepreneurship. First, as part of prudential incentives for lending to SMEs, reduced risk-weighting ratios for collateralized microloans for business purposes (50%) were introduced in 2023. In 2024, to support the automotive industry, the risk weighting for microloans secured by motor vehicles was reduced (from 150% to 100%), and the obligation to calculate the debt-to-income ratio (DTI) for microloans for vehicle purchases was suspended. Second, to expand lending by credit partnerships to their members, the requirement to calculate the borrower’s debt burden ratio was abolished. Third, to ensure the availability of microfinance for regional entrepreneurs, especially in rural areas, the Agency licensed 18 MFOs established with the participation of the National Chamber of Entrepreneurs “Atameken” and local executive authorities. Fourth, in 2022, to improve access to banking services for micro and small businesses in the regions, a simplified mechanism was introduced for converting MFOs with extensive branch networks and established client bases in rural regions into banks.
Fifth, to expand the funding base of MFOs, listing requirements for admission to the securities market applicable to bond issuers were simplified in 2021. As a result, equity and debt instruments of 20 MFOs totaling KZT 237.9 billion are currently listed on the KASE platform.

Sixth, for the purpose of expanding funding sources for credit partnerships to finance business entities in the agro-industrial and other sectors of the economy, in November 2023 the first apex fund, APEX FUND I LP, was registered within the jurisdiction of the Astana International Financial Centre (AIFC). In addition to its primary objective, this mechanism is expected to have an indirect positive impact on employment growth. Maintaining a balance between regulating the activities of microfinance market participants and stimulating their business lending has made it possible to continue providing financing to entrepreneurs. Current Status of MFOs and CPs At present, MFOs and CPs are represented in all regions of Kazakhstan and are active participants in various business support measures.
Their activities ensure access to affordable financing for a wide range of households in remote areas and rural settlements, including those actively engaged in agricultural development. The accessibility of MFOs’ and CPs’ products has ensured sustainable asset growth from early 2021 through the third quarter of 2025, with total assets increasing by 178% from KZT 1,054 billion to KZT 2,932 billion (including an 11.7% increase over the first nine months of 2025). The assets of MFOs and CPs continue to demonstrate positive growth dynamics.

Demand for microloans provided by MFOs and CPs has enabled them to increase their loan portfolio to 82% of total assets. Since 2021, the loan portfolio has grown threefold, from KZT 925 billion to KZT 2,402 billion, accounting for 90% of total microloans in the sector as of today. The volume of microloans extended to business entities amounts to KZT 1,775 billion, or 67% of the loan portfolio of MFOs and CPs. By business size, SMEs and self-employed individuals prevail, accounting for KZT 1,347 billion, which represents 51% of the total loan portfolio of MFOs and CPs. In addition, certain microfinance market participants are able to provide microloans to large enterprises, which account for 16% of the loan portfolio of MFOs and CPs. This is explained by large credit partnerships extending microloans to capital-intensive projects in the industrial and manufacturing sectors. Despite the fact that borrowers of MFOs and CPs operate in sectors of the economy considered to be higher risk, the share of overdue loans exceeding 90 days (NPL 90+) in the loan portfolio of MFOs and CPs remains low.
While NPL 90+ across the entire loan portfolio increased by 1.4 percentage points since 2021, as of October 1, 2025 the NPL 90+ ratio stood at 4.7%. At the same time, NPL 90+ on microloans to business entities increased by 1.7 percentage points to 2.9%. Regional Presence and Sectoral Coverage When analyzing the borrowers to whom financial institutions provide loans, it is necessary to take into account their strategic focus. Second-tier banks concentrate their lending activities on large borrowers with audited financial statements and significant funding needs. In contrast, MFOs and CPs focus on rural and remote regions, where entrepreneurs operate under simplified reporting regimes and face limited access to financing. The effectiveness of MFOs’ and CPs’ activities is ensured by their presence in all regions of Kazakhstan and by the availability of sufficient information on the business activities of the entrepreneurs they finance. The largest shares of issued microloans are concentrated in the following sectors: agriculture (26.9%), services (22.8%), industry (17.6%), electricity and water supply (15.4%), and financial and insurance activities (7.8%).

The structure of regional lending is determined by the sectoral specifics of each region and the nature of local entrepreneurial activity. Thus, in the regional breakdown, the largest volumes of microloans were issued in Pavlodar Region (19%) and Kostanay Region (11%), primarily in industrial sectors related to iron ore mining and energy supply. In terms of microloan volumes, the major cities of Almaty (16%), Astana (7%), and Shymkent (6%) stand out, as well as Turkistan Region (10%) and Akmola Region (5%), mainly in the trade and services sectors. The highest level of lending activity by credit partnerships is observed in agriculture across all regions of Northern and Central Kazakhstan (46%) and Southern Kazakhstan (29%), due to the presence of large cultivated areas in these regions. As of October 1, 2024, the total volume of agricultural lending in these regions amounted to approximately KZT 320 billion.

The main volume of business micro-lending by MFOs is concentrated in Astana (20%), Almaty (18%), Turkistan Region (16%), Shymkent (7%), and Zhambyl Region (6%). Despite the continued growth of the loan portfolio, interest rates on business microloans remain relatively high. The average nominal interest rate at MFOs is around 30%, while for loans issued by credit partnerships it is approximately 11%. However, the broad outreach and accessibility of MFOs and CPs offset the impact of higher interest rates.
Conclusions At present, the microfinance market is a significant player in the financial sector in terms of providing financing to small and medium-sized enterprises, including specific sectors of the economy that are not attractive to larger market participants. By extending microloans to SMEs, MFOs and CPs provide social support by improving living standards, ensuring effective employment, regulating income levels and rural unemployment, ensuring access to basic and financial services, and enhancing overall public welfare. Due to their extensive presence across all regions of the country, organizations engaged in microfinance activities (OMFAs), particularly MFOs and CPs, demonstrate a strong interest in financing SMEs, thereby playing a substantial role in addressing the issue of insufficient corporate lending and supporting entrepreneurs, as highlighted in the Address of the Head of State.
This is reflected in a threefold increase in the total volume of business microloans since the introduction of licensing, reaching KZT 1,775 billion as of today. Another advantage of MFOs and CPs is their access to sufficient information on business entities, which enables them to provide microloans to entrepreneurs operating in sectors of the economy that are not a priority for other financial institutions and are considered higher risk. In particular, the agricultural sector, which is exposed to various risks, accounts for 26.9% of the loan portfolio of MFOs and CPs, especially in regions with large cultivated areas.
By offering accessible terms, MFOs and CPs are also able to extend microloans to such sectors of the economy as services and electricity supply, which account for 22.8% and 15.4% of the loan portfolio, respectively.