Report by the Chairperson of the Agency Madina Abylkassymova, at the Government Meeting
Dear colleagues!
Let me present information about the situation in the lending market and measures to expand corporate lending.
Slide 2. Loans to the economy in 2024 soared by 20.9% to 33.8 trillion KZT. Loans to businesses rose by 16.3% to 13.1 trillion KZT, including large businesses by 9.2% to 4.3 trillion KZT, SMEs by 13.1% to 6.5 trillion KZT and individual entrepreneurs by 46.6% to 2.3 trillion KZT.
Total volume of new loans to businesses issued in 2024 made 18.2 trillion KZT, which is 17.2% more than in 2023.
Quality of corporate loans remains high. Thus, loans overdue for over 90 days account for 2.1% of the business loan portfolio.
Slide 3. Coverage of business entities by bank lending is expanding. Number of borrowers in 2024 increased by 20.3% to 534 k entities.
Slide 4. In terms of economic sectors, share of bank loans was 82%. Along with that, in the industrial sector, the share was 70%, in construction and trade – over 99%, in transport and communications – more than 82%, in agriculture – 50%.
Slide 5. In order to ensure annual growth in lending to the real sector of the economy, the Agency has taken the following measures.
First. In order to release bank liquidity in 2024, liquidity ratio was set at a reduced level of 0.9 with a standard of 1. This allowed the banks to release liquidity for 1.6 trillion KZT.
Given the taken measures taken, out of the total volume of liquid assets in the amount of 19.2 trillion KZT, free liquidity reserve is about 6.0 trillion KZT.
Thus, banks have a high liquidity reserve, which can be used to finance the economy.
Slide 6. Second. In order to expand business lending, it is important to have a stable funding base for banks.
In the funding structure of banks, customer deposits account for a major share making 80% of the liabilities.
To support business lending in 2024, stable funding ratio was set at a reduced level of 0.9 with a standard of 1. This allows banks to expand the resource base for lending.
Since the funding base is short-term, the Agency, together with the National Bank, developed and adopted a mechanism for long-term funding of banks in 2024. The main objective of this mechanism is to provide loans for long-term projects of borrowers.
Funds are allocated through issue of bonds in KZT by banks with maturity of up to 7 years at market rates. Planned volume of financing is 500 billion KZT, where the banks have already raised 220 billion KZT for lending to 72 projects in the manufacturing industry, electricity supply and transport.
Moreover, measures are being taken for banks to raise long-term funding from foreign capital markets. It is planned to reduce the risk-weighting of loans to businesses in foreign currency from 200% to 100%.
Slide 7. Third. Particular emphasis is placed on lending to SMEs. Risk-weighting of SME loans in relation to capital has been reduced to 50%, with the standard risk-weighting of loans at 100%. This has freed up banks' capital to issue new SME loans in excess of 1.5 trillion KZT.
Moreover, a streamlined procedure for creditworthiness analysis has been introduced for loans up to 500 million KZT. Requirements for mandatory reconciliation of borrowers' financial and tax reporting have been relaxed.
In order to develop unsecured lending to SMEs, digitalization of the business lending process has been ensured. In 2023-2024, integration of bank information systems with 52 government services was implemented. This year, integration of banks with 19 additional government databases will be completed, including services for legal entities, tax reporting, electronic invoices, certificates of completion of work, and real estate transactions.
As a result of the taken measures, volume of unsecured loans to businesses surged by 35% in 2024 to 3.7 trillion KZT accounting for 21% of the total volume of loans to businesses.
Slide 8. Fourth. Today, lending to the real sector is curbed by lack of collateral for businesses.
To soften the collateral policy of banks, requirements for certain types of collateral were eased in 2024. In particular, liquidity ratios for passenger vehicles were increased from 50% to 60%, for equipment from 40% to 55%, for cash flows from PPP and offtake contracts from 0% to 50%.
In 2024, legislative amendments were adopted to improve effectiveness of collateral in the form of subsoil use rights and temporary land use rights to simplify the procedure for selling such collateral.
Amid limited collateral, role of the loan guarantee mechanism has increased. Today, 5% of business loans worth 607 billion KZT are covered by the DAMU guarantee.
In this connection, in order to expand the instruments for guaranteeing SME loans, establishment of the Guarantee Fund for SME Loans is being developed. Key difference of the new Guarantee Fund, in addition to the state's participation, is its financing through annual contributions from banks. The Guarantee Fund will cover up to 85% of an SME loan of up to 3.5 billion KZT.
In order to establish the Guarantee Fund, the Agency has developed and submitted relevant legislative amendments to the Government.
In order to stimulate lending under guarantees, a reduced 20% risk weighting of SME loans with a DAMU guarantee will be introduced.
Slide 9. Fifth. Legislative amendments have been adopted in 2024 to develop syndicated lending for lending to large investment projects. Composition of syndicate participants has been expanded to include non-resident banks and conditions have been created to sign a syndicated loan agreement based on principles of the international law.
A Project Office for Syndicated Lending has been established based on Development Bank of Kazakhstan with participation of Baiterek, Samruk-Kazyna and banks. A pool of investment projects for 6.5 trillion KZT has been formed and financing of 5 projects for 835 billion KZT has started through the mechanism of syndicated lending and co-financing.
Within the tasks set by the Head of State to ensure growth of lending to the real sector of the economy, resources of banks will be involved to the maximum extent possible. In particular, banks are ready to take an active part in financing a new pool of priority investment projects, as well as upgrade of the infrastructure of the energy and utilities sectors.
Together with banks, the offered measures to expand lending to the real sector of the economy will be worked out.
Photo source: Primeminister.kz