Business • 24 June, 2020

SMEs can apply for new loan deferral — Madina Abylkassymova

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At the government session chaired by Prime Minister Askar Mamin, Chair of the Agency for Regulation and Development of the Financial Market Madina Abylkassymova and Chair of the Board of Atameken National Chamber of Entrepreneurs Ablay Myrzakhmetov reported on measures taken to improve the business climate in the country.

As Abylkassymova noted, in the face of a downturn in economic activity, the Agency’s priority is to restore lending, prevent business from accessing credit resources, and provide additional support tools to preserve their operations and fulfill obligations. It is also important to mitigate the effects of the situation in the real economy on the stability of the banking system.

“During the state of emergency, on behalf of the President of the Republic of Kazakhstan, the Agency adopted a number of measures to support the financial situation of the population and businesses experiencing financial difficulties,” Abylkassymova said.

From March 16 to June 15, 2020, individuals and SMEs were granted a deferment of loan payments.

During this period, 1,890,443 people or 34% of all borrowers — individuals took advantage of the delay. The deferred payments amounted to 268 billion tenge.

12,455 SMEs applied for the restructuring of loans. This represents 41.5% of SME borrowers with bank loans. The total amount of restructured payments amounted to 165 billion tenge.

It covered 12 sectors and 346 types of economic activities that were most affected by the state of emergency.

Of the total number of SMEs that have received a deferment, 34% falls on trade, 11% on the services of dry cleaners, beauty salons, hairdressers, 5% on transport and warehousing, 4% on catering, 3% on tourism, 1% on the hotel industry.

“Despite the end of the period of emergency, the activities of small and medium-sized enterprises have been restored unevenly and not fully. There is a decrease in demand for goods and services, turnover and revenue have fallen, and, therefore, the ability to service obligations on loans received has decreased. In this regard, the Agency, together with second-tier banks and the Association of Financiers of Kazakhstan, is implementing additional support measures for SMEs,” Abylkassymova said.

On June 15, 2020, a new procedure was approved for providing additional support measures to SMEs. From June 16 to Sep. 15, 2020, an SME entity has the right to apply to a bank or microfinance organization with a request for additional support measures, which is considered by a credit institution for no more than 20 days.

“A credit institution will individually assess for each entrepreneur his financial condition, the impact of the state of emergency and quarantine on financial and economic activities and the prospects for restoring the financial condition of an SME. Given the obvious deterioration in the financial condition of SMEs, credit institutions will offer two areas of support,” the Agency’s chair informed.

The first is the provision of deferred loan payments for a period sufficient to restore financial condition to borrowers experiencing temporary financial difficulties.

This measure will not lead to a significant increase in the business debt burden, since the payment of deferred loan payments will be distributed until the loan is fully repaid or at the end of the loan for an additional period equal to the delay time.

The second is refinancing of loans under preferential terms within the framework of state programs to support business entities for borrowers servicing loans at market rates. This will make it possible to take advantage of all SMEs, including those previously granted deferment.

Abylkassymova also noted that the National Bank, together with the Agency, is implementing a program of concessional lending to SMEs to replenish working capital. Under this program, loans are issued at a rate of up to 8% for a period of up to 1 year. The total volume of the Program is 600 billion tenge.

As part of this program, loans worth 259 billion tenge have been issued to date.

To reduce the debt burden of SMEs, loans are refinanced under the Business Roadmap-2025 Program at a rate of 6%.

Given the absence of collateral in SMEs, guarantees are provided by Damu up to 85% of the loan amount.

Currently, 5 thousand SMEs out of 14.5 thousand SMEs in the affected sectors of the economy are covered by state programs.

In addition, additional opportunities for refinancing are provided by a new direction for micro and small business entities, which provides for portfolio subsidized interest rates and guarantee loans with a final interest rate for the borrower of 6% per annum.

The banking system is currently absorbing losses associated with the restructuring of loans, thanks to the accumulated capital reserve.

In order to absorb the additional losses of banks caused by the crisis and to support lending to the economy, the Agency fully utilized the mechanism of prudential regulation.

Temporary regulatory exemptions have been introduced in order to free up capital and bank liquidity.

A decision was made to temporarily reduce the requirement for the conservation buffer of equity capital of second-tier banks by 1 percentage point

The requirements for equity were reduced, including for loans issued to SMEs, the requirements for liquidity ratios were relaxed, which allowed to release banks' capital in the amount of 468 billion tenge and liquidity in the amount of 1,767 billion tenge.

In general, the measures taken allowed us to support the volume of bank lending to the economy.

As of June 1, 2020, the loan portfolio of second-tier banks amounted to 15.1 trillion tenge, having increased by 325 billion tenge or 2.2% since the beginning of the year.

After the banking system loan portfolio fell by 2.5% in April, weak growth in May was observed at 1.2%.

At the same time, it was noted that the portfolio of loans to small and medium-sized businesses has not yet grown, after falling by 3.4% in April, remaining at the same level.

“The measures taken together with the government will prevent a significant reduction in lending to the economy, especially in the most affected sectors of the economy. The Agency will monitor and control the implementation of additional measures to support borrowers from the banks and the state,” Abylkassymova emphasized.

Chair Atameken NCE Ablay Myrzakhmetov, in turn, noted that systemic problems of business are constantly being identified and resolved. A single registry has been created, which includes over 600 business problems.

In addition, the Interdepartmental Commission for the Regulation of Entrepreneurship is working. Within the framework of this commission, over 500 issues were considered, 80% of them were resolved.

“For example, in 7-8 regions, many SMEs using gas complained about monopolists who demanded payment in advance, thereby exerting pressure on SMEs that already had low revenue. Subsequently, this issue was resolved. The requirement to pay the advance payment was excluded. There are a lot of such examples,’’ Myrzakhmetov said.

First Deputy Prime Minister Alikhan Smailov noted that the government has taken a number of urgent measures to support business. The implementation of the Comprehensive Plan for Restoring Economic Growth by the End of the Year has begun. At the same time, within the framework of meetings with business representatives, issues and problems requiring additional solutions were considered. These problems include the scope of tax administration, reducing the debt burden on loans, expanding the domestic market, providing soft loans in the agricultural sector and other issues.

Based on the results of the systematization of these issues, a package of additional measures to support the business was prepared and discussed several times. It is noted that in July 2020, a new direction will be launched in the framework of the Business Roadmap-2025 program to support micro and small business entities. Loans will be issued at the expense of funds of second-tier banks and microcredit organizations. The operator will be the Damu Fund. Loans will be issued for working capital and investment purposes.

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