Kyrgyzstan microlending industry review

The microfinance sector, which emerged in Kyrgyzstan in 1995, is today a leader in the Central Asia. Over the last 15 years, the sector has been growing and developing rapidly. Due to the success of FINCA and other microfinance pioneers also spawned a host of smaller local imitators. Kyrgyzstan’s microfinance sector is young compared to that of Bangladesh or India. But it has already provided thousands of Kyrgyz citizens with the chance to invest in their entrepreneurial skills and become financially independent. By the start of this decade, Kyrgyzstan had close to 600 microcredit providers. A tightening of regulations in 2011 closed out many of the weaker firms, but the country still boasts around 160 operators.

Microfinance is becoming more common in the Kyrgyz market, complementing the tradition banking segment. The microfinance sector aims to increase economic activity, create jobs and reduce poverty. Microfinance provides financial services to the population without access to banking services due to low income, the need for a small amount of the loan the inadequacy or absence of collateral, as well as the lack of banking infrastructure in the country.

  • availability of products and services, which meet the needs of low-income population
  • knowledge and experience in servicing the rural population, in particular women
  • loans are offered in the national currency, which reduces the currency risks for the clients
  • Insufficient professional competence in the NBFOs risk management
  • low level of corporate culture and management in a significant number of small and medium-sized NBFOs
  • presence of a significant number of small NBFOs with a low level of financial stability
  • insufficient development of the deposit market availability of reputational risk of the NBFOs system
  • insufficient level of the clients’ financial literacy
  • high dependence on migrants’ incomes, remittances, volatility of the dollar exchange rate
  • availability of demand for microfinance services from various segments of the population
  • use of appropriate information and communication technologies to expand healthy banking services and introduction of new technologies, products and services
  • partnership with government development programs and access to the financial and non-financial services
  • readiness to implement successful international microfinance practices and promotion of the NBFOs transparent operation.
  • legal risks associated with frequent changes in legislation
  • lack of information on the extent of shadow activities among the participants of the financial market and SMEs
  • active entry of the commercial banks into the microfinance sector
  • vulnerability to the impact of external economic and geopolitical shocks