Z.K. Esymkhanova,

Finance Department Head, Candidate of Economic Science, Assistant Professor

Kazakhstan, Kostanay State University in the name of A. Baitursynov

SOME MICROFINANCIAL ASPECTS IN THE REPUBLIC OF KAZAKHSTAN

In 2003 an issue of the Microcredit Institutes (MCI) Law and the Rural Credit Institutes (RCI) Law caused a collapse of the existing three level credit system: banks, credit societies, and microcredit institutes. As the result, non-bank financial institutes started services of crediting as well as the second level banks. Those legislative acts were of importance specifically to the small and medium business because of a shortage of cheap and available credits in that sector [1, 2].

Advantages of similar services at microfinancial institutes in comparison to the ones at the second level banks are: a possibility to establish non-bank financial institutes in any country region including the rural ones following the common requirements applicable for establishing a limited liability partnership; a simple procedure of applying for microcredits that expedites client services and decreases administrative expenses at such organizations etc.

As of today the small business misses an availability of non-bank financial institutes that appearance on the market gives a hope for an accessibility and cheapness of microcredits to the small business.

Implementing the Concept of Microcredit Institute Network Development for Crediting of RoK Agricultural Googs Producers in rural areas there are RCIs and MCIs established with share participation of state financial organizations such as “Small Business Development Fund” Stock Company and “Fund of Financial Development for Agricultural Economy” Stock Company [3].

Microfinancial Institutes shall set up a competition to major credit institutes in providing the business with micro loans.

Per expert opinions, in countries with the well-developed small and medium business an activity of non-banking microfinancial institutes grows up.

It is well-known that during the world crisis major banks, such as, City Bank, World Bank, European Bank of Reconstruction and Development and others actively offer microcredits in rural areas as well as in urban ones. And that is an important factor for our country because of the geographic location.

One of major aims for microfinancing is to stimulate the small business as well as to support its work openness. At the same time, a purpose for this legislation is to decrease a volume of “shadow” financial support represented in the republic and CIS countries.

As per the existing legislation all microcredit institutes those participate the microcrediting business have a right to participate additional activities, such as, getting loans (excluding getting loans from individuals as a part of the business) and grants from residents and non-residents of RoK; allocation of temporary available assets to government securities, corporate securities, second level bank deposits and other ways which do not go against the legislation of RoK; consulting services on issues related to allocation of microcredits; leasing issues and others. However this is not the full list of services that microcredit institutes could provide us with.

Microfinancing process involves a wide range of participants, from those who control it up to the consumers of financial resources.

So currently in Kazakhstan such institutes as Association of Microfinancial Institutes of Kazakhstan (AMFIK), “DAMU” Enterprise Fund, Central Asian Microfinancial Allians (CAMFA/USAID) and others are actively taking measures on issues and prospects for development of microfinancing in the Republic of Kazakhstan, and in Central Asia in general. [4]

In circumstances of world financial imbalance, where governments of many countries and Kazakhstan in particular offer financial support to major second level banks, it is necessary to keep nonbank financial institutes on the financial market of Kazakhstan since they provide microfinancing.

Therefore having surveyed the condition and peculiarities of microfinancing at the current stage in Kazakhstan the following recommendations can be pointed out to strengthen the process of microfinancing in Kazakhstan:

· Thorough study of foreign experience of microfinancing and use of most applicable advances in the area of microfinancing in our conditions;

· Extension of services of microfinancial institutes (microsaving, microinsurance, microfinancing transfers and etc.);

· Further wide interaction between the government agencies and business communities directed to implementation of partnership between state and private organizations;

· Introduction of alterations and amendments to the existing legislations in terms of strengthening the process of microfinancing which they control;

· Search of new types and forms of microfinancial resources;

· Use of innovation technology in the process of microfinancing (electronic means of payment and others);

· Availability of information and enquiry materials on the performance of nonbank financial institutes which provide microfinancing.

In this way operation of microfinancing institutes helps small and medium business grow dynamically in regions and helps to solve problems of access to the financial and credit resources which are so vital for extension of entrepreneurial business.

References

1. Microcredit Institutes (MCI) Law of the Republic of Kazakhstan as of 06.03.2003.

2. Rural Credit Institutes (RCI) Law of the Republic of Kazakhstan. Almaty, 2003. 3. Territorial development strategy of the Republic of Kazakhstan to 2015. Astana, 2006.

4. Orazymbetova G. Microfinancing in Central Asia//Money. Financial informational and analytical edition, September 2008, #19 (137), p 8.