"Lending does not confirm the real financial inclusion, this service is only part of it" - a consultant on the financial sector of ADB, Mr. David Lacock. 

The ADB expert announced his vision of access to financial services and signs of financial inclusion of population during the International conference "Microfinance - successes, problems and solutions" held in Bishkek on the initiative of the National Bank of the Kyrgyz Republic on June 25-26.  

"Deposits and insurance are also part of financial inclusion. We work not only with MFO, but also banks, financial, leasing companies, mobile networks operators, insurance companies and pawnshops. We have a large range of organizations, which are involved in expanding of access to financial services", - Mr. David Lacock said.  

The expert cited statistics of the World Bank, which say that Kyrgyzstan’s GDP per capita is 1060 USD, 4% - are adult citizens with official accounts; borrowings over the past 12 months are as follows: formal - 11%, informal -26%; and 2% of the population used mobile money in 2012.  

The ADB consultant noted the positive growth of lending and index of broad money - M2, as well as decrease in the percentage of money out of banks that, in his opinion, indicates an increase in confidence in the banks. Thus, loans to GDP in 2011 amounted to - 10.9% and in 2013 - 14.7%; M2 to GDP in 2011 amounted to - 29.1%, while in 2013 this figure reached - 37.4%. Money out of banks amounted in 2011 - 59.4%, in 2013 - 51.2%  

"When we look at these indicators, we see a market that is very suitable for increasing of financial inclusion and we must congratulate the National Bank of Kyrgyzstan for such work" - Mr. David Lacock said. 

Resuming his speech Mr. David Lacock stressed that financial inclusion depends on the legal framework, normative and regulatory environment, capital markets and institutional capacity. 

"The attempt to prohibit anything without giving alternatives, never and nowhere else did not succeed. Market can become quite black but it will not disappear", - Mr. Mikhail Mamuta, Head of the Main Department of microfinance market and financial inclusion methodology of the Central Bank of the Russian Federation. 

The representative of the Central Bank of Russia Mr. Mikhail Mamuta shared with Russian experience of development of the microfinance market and financial inclusion during the International conference "Microfinance - successes, problems and solutions" in Bishkek.  

"The topic of microfinance becomes one of cross-cutting, which binds together all states of our region and not only. Of course, it highlights and importance and significance of the issues discussed and their potential" - Mr. Mikhail Mamuta, Head of the Main Department of microfinance market and financial inclusion methodology of the Central Bank of the Russian Federation, started his speech.  

During the International conference "Microfinance - successes, problems and solutions" Mr. M. Mamuta made a presentation on the topic: "Development of microfinance market in the context of access to financial services: Roadmap 2013-2017". 

According to him, issues of financial inclusion are of great importance and interest for Russia, as well as in many states. 

"Despite the fact that the banking system in Russian Federation is well developed and non-banking financial intermediaries have less space than in Kyrgyzstan, however, this space remains. And the banks due to many constraints, both economic and structural cannot fully provide the population and business with the necessary financial services, so Russia is actively involved in the work on the development of microfinance and improvement of access to financial services in general". 

"The concept of microfinance of the Russian Federation is aimed to address one major problem - the fight against poverty through the provision of high quality financial services to the population", - Mr. Mikhail Mamuta stated. - But there is a flip side of the coin - this is a market of unregulated financial intermediation or what is called "Shadow banking system" (The shadow banking system), with which a legal microfinance is fighting.  

According to the expert, it is impossible to beat the market of unregulated financial intermediation simply banning it.  

"The attempt to prohibit anything without giving alternatives, never and nowhere else did not succeed. Market can become quite black but it will not disappear", - Mr. Mikhail Mamuta noted.  

"Financial inclusion" (Financial Accounting) - is a concept that holds the key to solving the problems on "Shadow banking". Basic meaning of this concept is very simple. We must and we are entitled to allow various financial intermediaries different levels, different sets of operations", - the representative of the Central Bank of the Russian Federation added.  

According to the World Bank’s data covering of potential audience with microfinance services is slightly less than 5% of the needs.  

In this regard, the specialist noted that the non-banking microfinance sector of Russia and throughout the region as a whole has nothing to boast. At the moment there is a big problem of the further development of this sector of economy.  

Along with this, Mr. Mikhail Mamuta attracted the conference participants’ attention for the importance of the issue to protect the rights of the borrower.  

"At some moment we can move from the development of qualitative financial inclusion to quantitative. Not every access to financial services is good. Because access can be carried out under such conditions, which will allow everybody to take the credit. At the same time the quality of the loan portfolio and the quality of the undertaken loans service will worsen. This will result in significant adverse social and economic consequences".  

At the end of his speech, Mr. Mikhail Mamuta expressed the hope that in 3 years it will be able to achieve a much higher level of transparency and the level of compliance with those requirements, which are now set by the controller from the microfinance market.  

"We believe that the official, legal microfinance market can defeat the gray market and will help us to deal effectively with Shadow Banking" - Mr. Mikhail Mamuta, Head of the Main Department of microfinance market and financial inclusion methodology of the Central Bank of the Russian Federation summed up in the conclusion.  

The microfinance sector of Kyrgyzstan took place in terms of the fulfillment of its functions - head of the National Bank T. Abdygulov 

"In Kyrgyzstan today we can say that the microfinance sector took place in terms of the fulfillment of its role in poverty reduction and coverage of providing of microfinance services", - the Governor of the National Bank of the Kyrgyz Republic Mr. Tolkunbek Abdygulov said at the International conference "Microfinance - successes, problems and solutions".  

In his speech on June 25 of this year the head of the National Bank focused on the history of microfinance, outlining the main stages in the development and the key indicators of the sector. "Microfinance system began to develop in our country since 1994. In the period of 2000-2005 the economic and legal environment for microfinance institutions were created, their resource base increased, branch network was expanded with penetration, mainly in the countryside. In 2005, a Mid-term strategy for the development of microfinance in the country for 2006-2010 was approved. The main purpose of this document was to reduce poverty by increasing access to microfinance services for poor people. As a result, people living in remote regions of Kyrgyzstan got access to microfinance services, indices of penetration of the financial services in the regions increased. Main directions of development of the sector, including the improvement of the regulatory framework, the establishment of financial apexes, development of financial banking, are imprinted in the Strategy of microfinance sector development for 2011-2015", - he informed.  

The Governor of the National Bank stressed that from 2005 to 2013 the microfinance sector has achieved good performance. In this period under microcredit coverage increased from 1.4% to 7.6%, and the number of borrowers increased in 12.5 times - from 35 thousand to 436 thousand persons. Loan portfolio of microfinance institutions increased more than in 26 times - from 722.9 million soms to 19.1 billion soms. During this time the financial penetration rate of microfinance institutions has increased from 3.9% to 5.4%, while the poverty rate declined from 43% to 38%.  

However, he noted that the established extensive network of MFO, especially in the regions, allowed providing with services more than 7% of the population. According to him, this figure is the highest in comparison with other Central Asian states, however, it is low compared with other countries with a long history of microfinance, that confirms the opportunities for further growth. "At the current stage of its development, microfinance organizations need to move to a new, more qualitative level of development and expand the types of services provided. It is provided by law. At the same time more attention should be paid to protecting the rights of consumers of microfinance services and improving of financial literacy of population" - Mr. T. Abdygulov summed up.  

In the end of his speech Mr. T. Abdygulov assured that in the future the National Bank intends to focus on the implementation of key reforms and the development of the microfinance sector strategic directions identified in the action plan of the National Strategy for Sustainable Development of Kyrgyzstan 2013-2017. 

In Bishkek the International conference "Microfinance - successes, problems and solutions" completed its work 

The International conference "Microfinance - successes, problems and solutions" was on June 25-26 in the State Residence "Ala-Archa", organized by the National Bank with the support of the World Bank, the German International Center for Cooperation and the Association of Microfinance Organizations. The conference was attended by the Prime Minister of the Kyrgyz Republic Mr. Djoomart Otorbaev, the Governor of the National Bank of the Kyrgyz Republic Mr. Tolkunbek Abdygulov, head of the department of financial and economic analysis and monitoring of the development of the President Office of the Kyrgyz Republic Ms. Nursulu Akhmetova, head of credit and financial policies department of the Government Office of the Kyrgyz Republic Mr. Shamshibek Moldokanov, head of the World Bank office in the Kyrgyz Republic Mr. Alex Kremer, Extraordinary and Plenipotentiary Ambassador of Switzerland in the Kyrgyz Republic Mr. Rene Holenstein, Ambassador of the Federal Republic of Germany in the Kyrgyz Republic Ms. Gudrun Srega, IMF Resident Representative in the Kyrgyz Republic Mr. Yuri Sobolev, management of the Microfinance Organizations Association, the Union of Banks of Kyrgyzstan, as well as representatives of UNDP, EBRD, ADB, KfW, IFC, ICCO, GIZ, IFC, Oikocredit, BlueOrchard and other domestic and foreign financial institutions.  

Opening the event, the Governor of the National Bank welcomed the participants of the International conference and thanked the partners for their assistance in organizing this event.  

In his speech Mr. T. Abdygulov cited the indicators of microfinance sector characterized a positive dynamics of its development. So, for 2005-2013 years microcredit coverage of population increased from 1.4% to 7.6%, and the number of borrowers increased in 12.5 times - from 35 thousand to 436 thousand persons. During this time, the loan portfolio of microfinance organizations has increased more than in 26 times - from 722.9 million soms to 19.1 billion soms. Indicator of the financial penetration of microfinance institutions has increased from 3.9% to 5.4%, while the poverty rate at the same time decreased from 43% to 38%.  

In turn, the Prime Minister Mr. D. Otorbaev stressed the unique of the history of development of the microfinance sector in Kyrgyzstan. "It is difficult to imagine the development of our country without the microfinance sector. This sector has a good development. Our foreign partners took an active part in its development, who quickly realized that expanding access to financial services is one of the most effective ways to fight poverty. Currently, the sector shows unprecedented growth. However, due to the transformation of one of the largest microfinance market participants - "Bai Tushum" into a commercial bank, the growth rate indices in the sector decreased. But actually microfinance indicators grow. I made my calculations based on "Bai Tushum". So, for the year capital growth in the microfinance sector was 17%, in the banking - 16%. Total assets increased by 34% and the loan portfolio - by 26%, reaching 24 billion soms. Thus, we have good results", - he concluded.  

Head of the Government added that under the National Strategy for Development there is a work on improving of financial literacy of population. 

Ms. N. Ahmetova in her speech noted that the microfinance sector plays an important role in providing with finance of population. "However, it is necessary to direct financial resources in the sector, not for consumption, but for economic development. Liberal legislation of the Kyrgyz Republic has allowed some progress in the development of sector, but weaknesses remain. It is possible to eliminate them only jointly: state agencies, MFO and the borrowers themselves", - she said.  

On the sessions of the two-day conference the following topics were discussed: the role of government and regulatory framework for the microfinance sector, access to finances - the main problems and key challenges, interest rate regulation - international experience, credit bureaus’ activities, responsible microfinance, as well as issues of financial literacy and protection of consumers rights, taking into account the practices of foreign countries.  

National Bank: exchange offices must work in the legal field. 

Inspectors of the National Bank of the Kyrgyz Republic together with representatives of the Mayor of Bishkek, of Bishkek Department of the State Agency of antimonopoly regulation under the Government of the Kyrgyz Republic, of the Main Department of Internal Affairs of Bishkek, Road Inspection Service of the Ministry of Internal Affairs of the Kyrgyz Republic and municipal enterprise "Tazalyk" organized a planned raid on the exchange bureaus working without permits in some areas of Bishkek. 22 of 34 scheduled inspections of exchange offices could be carried out. Only for the owners of two of them it was possible to issue administrative reports. Representatives of the municipal enterprise "Tazalyk" dismantled 35 advertising installations, arbitrarily placed by the owners of exchange offices and misleading people, including billboards with the names and charts with the currencies rates.  

As of June 1, 2014, 336 exchange bureaus are registered in the Kyrgyz Republic and deal with foreign exchange operations under the license of the National Bank.  

As of June 19, 2014 the National Bank conducted 704 inspections of exchange bureaus, including inspections carried out jointly with the State Revenue Service and the State Service for Combating Economic Crimes, the results of which are written in the relevant protocols.  

According to the results of inspections for violations of the law, particularly for violations of cash discipline, denial of foreign currency exchange, including currency of small denominations, improper accounting exchange transactions, including transactions that fall under the requirements of legislation for counter the financing of terrorism and money laundering from crime, there were aimed prescriptions to 110 exchange bureaus and suspended the licenses of 85 exchange bureaus (for 7 days, during which the exchange bureaus must take measures to prevent violations and to submit report to the National Bank).  

In addition, due to counteraction from the inspection, as well as the implementation of exchange operations in the period of suspension of the license by the National Bank, there were revoked the licenses of 10 exchange bureaus.  

It should be noted that individuals provide foreign exchange operations without a license of the National Bank that is a violation of the legislation of the Kyrgyz Republic.  

Since the beginning of this year, the National Bank jointly with the State Revenue Service, the State Service for Combating Economic Crimes, Ministry of Internal Affairs conducted a number of field inspections of exchange bureaus providing unlicensed activity. According to the results of inspections protocols of administrative offense were drawn up for 168 persons, it was possible to identify 108 persons of whom, 86 persons were fined in accordance with the Administrative Code in the total amount of 132 500 soms.  

The National Bank for several years attracts the attention of government agencies and the public to the problem of unlicensed activity of exchange bureaus and states for prevention of such practices of unfair business conducting. Thus, in 2012 the National Bank has launched the draft of the Law of the Kyrgyz Republic "On Amendments to the Code of Administrative Responsibility" for increasing fines for violations in the sphere of banking legislation. In particular, they talked about increasing administrative punishment for unlicensed activity of individuals to 20 000 soms (instead of 1500 soms) and legal entities (including individual entrepreneurs) - up to 100 000 soms. The draft law was approved by the Committee on Economic and Fiscal Policy of the Jogorku Kenesh of the Kyrgyz Republic on September 13, 2012 and submitted for the first reading of the Jogorku Kenesh of the Kyrgyz Republic. However, the draft law was rejected on October 11, 2012 after review by the Jogorku Kenesh of the Kyrgyz Republic.  

In 2014, the National Bank, within a set of measures taken to address illegal activities of exchange bureaus, resumed work on amendments and additions to the legislation of the Kyrgyz Republic in terms of increasing the size of administrative fines for unlicensed activity implementation. The relevant draft law is currently published on the official website of the National Bank for public discussion. 

Press-release of the National bank of the Kyrgyz Republic Board meeting on the discount rate 

Since the last Board meeting on discount rate there were no significant changes in the economy of Kyrgyzstan and countries - major trading partners. During the discussion of the current macroeconomic situation it was noted that the assumptions with multidirectional trends, made in the baseline scenario of inflation forecast before the end of 2016, remain. On the one hand, in the nearest future it is expected slowing of economic growth in the countries - major trading partners that will probably be reflected in the decline in external demand and remittances.  

On the other hand, high inflationary background, caused by more profound devaluation of som, may affect the acceleration of inflationary processes by the end of the year, however the average rate of inflation in the current year and the medium term due to the measures of the National Bank will be within the targets of monetary policy. Under the conditions of preservation of high import dependence of the economy, the National Bank will continue to monitor the state of prices on world food markets and to study their possible changes. In addition, the emerging trend in the increase of interest rates in emerging market countries, caused by the outflow of capital into the developed countries, also probably requires the strengthening of monetary terms in Kyrgyzstan in the near future that will create conditions for the stabilization of inflation in the medium term perspective.  

Thus, taking into account the ratio of inflation risks and risks of external demand reduction, both in time of occurrence and in amplitude, it was decided to retain the current direction of monetary policy and leave the NBKR discount rate unchanged at 6.0 percent. 

The National Bank of the Kyrgyz Republic held a workshop for regional journalists 

One-day training for the media of the southern region on the issues of coverage of the National Bank’s activities was organized in Osh on the initiative of the press service of National Bank jointly with the regional offices of the National Bank in Osh, Jalal-Abad and Batken regions. The event was attended by 25 media representatives from all over the southern region.  

During the training the heads of regional offices addressed to the journalists, told about the role and functions of the National Bank, and also shared with the latest trends in the field of micro crediting, market of payment systems, as well as monetary and cash circulation. Head of Osh office Mr. Jumash Sydykov told reporters in details about the activities of National Bank, focusing on the history of the formation of the main bank of the country. Lighting the issue of gold and currency reserves of Kyrgyzstan, head of Osh office of the National Bank noted: "During the years of independence gold and currency reserves in dollar terms exceeded two billion. For last 3 years, the National Bank resumed buying gold in the domestic market; it has led to an increase in the proportion of gold in international reserves to 8.6%. From 1997 to 2011 the amount of gold on the balance sheet of the National Bank amounted to 2.58 tons. Today this figure is 3.69 tons". 

During the training, there was told in details to the journalists about the payment system of the Kyrgyz Republic. Specialist of the Batken regional office of the National Bank Mr. Talantbek Imaraliev noted that this market is rapidly growing every year. Population use ATMs and terminals more often. The National Bank worked out the draft law on Payment System of the Kyrgyz Republic, which is currently under consideration of the conciliation commission. "In 2013, the payment system in the country was stable. Volume of interbank payments grew by 23% and amounted to 839.5 billion soms. Payment cards increased by 59.1% compared with last year that amounted to 650.5 thousand cards", - Mr. Talantbek Imaraliev noted. "For Kyrgyzstan, as a country with a traditional preference for cash, a ratio of 40% cash to 60% non-cash circulation is realistic. Within the framework of the State Program achievement of these indicators is planned until 2017. In the present time this issue is under active work", - the specialist added.  

Head of Jalalabad regional office of the National Bank Mr. Jeenbek Malikov told to the journalists about the specifics of regional offices of the National Bank, functions executed by them and tasks. Talking about the supervision of financial institutions of the republic, and in general about the state of the banking sector, Mr. J. Malikov stressed good rate of its recovery after the ordeal that has fallen during the tragic events in the south of the country in 2010. According to him, the population in the regions has become more responsible for the obligations on banking loans, as evidenced by the raised indicator of their recurrence.  

However, the head of the regional office of National Bank is sure that the issue of increasing the financial literacy of the Kyrgyz Republic population remains relevant. "Unfortunately, our country’s citizens do not apply to the National Bank for consultations before taking a credit. And come to us when there is a problem, when agreements were already drawn up and signed with financial institutions, where people agree to comply with its obligations. Often borrowers turn to the National Bank for help in solving problems, having the court decisions not in their favor. In such cases, we have already cannot help too", - Mr. J. Malikov said.  

Not only the employees of the National Bank, but also the journalists said on the training about the need to improve the knowledge on the topics of economics and finance, both of the society and the media representatives. From training participants there was received a proposal to the National Bank to continue holding of such educational projects, during which it is possible to get general information on the National Bank and its fields of activity, and ask questions on topics of interest within the competence of National Bank: from the exchange, banking, microfinance and payment markets to monetary policy. During the training the journalists were interested in answers to the questions about the principles of taking a credit, interest rates and their formation, reasons of unpredictable behavior of exchange rates, on public confidence in the banks and microfinance institutions, and more. Discussing the information policy of the National Bank, presented by the head of the press service of the National Bank Ms. Sofya Balakina, they noted the progress in cooperation with the National Bank with the media and in this connection increased level of transparency of the National Bank in the public eye. Also during the meeting with the journalists of the southern region it was expressed willingness for further cooperation with the National Bank with the overall objective of improving financial literacy of the population. 

Licenses/certificates have been issued to the following non-bank financial institutions and exchange offices: 

LLC MCA "Tri semerki" (license No. 5135of June 23, 2014 for exchange operations with cash foreign currency). Letter on registration No. 3126. Legal address: without number, Lenin Street, Kant city (in the entrance to the central market).  

Interbank payments