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Creation date: 2018-01-12

Approved by Resolution  

No. 2017-П-11/51-4-(НФКУ) 

of the National Bank of the 

Kyrgyz Republic Board  

as of december 13, 2017 

 

 

Main Directions for Development of the Microfinance Sector in the Kyrgyz Republic for 2018-2021  

 

Chapter 1. General Provisions 

 

The role of microfinance as an element of the financial system aimed at social mobilization of the population through increased access to quality financial services and provision of the financial and social intermediation for low-income clients was emphasized in the National Sustainable Development Strategy of the Kyrgyz Republic for 2013-2017 approved by the Decree of the President of the Kyrgyz Republic No. 11 as of January 21, 2013 noted.  

The program of the Government of the Kyrgyz Republic “Jany doorgo-kyrk kadam” (40 steps to a new era) approved by the Resolution of the Jogorku Kenesh of the Kyrgyz Republic No. 1836-VI as of August 25, 2017 provides for systematic work aimed at development of the credit market, the potential of the financial services consumers, raising financial literacy and responsible lending. This program stipulates further reduction in interest rates on the loans, introduction of the services based on information and digital technologies, increase of the population covered by the banking services, development of the cooperatives, and the principles of Islamic finance. Moreover, this program, being a key parameter for development of the small and medium-sized enterprises (SMEs), determines introduction of the self-sufficiency and self-regulation system.  

The main directions for development of the microfinance sector (MDDMS) for 2018-2021 contain assessment of the current state of the microfinance sector and implementation of the Microfinance Development Strategy for 2011-2015 approved by the Resolution of the Government of the Kyrgyz Republic and the National Bank of the Kyrgyz Republic No. 150/40/6 as of February 28, 2012 and also define the main directions for development of the microfinance sector for 2018- 2021. 

In this document, the microfinance sector is understood as nonbanking financial organizations in the form of the microfinance organizations, credit unions, and “Financial Company of Credit Unions” OJSC, which is engaged in lending to the credit unions. 

The objective of the MDDMS for 2018-2021 is to ensure a favorable economic, legislative and regulatory environment for the institutional development of a healthy, sustainable and socially responsible microfinance sector as an important tool for financing the development of small business and private entrepreneurship, increasing the employment and welfare of the population.  

To achieve this objective, the following tasks shall be resolved: 

1) improvement of the legislative and regulatory framework that facilitates introduction of the new financial products and services, as well as expanding the sources of financing for the NBFOs; 

2) strengthening the system of regulation and supervision in the field of microfinance; 

3) institutional development of the microfinance sector to ensure its sustainability and efficiency, expanding the range of services provided by them, and improvement of their price affordability and geographic availability; 

4) development of the institutions of the microfinance market infrastructure; 

5) ensuring the transparency of the microfinance market and protecting the rights of the microfinance services consumers. 

The successful implementation of the MDDMS for 2018-2021 depends on the effective, consistent and coordinated work of all market participants, including the National Bank of the Kyrgyz Republic, business associations and the NBFOs.  

Implementation of the MDDMS for 2018-2021 will be carried out by the National Bank of the Kyrgyz Republic in cooperation with stakeholders in accordance with the Action plan for implementation thereof, indicating specific measures and deadlines for implementation in accordance with Appendix 1 to the MDDMS for 2018-2021.  

 

Chapter 2. Current State of the Nonbanking Financial Institutions Sector in the Kyrgyz Republic  

§ 2.1. General Macroeconomic and Socio-economic Environment  

The National Sustainable Development Strategy of the Kyrgyz Republic for 2013-2017 determines macroeconomic stability as the key target point. Meanwhile, macroeconomic stability can be achieved by maintaining the following key quantitative parameters: average annual growth in real GDP of at least 7%, inflation rate within the range of 5-7%, budget deficit - no more than 5% of GDP and public external debt to 60% of GDP. In the course of approaching the end of the period covered by the NSDS 2013-2017, one can confirm that achievement of the target parameters is more than possible. 

Under the conditions of deteriorating economic situation due to unfavorable external economic conditions, world economic tensions in the financial markets, Kyrgyzstan managed to improve the macroeconomic situation, to reduce volatility of the national currency and increase of the inflation rate. 

The current monetary policy was aimed at maintaining the positive economic growth rates. In order to reduce the interest rates on the loans for the end borrowers and expand lending to the economy, the National Bank of the Kyrgyz Republic continues to provide credit resources within the framework of refinancing facilities. 

Some socio-economic indicators are also improving: in 2016, the overall poverty level calculated by the National Statistics Committee of the Kyrgyz Republic was 25.4%, having decreased by 6.7% compared to 2015. It should be noted, that the absolute majority of the poor lived in rural areas (74%). 

Starting from 2012, the National Bank of the Kyrgyz Republic started implementing large-scale reforms to expand financial access and to support development of the financial sector aimed at strengthening competition among the banks, strengthening financial infrastructure, expanding financial instruments, introducing the system for protecting the rights of the financial services consumers and promoting the financial literacy programs. In 2015-2016, a consumers’ rights protection division and a financial literacy sector were established in the National Bank of the Kyrgyz Republic. 

Work is implemented to increase access to the financial services through electronic and payment terminals, through development of the remote banking. Every year, progress is observed in improving the indicators on development of the infrastructure for provision of the financial services (Table 1). 

 

Table 1. Indicators of Financial Affordability  

 

 Indicators 

2012 

2013 

2014 

2015 

2016 

Number of the bank branch offices per 1,000 km2 

4.8 

5.2 

5.6 

6.0 

6.6 

Number of the bank branch offices per 100 thousand people 

17.1 

18.2 

19.2 

20.4 

21.9 

Number of ATMs per 1,000 km2 

3.1 

4.1 

5.0 

6.2 

6.5 

Number of ATMs per 100 thousand people 

11.0 

14.4 

17.3 

21.0 

21.6 

Number of terminals per 1,000 km2 

12.4 

17.4 

23.4 

30.3 

35.5 

Number of terminals per 100 thousand people 

44.8 

61.5 

80.9 

102.7 

118.0 

Deposits in the commercial banks (% of GDP) 

16.33 

18.94 

20.59 

23.9 

23.38 

Loans of the commercial banks (% of GDP) 

12.92 

15.19 

19.67 

21.84 

20.41 

NBFO’s Loans  

15.41 

19.11 

22.95 

14.97 

10.92 

NBFO’s Loans (% of GDP) 

4.96 

5.38 

5.73 

3.48 

2.38 

However, generally, there are factors, which restrain economic growth - high level of inequality between the regions, insufficient development of infrastructure and institutional system, dependence on remittances and geo-economic factors. Despite slight decline, the overall poverty level remains relatively high as opposed to the comparable countries in the region.  

In the medium term, retaining the inflation rate within the range of 5-7 percent will be the benchmark of the monetary policy. Maintaining macroeconomic stability and accelerating economic growth in the medium term requires economic diversification, suspension of further growth in the external debt and improvement of the business environment for development of the entrepreneurship, including use of the modern technologies. Accelerating economic growth up to 6-7% is an essential condition for development of the country as a whole and poverty reduction.  

 

§2.2 Current State of the Microfinance Sector and Impact thereof on the Economy of the Country  

 

The microfinance sector of the Kyrgyz Republic is represented by the microfinance organizations, in the form of the microfinance companies, microcredit companies, microcredit agencies and credit unions. 

The share of assets and loans of the microfinance sector in the total amount of the assets and loans of the banking system and the system of nonbanking financial institutions is 7.3% and 10.2%, respectively. 

The microfinance organizations have made a significant contribution to development of the SMEs and to stimulation of the business initiative among the low-income population. Women are the main clients of the microfinance organizations (about 56.2%). The loan portfolio of the MFOs comprise 60% of loans without collateral, 34% thereof are issued under a group guarantee. Meanwhile, the level of repayment of these loans remains at the level of not less than 95%. 

If during 2007-2011 the microfinance sector was characterized by high dynamics of growth and the entry of new participants into it, however, for the last four years slowdown was observed in the market, meanwhile there is a stable preservation of the main quality performance indicators. Thus, over the last ten years (from 2007 till 2016), the number of active borrowers increased from 163.2 thousand to 228.5 thousand people, and the volume of the total loan portfolio increased from 4.8 billion to 10.9 billion. The average loan size for one borrower was practically unchanged: KGS 45.6 thousand and KGS 50 thousand in 2007 and 2016, respectively, while the portfolio indicator at risk in excess of 30 days did not exceed 7.7%. 

It should be noted that in 2010, the number of participants in the sector (454 MFOs) stopped growing, and since 2011 there has been a significant reduction in the number of MFOs: at the end of 2016, the number of MFOs was 162 units. The reduction in the number of MFOs was due to the lack of sufficient capital to conduct profitable activities, increased regulatory requirements for the MFOs and other reasons.  

Table 2. Main Indicators of NBFOs Development  

  

2005 

2010 

2016 

MFO 

CU 

MFO 

CU 

MFO 

CU 

Quantity 

134 

320 

396 

217 

162 

116 

Borrowers, thousands of people  

52.1 

22.4 

371.9 

19.6 

218.6 

9.4 

Loan portfolio, billions of KGS  

1.49 

0.58 

9.9 

1.14 

19.5 

0.94 

Average amount of loan, thousands of KGS  

28.5 

25.9 

26.7 

58.2 

89.2 

100.1 

 

Despite the reduction in the number of MFOs, the population covered by microlending increased from 1.4% to 3.8% (Table 3). However, the financial inclusion indicator decreased from 3.9% in 2005 to 2.5%.  

Table 3. Main Indicators of MFOs Development  

Main indicators 

2005 

2010 

2015 

2016 

Quantity of MFOs  

134 

396 

172 

162 

Population covered by microlending  

1.4% 

7.1% 

9.1% 

3.8% 

Financial inclusion indicator  

3.9% 

5.2% 

3% 

2.5% 

Poverty level  

43.1% 

33.7% 

32.1% 

25.4% 

GDP per capita (in USD) 

478 

888 

1,163,3 

1,133.6 

Inflation rate (average annual) 

4.9% 

19.2% 

13.6% 

0.4% 

 

The reduction in the loan portfolio of MFOs, assets, the resource base, the financial inclusion indicator since 2010 is explained, among other things, by the transformation of three large MFOs into the commercial banks: “Bai Tushum and Partners”, “FG Companion” microfinance companies were reorganized into Bank “Bai Tushum” CJSC, “Bank Companion” CJSC, Finca microcredit company – into “Finka Bank” CJSC.  

Chart 2. Dynamics of the NBFO’s loan portfolio  

 

Due to transition of “MFC Financial Group Companion” CJSC to the commercial banks sector, in 2016, a decline was observed in the key indicators of the NBFOs sector, in particular in the assets and the resource base, moreover, the loan portfolio decreased by 27.1 percent compared to the same indicator in 2015 year and amounted to KGS 10.9 billion. Without taking into account “MFC Financial Group Companion” CJSC, the NBFO loan portfolio increased by 3.3 percentage points compared to 2015.  

 

Chart 3. Distribution of the NBFOs Loan Portfolio by Sectors

The aggregate loan portfolio of the MFOs decreased by 29.0 percent and at the end of 2016 amounted to KGS 10.0 billion s. In general, the MFOs loan portfolio consists of short- and medium-term loans. Chart 3 shows that agriculture still remains a priority area for MFOs lending, the share of agriculture in total microlending fell from 44.2% in 2012 to 27.7% in 2016. In 2009-2015, the share of agriculture varied from 36 to 45%. The share of commerce and trade fell steadily from 20.61% in 2012 to 16.1% in 2016. However, the share of consumer loans increased from 9.5% to 23.5%, having becoming the second sector in use of microcredits. 

Equity capital (slightly more than 50%) is the main source of the MFOs activities. The share of liabilities to the foreign organizations was 26.8 percent in the structure of MFI liabilities. At the same time, liabilities in foreign currency amounted to 33.1 percent of the total liabilities, despite the fact that the volume of MFOs liabilities decreased by 55.6 percent to KGS 4.4 billion from 2015 till the end of 2016 (due to transformation of “FG Companion” MFC into a commercial bank). 

At the end of 2016, the total amount of paid-up authorized capital of the nonbanking financial institutions decreased by 17% from 2015 and amounted to KGS 3.9 billion. Meanwhile, NBFOs equity capital amounted to KGS 6.9 billion, having decreased by 8.0 percent or by KGS 0.6 billion. 

The share of MFOs (MFCs, MCCs, MCAs) in the total volume of the NBFOs loan portfolio is 91.4%. The remaining part of the loan portfolio is issued by the credit unions.  

As of the end of 2016, 116 credit unions operated in the territory of the Kyrgyz Republic. Credit unions numbered about 16.4 thousand of participants, of which 9.4 thousand of people are the borrowers. Approximately 140 participants accounted for each CU, which is rather low indicator for the credit union system, taking into account the potential and 20-year existence of this system. 

Starting from 2013, the loan portfolio of the CUs system stopped growing and by the end of 2016 it amounted to KGS 940 million. The share of loans in the assets is equal to the share of loans in the assets within the MFOs system: 79.5% and 80.4%, respectively. The average loan size of the credit union is about KGS 100 thousand (Table 4).  

Table 4. Performance Indicators of Credit Unions for 2013-2016  

Indicators  

2013 

2014 

2015 

2016 

Number of organizations  

153 

135 

125 

116 

Number of borrowers (persons)  

15,176 

11,613 

9,924 

9,396 

Assets (millions of KGS)  

1,747.2 

1,330.4 

1,136.5 

1,183.9 

Loan portfolio (millions of KGS)  

1,456.5 

1,152.6 

933.5 

940.6 

Average amount of loan (thousands of KGS)  

96 

99.3 

94.1 

100,1 

Total volume of deposits (millions of KGS)  

80.8 

14.2 

8.5 

8,6 

Number of members (persons)  

24,541 

20,047 

17,488 

16,353 

Interest rate of loan (%) 

27.31 

25.63 

27.88 

27.77 

 

Equity capital and financing from “Financial Company of Credit Unions” OJSC are the main sources of financing for the credit unions. Individual credit unions attract funds from other financial institutions of the country, and other sources. At the end of 2016, only 8 credit unions with a small deposit base had a license to attract deposits. 42% of the credit unions are located in rural areas, 15% are located in the cities of Osh and Bishkek, and other credit unions operate in small towns, covering the territories adjacent to them. During the period of the CUs activity, the branch offices network and the points of service have not been developed, and lending is mainly focused on agriculture and trade.  

 

 

 

 

 

 

 

 

 

SWОT Analysis of the Microfinance Sector of the Kyrgyz Republic:  

WEAKNESSES: 

- 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. 

- inadequate provision of resources due to limited access to sources of financing, apex institutions and high cost of external financing; 

- availability of reputational risk of the NBFOs system, insufficient level of credit culture and trust in the NBFOs system; 

- insufficient level of the clients’ financial literacy; 

- lack of an integrated system of training and personnel development for the microfinance sector, lack of highly qualified specialists in the regions; 

- high dependence on migrants’ incomes, remittances, volatility of the dollar exchange rate; 

- weak institutional capacity of the professional associations and second level organizations; 

- low level of NBFOs participation in the system of credit information exchange. 

STRENGTH: 

- availability of products and services, which meet the needs of low-income population (short application processing time, unsecured lending, convenient repayment schedule, high level of client orientation, etc.); 

  - knowledge and experience in servicing the rural population, in particular women;  

- loans are offered mainly in the national currency, which reduces the currency risks for the clients. 

THREATS:  

- legal risks associated with frequent changes in legislation; 

- lack of information on the extent of shadow activities among the participants of the financial market (licensing activity) and SMEs; 

- active entry of the commercial banks into the microfinance sector; 

- vulnerability to the impact of external economic and geopolitical shocks; 

- uncertainty associated with entering into the EAEU and consequences thereof on the level of migration, remittances; 

- unfavorable business climate (growth of unemployment, low growth rate of the private business and SMEs); 

- volatility of economic recovery and the concomitant adverse effects on vulnerable sectors - poor and rural households. 

OPPORTUNITIES: 

- availability of demand for microfinance services from various segments of the population; 

- high need for various services from microfinance target groups; 

- use of appropriate information and communication technologies to expand healthy banking services and introduction of new technologies, products and services; 

- integration of joint projects on digitalization of financial services with multi-profile partners; partnership with government development programs and access to the financial and non-financial services. 

- wide provision of the non-financial services - rendering assistance to the clients (consultation of single-subject specialists, free training of the clients, organization of the exhibitions and fairs for promotion of the products and services, etc.); 

- readiness to implement successful international microfinance practices and promotion of the NBFOs transparent operation.  

§2.3. Assessment of Implementing the Microfinance Development Strategy 

for 2011-2015.  

 

The Microfinance Development Strategy for 2011-2015 was approved on February 28, 2012 by a joint resolution of the Government and the National Bank of the Kyrgyz Republic No. 150/40/6. 

The main direction of the MDS 2011-2015 is further development of the NBFOs sector, improvement of the regulatory framework, development of the concept of the MFOs deposit protection system, implementation of the consumer protection principles, creation of the financial apexes and development of the agent banking and remittance operations.  

Within the framework of implementing of the MDS 2011-2015, measures were taken to improve the regulatory framework. In particular, amendments and additions were introduced into the laws of the Kyrgyz Republic “On Microfinance Organizations in the Kyrgyz Republic” and “On Credit Unions”, the regulatory legal acts of the National Bank of the Kyrgyz Republic within the framework of the Strategy implementation. The most significant amendments introduced into the legislative and regulatory environment that influenced the development of the sector are as follows: 

- expansion of the list of operations for the MFOs, improvement of the legislative and regulatory framework for establishment and operation of the MFOs under the principles of Islamic finance;  

- strengthening of licensing requirements for the new market participants (increase in the requirements for the minimum size of the MFOs authorized capital, establishment of the qualification requirements and reputation of the MFOs officials, establishment of the requirements to the sources of funds transferred to the authorized capital of the MFCs and MCCs, procedure for confirming the legality of their origin and others instruments for ensuring institutional stability of the MFOs); 

- implementation of the standards regulating the procedure for the NBFOs transformation, implementation of measures to reduce the high debt ratio of the population by establishing additional requirements for LLP formation in respect of the parallel loans, establishing the requirements for credit risk management; 

- establishment of the consumer protection system, which includes the following regulatory requirements for legal implementation of the relationships with the clients, restriction on the maximum size of microloan, restriction of the amount of forfeits (fines, penalties), the requirement to information disclosure on the effective interest rate and the full cost of loan in absolute terms, etc. 

In 2016, the Government Resolution No. 319 as of June 15, 2016 approved the Program for Improving the Financial Literacy of the Population of the Kyrgyz Republic for 2016-2020 and the Law of the Kyrgyz Republic “On the Exchange of Credit Information” came into force. 

Main achievements of the NBFOs sector: 

- reduction in interest rates on the NBFOs loans from 38.8% in 2010 to 31.4% in 2016; 

- attraction of investments from the foreign donors and investors to the sector to the amount of more than KGS 1.5 billion; 

- increase in capitalization of the NBFOs by 62% as compared to 2010; 

- covering the population with credit services, increasing the availability of loans. The number of borrowers in the NBFOs sector amounted to 222 thousand people with a total loan amount of KGS 10 billion; repayment of the NBFOs loan portfolio is 95%; 

- development of the microfinance sector: an increase in the minimum amount of the authorized capital for the MCCs up to KGS 5 million, transformation of the small NBFOs into larger ones. Transformation of three MFOs into the commercial banks, the upward trend observed in the number of microfinance companies through transformation from the microcredit companies and credit unions. 

The MDDMS for 2018-2021 also include the activities stipulated by the Microfinance Development Strategy for 2011-2015, approved by the Government of the Kyrgyz Republic Resolution No. 150/40/6 as of February 28, 2012, requiring permanent implementation: improvement of the regulatory environment, which along with ensuring financial stability will create opportunities for providing financial accessibility and formation of a strong and sustainable microfinance sector.  

Chapter 3. Main Directions for Development of the Microfinance Sector in the Kyrgyz Republic  

§ 3.1. Role of the Microfinance Sector in the Social and Economic Development of the Country  

The demand for microfinance services is formed as a result of a number of factors that determine its growing importance in resolving the most important problems of social and economic development: 

1. Microfinance is one of the most effective tools for combating poverty. The poverty level remains high - 25.4%, over 1.5 million people are below the poverty line, the bulk of which (74%) live in rural areas. Increasing the access of the vulnerable social groups to the services provided by the MFOs, in order to encourage self-employment and improve material position, can replace subsidies, provision of the benefits to the unemployed people, whose number was 2.2% of the economically active population (totally, there are 2,544.3 thousand people). 

2. Microfinance is considered to be an effective mechanism for development of small and medium-sized businesses, which is one of the main factors for economic growth. Small business entities dominate in the economy of the Kyrgyz Republic, most of these business entities are the farmers, individual entrepreneurs and small businesses that are potential clients of the NBFOs. 

At the end of 2016, the share of small business in GDP constituted 40.8%, the number of entrepreneurs doing business totaled 463.6 thousand people. Of the total number of new jobs created in 2016, about 65% thereof accounted for the small business. Microfinance plays a special role in agriculture, occupying a significant place in the NBFO’s portfolio (30%), thereby contributing to rural employment. 

3. Microfinance contributes to addressing youth employment issues. According to UNICEF, the Kyrgyz Republic is among 20 largest countries with the most significant share of youth in their respective population groups. In the age structure of the population, the share of the population aged under 19 is 38.5% and high population growth rates. In the total number of unemployed people, the majority are the people aged from 18 to 30. This category of population needs small loans for business start-up: work at home, rendering services under a civil law agreement, etc., it will finally result in a decrease of the youth unemployment level.  

4. Microfinance can meet the demand for loans that has grown in the cities due to beginning of the urbanization process. In recent years, the following processes are observed around the cities of Bishkek and Osh: intensification of urbanization processes, as a consequence of the simultaneous impact of two factors, increase in the rates of economic growth and internal migration. Rapid growth in consumer lending, which will increase demand for microfinance services can be considered as reflection of the formation of the middle class and the young urban population. 

5. Microfinance has proved itself as an effective mechanism for promoting gender equality and creating economic opportunities for the women. In Kyrgyzstan, the number of women entrepreneurs has increased and the economic activity of women is growing, for example, the number of women entrepreneurs in 2015 reached 87,125 people compared to 30,254 people in 2002.  

6. Microfinance promotes the development of cooperative lending in rural areas through credit unions. Only 15% of the credit unions are located in the cities of Osh and Bishkek, the funds, most of which is used for agricultural development, are directed through other credit unions located in villages, small towns and adjacent territories.  

Briefly summarizing the role of microfinance in the social and economic development and the results of the sector’s development to date, we can draw the following conclusions: 

1. The most important target groups in the social and economic context, which receive the maximum benefit from increasing the availability of microfinance services, are low-income families, women, rural residents, young entrepreneurs and young people. 

2. The microfinance sector has a relatively small share in the structure of financial intermediation, however, there is a steady increase in its role, which indicates a significant potential for further development. 

 3. A number of external and internal factors of the country’s social and economic development will form a high demand for microfinance services in the long term. 

4. One of the key parameters of the “Jany doorgo-kyrk kadam” (40 steps to a new era) program in development of the agricultural sector and SMEs in remote regions is aimed at development of cooperative lending, the CU are engaged in this lending in the microfinance sector. 

§3.2. The main directions for development of the microfinance sector 

Increasing the availability of financial services regardless of the type of financial institutions is the main objective of the financial sector development in Kyrgyzstan in the long term. This involves creating a diversified model of the microfinance market, reflecting the diversity of financial services institutions and technologies. In the medium term, this requires strengthening the integration of microfinance institutions, which conditions the necessity of: a) a significant increase in the scale of microfinance activities; b) a significant increase in access of the population to microfinance services. 

Under the current conditions, it is necessary to apply a new strategic approach based on development of the microfinance sector driven by market-oriented growth of the socially responsible institutions, and also on the basis of improved access of the population, including its socially vulnerable groups, to a variety of quality microfinance services. 

The package of activities specified in the Action Plan provides for further stimulation of the microfinance sector development as an important tool for poverty reduction and financing of small business, employment promotion and welfare improvement. Particular emphasis is placed on expanding the geographic scope of the NBFOs, ensuring their sustainability and effectiveness, expanding the range of services and strengthening the infrastructure. 

 

1. Improvement of the legislative and regulatory framework that facilitates development and implementation of the new financial products and services, and expansion of the financing sources for the NBFOs  

In order to strengthen the role of NBFOs in the national economy, to promote affordable microfinance services in the hard-to-reach regions of the country and to encourage the sustainable development of the NBFOs, taking into account the specific nature of the microfinance activities, it is necessary to identify a number of conceptual regulations for further improving the legislative, regulatory and methodological base of the NBFOs. 

In the medium term, attention shall be focused on the qualitative development of the microfinance sector. 

In this direction, the following measures shall be taken: analysis and adjustment of the legislative framework affecting the increase in the level of financial intermediation of the NBFOs and the degree of penetration of microfinance services, both in terms of geographic coverage of the country, and introduction of new products and services, expansion of the NBFOs resource base and development of access provision to the alternative sources of financing. 

In order to provide impulse for development of the credit unions, it is necessary to further improve the legislative regulations for cooperative management, which requires studying and implementing the best international practice for operation of the credit unions. The direction, first of all, shall be aimed at stimulating the use of the full mechanism of co-operative lending, in particular, accumulation of the CU participants’ savings for further consumer and business lending, development of a cooperative community, and effectiveness of credit union management arrangements. At the same time, special attention shall be paid to development of the auxiliary and apex institutions within the system of credit unions, the possibility of introducing of the system self-regulation.  

To further develop the principles of Islamic banking and finance in the Kyrgyz Republic, work on studying the best international practices, adjusting the existing and developing the new regulations of the banking legislation in terms of expanding the spectrum and introducing operations in accordance with the principles of Islamic finance will be continued in the NBFOs system.  

 

2. Strengthening the system of regulation and supervision in the field of microfinance  

Optimizing the regulatory impact and development of the microfinance market, through introduction of the regulatory standards for various types of the NBFOs, introduction of the new products and alternative technologies, as well as active promotion of the digital technologies and introduction of the ICT, will assist in creating more favorable conditions and will allow involving the potential of the microfinance sector.  

Further development of the sector involves creation and implementation of a self-regulatory institution, which will also improve the efficiency of regulation and supervision, and reduce regulatory costs. Until 2021, a set of measures is planned to be developed in order to introduce the institution of self-regulation, which will require study of the international practice, preparation of a concept for self-regulation of the system to create a legislative and regulatory framework. 

In order to reduce the costs for regulation and ensure its effectiveness, measures are envisaged to introduce risk-based supervision, to strengthen the mechanism for protecting consumers’ rights, and strengthen the capacity of the regulator through participation of the staff involved in professional exchange programs, continuous training in new approaches to regulating the microfinance sector. 

To monitor provision of increased women’s access to financing in accordance with the international practice, as well as further development of the women’s entrepreneurship, activities will be carried out to develop gender statistics in the National Bank, which includes collection, analysis and application of the gender-disaggregated data in development of the financial accessibility policy.  

It is necessary to improve the regulatory framework for combating anti-money laundering and counter-terrorism or extremism financing, implementing measures to introduce proportional and risk-based regulation and supervision of new technologies in accordance with the recommendations of the Basel Committee on Banking Supervision and the FATF.  

 

3. Institutional development of the microfinance sector to ensure its sustainability and efficiency, expand the range of services provided by them, and improve their price and geographic availability  

Full institutional development of microfinance organizations is impossible without introduction of the professional standards of activities, such as introduction of the principles of responsible financing and also introduction of the corporate governance standards. Unfortunately, lack of the performance standards and the low level of professionalism in the majority of NBFIs is a restraining factor for attracting domestic and foreign investment in the microfinance sector, increasing the NBFIs capitalization. In this regard, development of the capacity of the NBFOs in terms of improving the skills of the sector’s staff is of paramount importance. In order to ensure the quality management and the NBFOs management based on the best international experience, it is proposed to introduce a requirement for mandatory annual training of the NBFOs staff, raising the level of senior management skills, and introducing corporate governance principles. 

The price accessibility of the financial services is directly dependent on the cost of microfinance services, as determined by the NBFOs price policy. The Action Plan foresees the development of a set of measures to improve the NBFOs price policy aimed at increasing the availability of the services, including in accordance with the principles of Islamic finance. 

 Affordability of microfinance for the population will be increased by expanding the access of MFOs to long-term and cheap sources of resources. In this context, attraction of the population savings through stimulation of further development of the credit unions system, use of the right to attract deposits, attraction of investments by financially stable and socially responsible MFOs, etc., shall become a benchmark. In order to increase physical accessibility, as well as to reduce the costs of creating and maintaining a branch network, it is necessary to create conditions for development of the remote banking, including development of the standards for operations and interaction of MFOs with operators of digital financial services. 

Within the framework of implementing the Program for Improving the Financial Literacy of the Population of the Kyrgyz Republic for 2016-2020, it is necessary to provide educational programs for the general public on the remote use of microfinance services by the MFOs. 

A survey of the mediators of microfinance investments (MIV), Symbiotics conducted in 2016 shows that growing number of the investors in microfinance sector are paying more attention to the environmental, social and managerial priorities (the so-called ESGs) in making investment decisions. The results of the 95 MIV survey show that in the process of considering loan applications, they use a number of environmental indicators and 98% of MIVs support implementation of the system for customer protection principles and social impact assessment. At the same time, 80% of MIVs reports on environmental, social and management factors (ESG) to their investors. 

Thus, in order to attract funds from the international investors and creditors, the microfinance sector shall demonstrate its commitment to adhere to the above standards, including creation of an integrated system for protecting clients in accordance with the requirements of responsible financing.  

 

4. Strengthening and building the institutions for microfinance market infrastructure 

Professionally operating structures for supporting microfinance are an important component of a thriving microfinance industry. Operation of a meso-level adequate and efficient infrastructure is necessary to reduce transaction costs, expand outreach, build capacity and ensure sector transparency. 

Currently, the list of the sources for formation of the NBFOs resource base is limited. Despite the importance of attracting savings and directing them to the investment channel in a macroeconomic context, it is necessary to keep in mind that, firstly, the institutions shall have the appropriate risk management capacity associated with provision of the deposit services. Secondly, an appropriate infrastructure shall be available to ensure their protection. In this regard, as well as in order to increase the credibility of the NBFO sector that accepts deposits, it is proposed to consider the possibility of establishing a deposit protection institution, or to include it in the existing deposit protection system by creating a separate mechanism.  

Despite the considerable interest of international private investors and donors in providing credits and loans to the MFOs, one shall keep in mind that they are primarily interested in partnership with the financially sustainable organizations. In order to solve the problems with providing the resource base of the NBFOs with small capital, it is proposed to organize the activities of the apex organizations. In the international practice, apex institutes, in addition to carrying out basic functions in the form of raising funds from organizations and issuing wholesale loans to the FIs, carry out hedging of currency risks, provide advisory, technical assistance. Programs are being implemented through apex institutes to stimulate certain sectors of the economy, introduce new methods, etc. 

In addition to creating new support institutions for the microfinance sector, special attention shall be paid to strengthening the capacity of professional associations. Currently, business associations cannot provide a clear picture for development of the sector due to the fact that only 20% of the participants in the sector are the members. Business associations are expected to have a key role in development of the sector, including increasing the capacity of the NBFOs, conducting educational programs and consultations on all aspects of the NBFOs activities: taxation issues, legal advice and support, personnel training and certification, etc. 

Along with the development of the accompanying microfinance infrastructure, these measures will provide additional financial stability and transparency of the activities of microfinance organizations, will contribute to substantial growth, consolidation and harmonization of the sector. 

 

5. Ensuring transparency of the microfinance market and protecting the rights of microfinance services consumers  

The transparency of the microfinance sector will facilitate the systematic collection and publication of information on the loan portfolio, financial indicators, coverage and social impact for the general public at the national level. 

Professional associations can promote transparency in the sector by disseminating information about their members on specialized international information sites. 

Expansion of financial coverage and increase of transparency cannot occur only through access to traditional credit services; however it involves broad involvement of the population in use of the microfinance services. In order to attract the public to microfinance services, it is necessary to carry out a set of measures aimed at increasing public confidence in the NBFOs, changing the consciousness/views of the population about personal long-term financial prospects, which shall be formed through special programs under the conditions of low financial literacy. 

Development of the financial system conditions an increase in the number of financial disputes. In order to ensure stability and further development of the financial sector of the republic, establishment of the institution of a financial reconciler/ombudsman is becoming increasingly important objective. 

In this regard, a key role will be assigned to the full-scale implementation of the Program for Improving the Financial Literacy of the Population of the Kyrgyz Republic for 2016-2020, approved by the Resolution of the Government of the Kyrgyz Republic No. 319 as of June 19, 2016, carrying out systemic actions to implement the financial ombudsman scheme. 

Summarizing, we note that microfinance in Kyrgyzstan has a great development potential. There is a significant unmet demand for microfinance of small business and income-generating activities in the republic. However, for successful development of microfinance, it is necessary to intensify the work on informing and popularizing its goals and social significance for the population in the country at all levels and using various information tools. 

To achieve effective results, the main directions of the microfinance sector development will affect three levels. This is, first of all, a macro level, which involves further measures to create an enabling legislative and regulatory environment to ensure the effective operation of the NBFOs, introduction of the new products and services and their accessibility. The second level - the meso-level involves further development of the infrastructure supporting the NBFO sector, including training and counseling. The third level - the micro-level is aimed at creation and sustainable functioning of the NBFOs. It shall be acknowledged that, despite existing problems, the microfinance market in Kyrgyzstan is developing, business microfinance processes are being improved, facilitating access to borrowed funds for broad segments of the population, small businesses and individual entrepreneurs. 

§3.3. Implementation and Monitoring of the MDDMS for 2018-2021  

Implementation of the MDDMS for 2018-2021 will be carried out by the National Bank of the Kyrgyz Republic, the Associations of Microfinance Organizations (AMFO), “FCCU” OJSC, Associations of CUs and NBFOs on the basis of the Action Plan for the implementation of the MDDMS for 2018-2021. The monitoring system for implementation of the MDDMS for 2018-2021 will be ensured through establishment of a regular reporting and evaluation process. In order to conduct an adequate assessment of fulfilling the objectives of the MDDMS for 2018-2021, the annual meetings are proposed to be held with participation of the National Bank of the Kyrgyz Republic, professional associations, participants in the microfinance sector and the expert community to assess the effectiveness of measures implemented within the framework of the MDDMS. Within the framework of these meetings, a study of the views of all stakeholders on development of the microfinance market will be organized in order to implement corrective actions and to introduce additions/amendments to the Action Plan for implementation of the MDDMS for 2018-2021.  

Chapter 4. Expected Results 

As a result of implementation of the envisaged measures, expansion of the microfinance sector will result in the economic and social results: financial support for the small and medium-sized businesses, in particular entrepreneurial activity in the production, trade and services sector, will be one of the ways to reduce poverty and unemployment, development of the remote regions, promotion of gender equality and solving other issues of the socio-economic development. 

Implementation of the Plan of Actions of the MDDMS for 2018-2021, introduction of the specified priority measures will create the conditions for: 

- formation of an effective regulatory environment in the field of financial accessibility, ensuring the protection of socially responsible participants in the microfinance market and consumers of microfinance services, reducing the number of unscrupulous financial intermediaries, developing an effective microfinance market infrastructure; 

- increasing the resource and infrastructure potential of microfinance institutions that provide microcredits, first of all, for development of the private entrepreneurship, small business entities, self-employment and (or) other business initiative;  

- formation of conditions for involving individuals in the field of microfinance on a long-term basis in the form of deposits and savings units;  

- reducing risks in the microfinance market; 

- increasing the level of transparency, stability and reliability of the microfinance market, reduce the cost of financial resources for the NBFOs; 

- increasing the degree of protection of consumer rights for microfinance services, to reduce the interest rate on loans for the end user.  

 

 

 

 

 

Achievement of the expected results will be assessed on the basis of 

following indicators of progress: 

The level of microfinance services access for the population of Kyrgyzstan will be 4.89% by the end of 2021, the total number of clients will be 313 thousand and geographic coverage of microfinance services will reach - 60%; 

2) the total assets will amount to KGS 35.4 billion by the end of 2021 (as of December 31, 2016 – KGS 14 billion) or 5% to GDP; 

3) the indicator of mobilization of domestic savings will constitute KGS 14.7 billion (as of December 31, 2016 – KGS 8 billion) 

These indicators were determined on the basis of the forecast of macroeconomic indicators of development and trends in development of the microfinance sector, as well as taking into account the ongoing integration processes within the framework of regional cooperation.  

 

Chapter 5. Final Provisions 

Microfinance in Kyrgyzstan has created opportunities for thousands of people to become economically active members of the society, receiving income and doing business, however, it remains inaccessible to a significant number of people. In fact, the effect of microfinance services is more significant for the most vulnerable segments of the population. 

Over the years since the first programs and institutions appeared, microfinance has firmly taken its place in the financial system of the country, promoting development of the credit union system, as well as growth and development of the MFOs sector by transforming the major sector players into the banks. All these changes have occurred by creating favorable conditions for the legal, regulatory, infrastructural and institutional formation of the microfinance sector. 

At present, the stage of the dynamic quantitative development of the microfinance sector is coming to an end. The prospects for development of the microfinance at this stage are closely linked with the need to further deepen the level of financial intermediation and strengthen the integration of microfinance institutions, strengthen the financial capacity of microfinance institutions and diversify their resource base, including by increasing the access of institutional investors to the microfinance market, broad and widespread development of the microfinance products and services, introduction of the newest remote and interactive service technologies.  

Implementation of the MDDMS for 2018-2021 is focused on a better stage of the sector development through development of the competitive and socially responsible microfinance institutions aimed at expanding the range and volume of microfinance services they provide to achieve the goals of social and economic well-being of the population in Kyrgyzstan.  

 

 

 

 

 

 

 

 

 

 

 

LIST OF ABBREVIATIONS 

 

 

DPA 

Deposit Protection Agency under the Ministry of Finance of the Kyrgyz Republic 

ACUCK 

“Association of Credit Unions and Cooperatives of Kyrgyzstan” ULE  

AMFO 

“Association of Microfinance Organizations” ULE 

AIF 

“Association of Islamic Finance” ULE  

GDP 

Gross Domestic Product 

EAEU 

Eurasian Economic Union  

MFO 

Microfinance organizations 

MCC 

Microcredit companies 

MFC 

SME 

Microfinance companies 

Small and medium-sized enterprises 

NBKR 

National Bank of the Kyrgyz Republic  

NBFO 

NUCUCK  

Nonbanking financial organizations  

“National Union of Credit Unions and Cooperatives of Kyrgyzstan” ULE  

NSDS 2013-2017  

 

CU  

National Sustainable Development Strategy of the Kyrgyz Republic for 2013-2017  

Credit union  

MDDMS for 2018-2021  

Main Directions for Development of the Microfinance Sector in the Kyrgyz Republic for 2018-2021  

LLP  

Loan loss provision  

MMDS 

Medium-Term Microfinance Development Strategy for 2006-2010 

   

MS 2011-2015  

 

SRO  

Microfinance Strategy for 2011-2015  

Self-regulatory organization  

SWOT 

FCCU 

CIS 

ICT  

Strength, weaknesses, opportunities and threats  

“Financial Company of Credit Unions” OJSC  

Commonwealth of Independent States 

Information and communication technologies 

 

Appendix 1 

to MDDMS for 2018-2021,  

approved by Resolution No. 2017-П-11/51-4-(НФКУ) of the National Bank of the 

Kyrgyz Republic Board  

as of december 13, 2017  

 

ACTION PLAN  

for Implementation of the Main Directions for Development of the Microfinance Sector in the Kyrgyz Republic for 2018-2021  

 

No. 

Measure 

Measure/ 

action 

Expected results 

Implementation period 

Responsible officers 

1 

Improvement of the legislative, regulatory and methodological framework that facilitates implementation of the new financial products and services, and expansion of the financing sources for the NBFOs  

1.1 

Improvement of legislation and regulatory and supervisory system in the field of credit unions and “Financial Company of Credit Unions” OJSC taking into account the international practice 

1) Inventory of legislation and studying the international experience. 

 

2) Preparation of proposals on the part of CUs. 

      

3) Development of additions and amendments to the legislation and regulatory legal acts, in order to ensure further qualitative and sustainable development of the credit union system  

● Studying of the best international practices and preparation of a concept for improvement of the 

legislation and regulation. 

 

● Effective use of the potential of credit cooperation for development of the remote regions, mobilization of savings in the investment channel. 

 

● Functioning of a stable credit union system. 

 

● Formation of the infrastructure of the credit union system (ICT, audit, insurance). 

2018-2020  

1) NBKR, FCCU. 

 

 

 

 

4) FCCU, CU, CU Associations,  

 

3) NBKR, FCCU, CU 

1.2 

Establishment of a legislative framework for provision of the NBFOs with new financial services 

1) Study and analysis of the need to introduce new financial services aimed at providing microfinance services. 

 

2) Conducting a seminar on use of the new financial services in the banking and microfinance markets.  

 

3) Introduction of amendments and additions to the RLAs and /or development of the new RLAs of the National Bank of the Kyrgyz Republic, which provide for the possibility of the NBFOs to provide new financial services  

Regulatory framework enabling the NBFOs to provide new microfinance services 

2018-2021  

1) NBKR, AMFO, FCCU, CU Associations. 

 

 

2) AMFO, FCCU, CU Associations. 

 

 

 

 

3) NBKR, AMFO, MFO, FCCU, CU Associations;  

1.3 

Establishment of a legislative framework and mechanisms to provide the NBFOs with appropriate tools and mechanisms for attracting investment under the principles of Islamic finance. 

1) Studying the international experience in attracting investments on the principles of Islamic finance. 

 

2) Development of the regulatory legal acts to ensure the issuance and circulation of Islamic securities by the NBFOs due to adopted amendments to the Law of the Kyrgyz Republic “On the Securities Market”  

The issues of attracting investments in the NBFOs, which carry out activities on the principles of Islamic finance, are regulated, and appropriate regulatory and supervisory requirements for the NBFOs in attracting investments under the principles of Islamic finance have been developed.  

2018-2021  

1) и 2) NBKR, AMFO, МФО, FCCU, CU Associations;  

2 

Strengthening the system of regulation and supervision in the field of microfinance  

2.1. 

Improvement of the regulatory and supervisory system of NBFOs, including NBFOs, implementing activities under the PIF 

1) Studying the best international practices and optimization of the impact on financial accessibility. 

 

2) Introduction of amendments and additions to the regulatory acts of the NBKR in accordance with the regulatory standards for the microfinance sector and international practice. 

 

3) Improvement of the regulatory reporting in accordance with the new standards of regulation and supervision and collection of statistics in the field of gender finance. 

 

4) Development of mechanisms for supervision of Islamic microfinance providers and training / development of the supervisory authority. 

 

5) Amendments and additions to the NBKR regulatory requirements for the expansion of the list of operations carried out under the principles of Islamic finance 

● Microfinance legislative and regulatory environment has been improved. In the regulation and supervision of the NBFOs, a risk-based approach is applied, taking into account the specific features of the activities of the NBFOs and the target groups served by them 

 

● Improving the quality of regulation, monitoring and preventing systemic risks 

 

● The issues of regulating the microfinance services under the principles of Islamic finance, including those using the “Islamic window” are properly regulated, the issues of correct taxation of operations under the principles of Islamic finance have been resolved. 

2018-2021  

1) NBKR, AMFO, FCCU, CU Associations. 

 

 

2) NBKR, AMFO, FCCU, CU Associations. 

 

 

 

 

 

 

 

3) NBKR, AMFO, FCCU, CU Associations;  

 

 

 

 

 

 

4) NBKR  

 

 

 

 

 

 

5) NBKR  

2.2. 

Improvement of the regulatory framework of the NBFOs,  

related to AML/CTF, in accordance with the legislation of the Kyrgyz Republic and the FATF international standards for the NBFOs  

1) Inventory of the regulatory framework. 

 

2) Introduction of amendments and additions to regulatory acts of the NBKR  

 

Risk reduction in the NBFOs sector 

2018-2021  

1) NBKR, AMFO, “FCCU” OJSC ОАО, CU. 

 

2) NBKR 

2.3. 

Introduction of the self-regulatory institution of for the MFOs, which do not attract deposits 

1) Studying the international experience in creating and regulating the SROs. 

2) Analysis of the impact of the SROs on the market. 

3) Preparation of the SRO concept. Development of a set of measures to introduce SROs 

Development of the legislative and regulatory framework for e creation and implementation of a self-regulatory scheme 

2018-2021  

1) NBKR, AMFO. 

 

 

 

 

2) NBKR  

 

 

 

3) NBKR, AMFO, MFO 

2.4. 

Strengthening the capacity of the regulatory and supervisory authority for the microfinance sector 

Training and professional exchange on new approaches in regulating the microfinance sector, exchange of experience in establishing SROs, apex institutions, hedging risks, etc. 

Improving the quality of regulation and monitoring. Risk warning system  

2018-2021  

NBKR 

3 

Institutional development of the microfinance sector to ensure its sustainability and efficiency, expand the range of services provided by them, and improve their price and geographic availability  

3.1. 

Increasing the availability and reducing the cost of financial services in the remote regions of the Kyrgyz Republic.  

Introduction of additions/ amendments to the RLAs aimed at diversifying the NBFO resource base and ensuring the availability of microfinance services  

The MFOs were allowed to issue the debt securities within the limits established by the NBKR, the restrictions on raising funds from shareholders and borrowing were revised, regulatory requirements for the issuer were developed. Diversification of the resource base of the NBFOs, lowering the cost of services and ensuring the viability of the sector in the long term.  

2018-2021  

NBKR, AMFO, MFO, FCCU, CU Associations;  

3.2. 

Consideration of the opportunities to provide agency services for micro-insurance  

1) Research of supply and demand for micro-insurance services. 

  

2) Assessment of legal barriers for the NBFOs authorization to act as an agent of an insurance company and development of a proposal in the RLAs. 

 

3) Amendments to the legislation allowing the NBFOs to provide micro-insurance services 

● Diversification of the activities of the NBFOs, mitigation of risks in the activities of the NBFOs  

 

● Increased financial penetration 

2018-2021  

1), 2) and 3) AMFO, NBKR 

3.3. 

Improvement of the NBFOs pricing policy to ensure the availability of services and taking into account maintenance of the rational profitability, including the principles of Islamic finance 

1) Conduct an analysis of the cost and pricing system of the NBFOs of various types, including those that carry out operations under the principles of Islamic finance, in accordance with the international practice. 

  

2) Analysis of regulatory provisions for presence of the restrictions on expansion of the NBFOs resource base  

 

3) Development of a set of measures to ensure an effective pricing policy 

 

4) Introduction of appropriate amendments to the NBKR regulatory documents to ensure diversification of funding sources  

● Reducing the cost of services to ensure the development of small businesses and entrepreneurship, avoiding excessive debt 

 

● Creating conditions for diversifying the resource base and reducing the cost of borrowed resources. 

2018  

1) NBKR, AMFO, AIF, FCCU, CU Associations. 

 

 

 

 

 

 

 

 

2)NBKR. 

 

 

 

3)NBKR, AMFO, AIF, FCCU, CU Associations. 

 

 

 

4) NBKR 

 

3.4. 

Ensuring introduction of the corporate governance principles in the NBFOs.  

1) Analysis of existing corporate governance practices. 

 

2) Introduction of corporate governance for MFOs and CUs in accordance with the international practice. 

  

3) Conducting training seminars  

Increase of management efficiency and transparency  

2018-2021  

1), 2) and 3) AMFO, CU Associations 

3.5. 

Development of information and communication technologies in the NBFOs activities  

1) Analysis of applied IT products in the MFOs. 

 

2) Introduction of scoring cards, risk management and flat-rate lending  

Improving the NBFOs effectiveness  

2018-2021  

1) and 2) AMFO, CU Associations 

4 

Developing the institutions for microfinance market infrastructure  

4.1. 

Establishment and functioning of auxiliary institutions, as well as under the principles of Islamic finance 

1) Studying the experience of foreign countries in regulating the activities of the MFO’s auxiliary institutions (apex institutes, hedging schemes, deposit protection / deposit insurance institutions, etc.). 

2) Analysis of the existing environment and development of the concept for creating auxiliary institutions. 

3) Preparation of a concept and feasibility study for creation of an apex fund to attract a strategic partner represented by the international financial institutions or social investors. 

4) Development of the regulatory legal acts and introduction of amendments and additions to the regulatory legal documents concerning the creation, activities and regulation of the activities of apex institutions. 

● Conclusion on the need to create a legislative framework for the development of MFOs subsidiary institutions. 

 

● An apex institution with the function of accumulation and redistribution of external and internal resources between the MFOs was established and is functioning, regulatory and supervisory requirements for the activities of the apex MFO have been developed. 

2018-2021  

1), 2) and 4) NBKR, AMFO  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3) AMFO, МFО 

4.2. 

Strengthening the capacity of the NBFOs  

1) Considering the ways and means to increase the capacity of the NBFOs 

 

2) Introduction of changes in the RLAs in terms of annual training of the NBFOs staff 

A professional and financially sustainable sector that provides efficient services 

2018-2021  

1) AMFO, CU Associations, NBFO 

 

2) NBKR 

5 

Ensuring transparency of the microfinance market and protecting the rights of microfinance services consumers  

5.1. 

Placement of information on the NBFOs on the international information sites, conducting an external audit on an annual basis 

1) Training of the NBFOs on use of the international sites. 

2) Providing explanatory work among the sector’s participants on the audit and publication of audited accounts 

Ensuring sector transparency and acknowledgment of social impact  

2018-2021  

1) and 2) AMFO, CU Associations 

5.2. 

Creating the conditions for implementation of the ombdusman financial scheme  

1) Studying the international practice for creation and implementation of the ombudsman financial scheme. 

2) Development of a legislative environment for creation and implementation of the ombudsman financial scheme 

An effective mechanism to ensure protection of the financial services consumers’ rights  

2018-2021  

1) and 2) NBKR, interested organizations 

5.3. 

Increase of financial literacy of the borrowers and participants in the microfinance sector 

1) Development of a procedure for training the borrowers, participants in financial management, debt management, business process management, etc. 

2) Conducting training seminars, courses for the borrowers, the sector participants  

Increasing public confidence in the NBFOs sector, increasing financial literacy of the population 

2018-2021  

1) and 2) AMFO, CU Associations, NBFO 

 

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