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Kazakh Development Ministry and Damu Fund Sign Cooperation Aagreement

Thursday 28 March 2013

ASTANA (Kazakh Prime Minister press service) – Kazakh Ministry of Regional Development, Entrepreneurship Support Fund Damu with participation of second-tier banks and leasing companies signed a cooperation agreement, the Kazakh PM’s website reports.

The agreement was signed by First Deputy Minister of Regional Development Kairbek Uskenbayev, Damu Fund’s Chairman of the Board Lyazzat Ibragimova, representatives of 10 regional hakimats, heads of 17 second-tier banks and 10 leasing companies.

The document will enable businessmen in 20 single industry towns to receive public subsidies at 10% interest rate on loans obtained from banks or leasing transactions. So, from tomorrow entrepreneurs in single industry towns receiving subsidies on their loans will substantially reduce the cost of their redemption, and in fact the interest rate on such loans to entrepreneurs will not exceed 4%.

Damu Fund is a national development institute and a wholly-owned subsidiary of Samruk-Kazyna National Welfare Fund. Its mission is to facilitate the quality development of Kazakh small and medium businesses (SMBs) and microfinance institutions as an integrator and operator of financial and consulting services. It provides financial support to small and medium businesses within several programmes:

The first one is the stabilization programme. It aims to partially mitigate the effect of the growing credit crunch on SMBs and does not target changing the SMB structure for the better in a dramatic way. The first KZT 48.8 bln worth tranche of this programme was allocated from the republican budget in pursuance of the Plan of Top-Priority Actions to Ensure Stability of Socioeconomic Development of the Country and was fully disbursed to STBs for subsequent on-lending to SMB entities. It was decided to allocate KZT 50 bln, as the second tranche of the stabilization programme, towards the support of small and medium business entities.

The third tranche of the stabilization programme worth KZT 117 bln was allocated to STBs towards the support of SMB in February 2009. Unlike tranches 1 and 2, this tranche was allocated in a lump sum, as instructed by the RK Prime Minister and Samruk-Kazyna Fund. Thus, the monies were disbursed to ultimate borrowers in an expedited manner, which improved the responsiveness of the government’s small and medium business support measures.

The second program, Damu-Regions, has the goal to narrow regional disparities in SMB lending. In January 2009, KZT 28 bln was fully disbursed to six partner banks and thus Damu Fund met its commitments with regard to conditional placement of republican budget funds in full.

Yet another crucial decision was to resume financing of microcredit organizations (MCOs). The Fund used to finance ongoing MCOs when they applied for funding and provided lending on equity participation basis, however, the arrangements that were put in place were dubious and inefficient, and, therefore, it was decided to support only ongoing MCOs on a competitive basis. When competing for money, MCOs need to improve themselves and, by doing so, enhance the business environment. Resumption of the MCO lending was also facilitated by the Address of the President of the Republic of Kazakhstan to the People «Growth of Welfare of Kazakhstan’s Citizens is the Primary Goal of State Policies», which emphasized a need to further support MCOs’ operations.

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