16 Jun 2021

IFC and KMF to Help Micro and Small Entrepreneurs Weather the Impact of COVID-19

Micro and small enterprises (MSEs) in Kazakhstan stand to benefit from a new investment which aims to help businesses recover from the economic shock of the COVID-19 pandemic, resume operations, and adapt to the post-crisis environment.

IFC will provide up to $25 million to the country’s leading microfinance institution, ‘Microfinance organization “KMF” LLC, to enable it to further support its 217,000 customers, mostly in rural and remote areas, via its 14 branches and 110 outlets. Denominated in Kazakhstani tenge, the financing package will support KMF’s lending program to MSEs across sectors, particularly those operating in the underserved regions.

While micro, small, and medium enterprises (MSMEs) contribute more than 27 percent of Kazakhstan’s gross domestic product (GDP), their finance gap is estimated at 22.9 percent of the country’s GDP or $42 billion, of which 8.4 percent is attributed to microenterprises. Moreover, many small businesses that were already credit constrained before the pandemic now face increased risks and uncertainty. For the financial institutions serving these enterprises, the crisis has triggered new liquidity pressures, particularly for non-deposit taking institutions.

“Given the economic challenges of an ongoing global pandemic, we welcome IFC’s timely support. Though our clients are slowly recovering, they lack working capital financing. Thus, IFC’s funding will potentially be in demand by 180,000 of our clients. This will also help contribute to increased business activity, accelerating economic recovery in Kazakhstan,” said Shalkar Zhussupov, Chairman of the Management Board of KMF.

Over the past several years, IFC has supported KMF with a range of financial products totaling $190 million, including loans, risk management solutions, and advisory services to enhance its corporate governance.

Cassandra Colbert, IFC Regional Manager for Central Asia, said, “We are delighted to continue our long-standing relationship with KMF, as the microfinance sector in general strives to continue to support small and medium-size enterprises affected by the pandemic. Small businesses are essential to economic growth, job creation, and poverty alleviation. Our investment in Kazakhstan will help provide much-needed financing at a crucial time for businesses.”

IFC launched the Base of the Pyramid Program (BOP) as an extension to the $8 billion Fast-Track COVID Facility that IFC launched in 2020. The BOP program will help financial services providers deliver funding to small businesses, informal enterprises, and low-income households that have been hit the hardest by the lockdowns and economic slowdown caused by the COVID-19 pandemic. It will provide up to $400 million to microfinance institutions, non-bank financial institutions, and banks that are focused on MSMEs. ​The loan to KMF is the first project under the BOP program.