United Nations Development Programme in Kazakhstan BUILDING SUSTAINABLE MICROFINANCE INSTITUTIONS UNDP Kazakhstan 9 November, 2005 Two cases from UNDP Kazakhstan

United Nations Development Programme in Kazakhstan Background information; Presentation of - Microcredit Support for Women Project in Semipalatinsk - Microcredit Center in Atyrau Focus: Bereke exit strategy and outcome evaluation; Focus: lesson learned. Contents

United Nations Development Programme in Kazakhstan Background (1) There are government and donor microcredit projects, but there is a downward trend in donor commitments; The Government considers microcredit as a tool for reducing poverty; The new law “On Microcredit organizations” (March 2003) regulates the sector; MFIs are not allowed to collect savings; Microfinance institutions are lobbying to amend the law.

United Nations Development Programme in Kazakhstan There are more than 400 registered organizations providing microcredit but 3-4 Microfinance Institutions (MFIs) have more than 1,000 clients. Only one has more than 10,000 clients. Background (2) SUPPLY There are more than 50,000 microfinance clients, about 2% of the poor in Kazakhstan. The potential demand for microfinance services is conservatively estimated between 140,000 and 220,000 clients; DEMAND

United Nations Development Programme in Kazakhstan Two main projects on the field Microcredit Support for Women Project in Semipalatinsk Microcredit Center in Atyrau

United Nations Development Programme in Kazakhstan UNDP Project Objectives To alleviate poverty and raise living standard by providing microcredit to entrepreneurs who do not have access to traditional sources of funding; To provide women entrepreneurs with business related training and support; To expand and attain operational and financial sustainability of the existing micro-lending scheme in region; Microcredit Support for Women Project in Semipalatinsk Microcredit Center in Atyrau Support low-income vulnerable population groups through simplified access to micro-credit; Gradually improve credit culture and discipline, and expose borrowers to the basics of business practices;

United Nations Development Programme in Kazakhstan Common features Creation of an independent NGO to conduct micro lending activities; Self-sustainability; Institution based in relatively small cities (Oblast Capitals) far from economic centers; Relatively big outreach in term of clients; Fast rate of growth.

United Nations Development Programme in Kazakhstan Active Portfolio (USD) Active Borrowers 20041,056,9313, ,8803, ,1081, ,8911, ,3991, ,0751, , Bereke: achievements % of Women98 % Average loan Size400 USD OSS 175 % PAR1.3 % 3 rd biggest NGO MFI in Kazakhstan (per number of active clients)

United Nations Development Programme in Kazakhstan Atyrau Micro-credit Center: achievements LOAN DISBOURSED (Cumulative) BORROWERS TRAINED Active Portfolio (USD) Active Borrowers 20041,584,9314, ,008,1252, ,6502, ,0001,705 Branch offices in 5 Rayon capitals

United Nations Development Programme in Kazakhstan Registration of Bereke as a public foundation; Bereke received its first grant from UNDP to purchase the office building; MIS and Accounting System adjusted to the national requirements Bereke signed Capital Grant Agreement with UNDP and started its own credit activity. It regulates the terms and conditions for transfer remaining project funds and assets to Bereke after approval from BOM-HQ; Bereke became a member of the Association Microfinance Organizations of Kazakhstan (AMFOK); Bereke reached operational and financial self-sustainability First external audit of Bereke undertaken; International Rating – ACCION CAMEL (Mid-November 2005). UNDP Exit Strategy: KMLO Bereke

United Nations Development Programme in Kazakhstan Bereke: outcome evaluation Rating CriteriaRating OutcomesPoverty alleviationPositive change Raising living standardsPositive change EmpowermentPositive change Income generationPositive change Job creationPositive change Other factors Sustainability of progress towards achieving outcome Sustainable Cost-effectiveness of progress towards achieving outcome Yes

United Nations Development Programme in Kazakhstan Lessons Learned (1) Provision of microcredit is an effective way to promote the growth of small businesses, expand employment opportunities, and strengthen the ability of vulnerable population groups to provide for their families in Kazakhstan. In 2000 a study by Yasushi Tairo concluded that Bereke clients on average increased their profit by 4,215 Tenge (per credit period). A survey conducted in 2004 found that 87% of Bereke clients reported that the profitability of their business had grown. 56 jobs were created in the Atyrau business incubator thanks to microcredit lending.

United Nations Development Programme in Kazakhstan Strong demand for microfinance services; People: staff professional and interpersonal skills; Extensive staff training; Selection of an appropriate market niche; Development of appropriate products – services; Low competition; Well-developed exit strategy. Lessons Learned (2): key factors for success

United Nations Development Programme in Kazakhstan Lessons learned (3): principals for MFI to be successful Maximum satisfaction of the borrowers; Flexibility of credit disbursing; Efficiency of information processing and loan disbursement; Provision of complementary technical and information assistance; Utilization of advanced microcredit technologies.

United Nations Development Programme in Kazakhstan Lessons learned (4): challenges Lack of qualified specialists / training programmes; Low population density / remoteness of borrowers; Underdeveloped transport infrastructure; Underdeveloped financial infrastructure (rural areas); Legal status of Microfinance Institutions in Kazakhstan. The main challenge is to reach REMOTE RURAL AREAS. Both Bereke and the Atyrau Microcredit Center face serious obstacles in expanding services to rural areas.