Earlier this year, the National Chamber of Entrepreneurs of Kazakhstan "Atameken" has launched a project on rural micro-financing of business, which in was launched in 4 regions of the country in the pilot mode.

One of the main problems that hinder the development of SMEs in the regions is the lack of access to affordable finances. Second-tier banks often refuse to lend money to rural entrepreneurs, arguing that they do not have the appropriate collateral. It is one of the reasons that the majority of entrepreneurs, living in rural areas, are unable to develop their business.

Taking this into account, "Atameken" has launched a new program that will allow lend to those small businesses, which remain outside the interests of the banking sector.

Deputy Chairman of NCE RK "Atameken" Nurzhan Altaev told about the purposes of microcredit program, its conditions, the amount of financing of rural entrepreneurs.

- Nurzhan Bauyrzhanovich is the pilot microcredit project already implemented in regions? And, on the basis of what criteria these regions are selected?

- Now, according to statistics, the bulk of employees are employed by organizations - 90.2% (5.6 million people.). At the same time the number of self-employed is 2.2 million people. It is a large category of citizens, employed in the private sphere. Among them there are lots of people, who are willing to do business, want to start a business. We need to support them, since it jobs, and in regions where there is often a serious problem with employment. In this connection, we selected Almaty, Aktobe, Kyzylorda, Kostanay, Zhambyl and Mangistau region for the launch of the microcredit program. These regions are characterized by a high number of self-employed and a relatively large percentage of the rural population.

We must move the lending infrastructure to the regions to the rural areas, where there is an acute demand for funds. The microcredit program is focused on this. Therefore, NCE RK "Atameken" promotes it. There are people who want to create business. There are entrepreneurs who can grow, but do not have access to funds.

- Where do the funds for lending come from? What is the total amount of money? Who is the operator of the pilot microcredit project?

- Microcredits come from borrowed money granted by JSC "Holding Group "Almex" and LLC "Trading House "ERG". Total amount is 1 billion 500 million tenge. Of them NCE allocates 300 million tenge for each region and the funds will be granted to borrowers at the interest rate of not more than 7%. In these times, it is a very low rate, the rates in commercial structures are much higher.

Loan Operator in Almaty and Aktobe regions is JSC "Fund for Financial Support of Agriculture".

In Almaty region the total loan fund amounts to 600 million tenge, where 300 million tenge is provided by NCE and 300 million tenge is allocated by Regional Akimat.

In Aktobe region the generated fund amounts to 900 million tenge, where 300 million tenge comes from NCE, 300 million tenge from Regional Akimat and 300 million tenge comes from JSC "Fund for Financial Support of Agriculture".

In Kyzylorda region the lending operator is "microfinance organization" Regional investment center "Kyzylorda" (RIC). The generated fund amounts to 660 million tenge, where 300 million tenge comes from NCE and 360 million tenge from Akimat.

Funds in the amount of 588 million tenge were allocated for the microcredit program in Mangistau and Kostanay regions, of them 288 million tenge come from Regional Akimat and 300 million tenge from NCE.

In addition, the akimat of Zhambyl region allocated 288 million tenge for the provision of micro-loans, it is searching investors for co-financing.

- The microcredits of NCE differ from the existing credit institutions at the microfinance market? What are its advantages?

- Microcredit allows access to financing without the stringent conditions put forward by the banks, with no start-up capital, credit history, collateral. We do not impose stringent collateral requirements. An entrepreneur can get a loan by pledging an old house in the village, which often STB do not take as a collateral. We are ready to accept as collateral an old house, the cost of which, for example, is 100 thousand tenge, and the person gets 3 million tenge. Of course, the person must be aware that the house is pledged and there is responsiblity.

Funds from NCE are available for the final borrower at an interest rate of not more than 7% for up to 5 years. There are no conditions like that on the market, as you can imagine. That is the main difference between microcredit program of NCE and other organizations.  We focus not only on business, but also on the social side. This is a social project, intended to develop a small business in the regions, thus to create jobs, to raise business activity. Visiting the regions and meeting with villagers, I must say that many of them would like to start business, young people are also willing to try their hand in business. Unfortunately, they do not have enough knowledge, there is no start-up capital.

Since last year, through Business Support Centers and Centers for Servicing of Entrepreneurs we provide free services to business. In the regions we teach villagers to the basics of business, set up a business school, conduct courses "Business Advisor", where budding and existing entrepreneurs learn the basics of entrepreneurship, accompany their projects.

Creation of SMEs in rural areas will help to solve many problems, primarily related to the issues of employment. After all, absence of work and prospects often pushes unemployed youth to rash acts. If young people were self-employed in rural areas, I think, there would be no emergency cases, which, unfortunately, have occurred in a number of regions. Now it is very important to ensure the stability of the economy and social well-being.

Now, in addition to service support, we provide financial assistance in the form of microcredits. Launching the microcredit program, we want to give people the opportunity to earn themselves, to feed their families, to gain financial stability.

Our goal, ultimately, with the involvement of NCE to create a flexible (collateral, amount, interest rate) and an effective microcredit system, within which the interest rate does not exceed 4-6% per annum, together with provision of the support to projects - training and promotion of business.

- Why the preference is given to small business?

- Microcredit funding – is funding of small businesses, the word "micro" means small. To give a chance to a man to develop, to put the business on its feet - is the goal of this program. We often when talking about support of SMEs, but the focus still is on medium-sized businesses. It is hard, difficult to work with small business. But small business – is the foundation, referring to the American concept "grass roots", on which rest the economies of many developed countries.

Microcredit system has received world-wide recognition as a tool to combat poverty, to develop small business. The most famous example is of course, Bangladesh - Grameen Bank founder Muhammad Yunus won the Nobel Peace Prize in 2006 for the development of micro-credit system. But this practice is adopted not only in developing countries. In Europe and in the US there is also a system of microcredit as an important tool to support and to develop small business.

These loans are given for the needs of all small businesses. Moreover, it covers mostly development of entrepreneurship in rural areas, small towns, single-industry towns.

The main reason why we are now looking for a microcredit system for small businesses is access to finances for the population. It is very difficult to conduct business without access to finances, to low-cost funding. At the same time in our country, as well as throughout the former Soviet Union, it is easier to receive financing only for residents of large cities. All others, especially rural residents, have virtually no access to financial services - banks are not willing to lend to the small businesses in the rural areas. Unavailability of loans constrains entrepreneurial initiatives in the region.

- On what terms the loans are given?

- The National Chamber on an equal basis with Akimats allocated funds to the selected regions, which are given to the borrowers at the interest rate of not more than 7% for up to 5 years. Loans are intended for the development of entrepreneurship in rural areas, mono - and small towns. Maximum loan amount is 16 million tenge (8000 MCI).

For example, entrepreneurs of Almaty and Aktobe regions will be able to get a loan from 500 thousand tenge to 16 968 thousand tenge at the interest rate of 6% up to 4.5 years. Entrepreneurs of Kyzylorda region will be able to get a loan of up to 15 million tenge at the 7% interest rate up to 5 years.

Such short terms on loans, it is a feature of the microcredit system, but also the amount is small. It is intended for small businesses.

- How actively people in rural areas take mircoloans and for what kind of projects?

- The work on microcredit project has just begun, but there are already companies that have received funding within the frames of our program. For example, in Aktobe region were issued loans in the amount of 25 million tenge for the sphere of crop production, purchase of seedlings, drip irrigation system. In Kyzylorda region were funded projects in the amount of 20 million tenge for breeding of pedigree dairy goats, beekeeping, production of meat products.

This is only the beginning of our program, but given the demand among the population, the willingness of our citizens to do business, to grow and to develop, we believe that micro-financing has a great future.

We have no restrictions on the availability of credit history and business experience. Those who have business and want to expand can receive funding, as well as those who want to start business from scratch. For example, in Kyzylorda region a project of cultivation of a new variety of rice within the micro-credit program is on. Chairman of the Agricultural Production Cooperative "Zhambyl" ATK" Bolatbek Rustemov from village Kogalykol of Syrdarya district of Kyzylorda region in July received the first tranche of 4 million 400 thousand tenge for 36 months. He received 10 million tenge in total for the development of his project. The Credit Committee of the Chamber of Entrepreneurs of Almaty region has approved 89 applications for a total amount of 315.5 million tenge. 61 projects worth about 264 million tenge was approved by the Credit Committee of RCE of Aktobe region within the microcredit program for small business "Aul kәsіpkerlіgі". 4 entrepreneurs have already received 50 million tenge loan and begun to implement their projects.

- How many loans in total and on what amount they have already been issued in the regions? How many applications have been submitted?

- In total NCE issued 441 million tenge, including LLP "MFI" RIC-Kyzylorda "- 96 million KZT, Aktobe branch of FFSA - 251 million tenge, Almaty branch of FFSA - 88 million tenge.

By the way, small businesses and the villagers are actively interested in micro-credit program. Thus, by the condition on 25^th of July this year, we have received 296 applications with requirements 1 532 million tenge, 179 of them were approved in the amount of 761 million tenge. Of the approved applications 93 applications amount to 441 million tenge (36 - crop production projects, 31 – livestock breeding, 12 – provision of services, 5 projects for the construction of mini-bakeries, etc.)

- That is, rural microcredit today can be called a good mechanism that will give impetus to the development of entrepreneurship in rural areas?

- We believe that at least 80% of micro-credit should be directed to business support in rural areas. At the same time a program of microcredit in rural areas should be linked with the development of agricultural co-operation and direct sales system.

The Head of State instructed to remove all barriers to business development in agriculture. The National Chamber of entrepreneurs is active in this direction. Today there are more than 2 thousand agricultural production cooperatives in the republic, NCE escorts 130 of them. But there are problems with development, which we must address. Farmers, who unite in cooperatives, face with the problem of lack of money. Bank loans are very expensive, and some banks do not want to take as a pledge their collateral. Many cooperatives are willing to modernize production, to update agricultural machinery and to create new jobs, but they do not have access to cheap long money. So now we are promoting through state agencies lending program for agricultural cooperatives.

Of course, there is a risk. But, I'm sure eventually we will get better businessmen, who will continue to favorable financial and investment environment in Kazakhstan.

I appeal to big businesses of Kazakhstan to respond to our idea and to contribute to the development of rural microcredit program to support small business, which is now in less favorable conditions than large business. Big business should help small. We have to stick together.

Karlygash Zhusupbekova