Investments in microfinance: experience and outlook. Why global holdings choose Kazakhstan.

The Article was published in newspaper on October 28, 2020

For 28 years of independence in Kazakhstan, a lot has been done to increase the investment attractiveness of the country. In 2019, Kazakhstan improved its position in the Doing Business ranking and moved up from 28th to 25th place. Now we can say with confidence that Kazakhstan and organizations operating in its territory have a huge potential for investments. Zhanna Zhakupova, Executive Director of MFO Asian Credit Fund interviewed Christian Anderson, a representative of BOPA (Base of the Pyramid Asia)- thethe main shareholder of ACF, to learn about the company’s activities and plans in the microfinance sector of Kazakhstan.

– What is BOPA and how did you come to the decision to create such an investment company to invest in microfinance organizations?

– BOPA is a Singapore registered holding company that invest equity in small and mid-sized microfinance companies in Asia. We set-up BOPA, because we could see that whereas large microfinance institutions (MFIs) could easily attract capital resources, we saw that smaller and mid-sized MFIs had big challenges in attracting investors. We therefore expressed our mission as helping small and mid-sized MFIs in Asia to scale up, by providing risk capital (equity) and taking active involvement in the corporate governance of the institutions we invest in.

– Which countries has BOPA invested in? Why? What is BOPA’s long-term strategy? What services, in addition to Lending, are or can your MFIs provide?

– BOPA is currently in 7 countries – Kazakhstan, Kyrgyzstan, India, Myanmar, Vietnam, Cambodia and Timor Leste. All these countries have reasonably good regulations for microfinance operation.
BOPA’s aim is to help growing good and responsible microfinance institutions that have both strong financial performance and important positive social impact in the countries where they work. We have also set upon ourselves – that we would like to reach to 2 million clients through our partner companies.
Depending on the legislation in the given country, our partner companies offer loans, savings, insurance and financial education to its clients.

– Why did you decide to invest in Kazakhstan? Why in Asian Credit Fund?

– BOPA works together with a network of debt funds in Asia, and one of them was an existing lender to ACF and they highly recommended BOPA to have a closer look at ACF, since they felt that it could be a good match.
After visiting ACF in Almaty during November 2013, we felt very positive towards both Kazakhstan and ACF. We were very impressed with the quality of the institution and their focus on rural women entrepreneurs.

– Tell us what difficulties your microfinance organizations faced during the coronavirus pandemic?

– Since most countries have had lock downs and typically were unable to collect payments from clients – there were initial challenges to ensure sufficient liquidity levels in our partner MFIs. However, thanks to good co-operations with funders – all of our institutions have so far managed to build sufficient cash levels to withstand longer periods with interrupted operations.

– What kind of support did BOPA provide to its companies at that time? Has the MFI received support from the regulatory authorities in these countries?

– To help strengthen capital and liquidity levels – BOPA has injected new equity in a number of our partner companies during Covid19. In some countries – regulators supported microfinance institutions with measures such as requiring domestic funder to provide moratorium to MFIs, Government backed funding to MFIs and temporarily more relaxed CAR requirements.

– What support did your microfinance organizations provide to clients? Including ACF?

– We have amongst other done moratorium, re-structuring and emergency lending to clients. In some areas, we also helped to train clients on covid-19 health measures.
As for the ACF, since the introduction of quarantine ACF has provided payment grace periods to 6 872 customers (24% of the total customer base) in the amount of KZT 2.5 billion (or 38.1% of the volume of the Company’s micro loan portfolio). The nominal interest rates were decreased for 5 231 borrowers, the micro loan terms were extended for 6 837 and 776 micro loans totalling KZT 470 million were restructured. As of now, ACF still does not charge fees for late payments. Despite the stabilization of the coronavirus situation, ACF continues to support its clients, and we, as investors, fully support all measures taken by ACF.

– How do you see the development of microfinance in the post-covid period? And longer term?

– I think microfinance will be even more needed post-covid 19, as the more formal financial sector will perhaps be less willing to provide capital to smaller and micro businesses. Due to increased corporate restructurings and lay-offs as a result of the reduced economic activity during covid-19, we will likely also see an increase in self-employed people requiring financial services to support their business activities.

– Tell us about ACF plans? What future do you plan for the company?

– ACF has used the covid-19 to invest in technology and processes that can reduce cost and improve products and service offerings to its clients. BOPA is also ready to invest additional equity in ACF, if needed, so that the institution can come strengthened out of the covid-19 period. Although we are globally facing a tough period during Covid-19 period, this is also a good opportunity to look at ourselves and see what we can do better in future.

– Your wishes to Kazakhstan…

– We have been very happy to work in Kazakhstan since 2014 – and wish for a continued successful development of your beautiful and fascinating country.