Financial Crime World

Kazakhstan’s Banking Sector Shows Resilience Amid Unprecedented Challenges

The banking sector in Kazakhstan has demonstrated remarkable resilience in the face of unprecedented challenges in 2021. Despite a decline in oil prices and new strains of COVID-19, the sector’s net income increased by 77.6 percent compared to the previous year.

Market Overview

The country’s banking services market is dominated by various players, including:

  • Banks: Local banks operate alongside subsidiaries of foreign banks.
  • Payment Services Providers: Companies providing traditional banking services such as payments and money transfers.
  • Microfinance Organisations (MFOs): Entities providing financial services to individuals and small businesses.
  • Fintech Companies: Innovative companies providing digital financial services.

The top five banks by assets are:

  • Halyk Bank
  • Sberbank
  • Kaspi Bank
  • Otbasy Bank
  • First Heartland Jysan Bank

Regulatory Environment

The regulatory regime for banks is overseen by three main regulators:

  • Agency for Regulation and Development of the Financial Market (AFR): Regulates banks, branches of foreign banks, and MFOs.
  • National Bank of Kazakhstan (NBK): Focuses on monetary policy and stability in the financial system.
  • Astana Financial Services Authority (AFSA): Oversees the financial services industry.

Islamic Banking

Islamic banks operate separately from conventional banks and are prohibited from:

  • Charging interest on loans
  • Paying guaranteed interest on deposits

They must comply with the principles of Islamic financing set out by the Council on Principles of Islamic Financing.

Fintech Companies

Fintech companies have become important players in the financial services market, providing traditional banking services such as payments and money transfers. However, most fintech companies are now restricted to operating in the payments sphere only after being forced to re-register as MFOs.

Payments Industry

The payments industry is represented by both local and international payment systems, including:

  • Mastercard
  • Visa
  • UnionPay

Payment systems provide payment infrastructure and various high-tech services associated with payments to Kazakh banks.

Cross-Border Lending

Cross-border lending to Kazakh borrowers by foreign banks is common practice. However, foreign banks must comply with mandatory provisions of Kazakh law, including:

  • Advertising restrictions
  • Securities market regulation

Conclusion

As Kazakhstan navigates these unprecedented challenges, it remains to be seen how the banking sector will respond. One thing is certain, however: the resilience of Kazakhstan’s banking sector has been put to the test like never before.