Financial Crime World

Kazakhstan’s Financial Sector Sees Rapid Growth and Competition

Overview

The financial sector in Kazakhstan has experienced significant growth over the past decade, driven by liberalization and privatization policies introduced by the government.

Banking Sector

  • The country’s banking sector remains concentrated, with the four largest banks - Kazkommertsbank, Halyk Savings Bank, Bank TuranAlem, and ABN Amro - accounting for around 60% of total assets and deposits.
  • Smaller banks have seen their market shares decrease due to increased competition from foreign banks.
  • Citibank, a US-based bank, has been aggressively expanding its operations in Kazakhstan, capturing blue chip companies away from local banks.

Private Pension Funds

  • Domestic private pension funds are emerging as a new source of competition for banks, as they create strong demand for domestic bonds and compete with them in lending.
  • The doubling of minimum capital requirements for private funds has led to the forced merger of two funds with stronger institutions.

Stock Exchange

  • The Kazakh Stock Exchange (KASE) solidified its position in 2000.
  • The government has set several objectives for the industry, including:
    • Development of domestic institutional investors
    • Increase investment attractiveness of non-government securities
    • Balancing demand and supply of securities

Non-Bank Financial Institutions

  • Leasing is not readily available, and the insurance sector is at an early stage of development.
  • Recent laws regulating insurance and leasing activities have yet to be put to the test, but they are expected to promote diversification of activity within the financial sector.

Insurance Sector

  • The insurance sector is dominated by around 70 companies, with three state-owned and nine foreign-participated firms.
  • The largest insurance company is AIG Kazakhstan, a joint venture between American International Group and local Rakhat group.

Future Outlook

  • Kazakhstan’s financial sector is expected to continue its rapid growth and development, driven by government policies and increased competition from foreign banks and domestic private pension funds.
  • To address the issue of underbanking, banks are introducing new products such as mortgages, leasing, and consumer financing.