Kazakhstan sets 30% interest limit on short-term microloans

NUR-SULTAN – The Kazakh National Bank plans to limit the maximum interest rate on microloans to 30 percent, according to the recently drafted Resolution of the Board of the National Bank of Kazakhstan “On establishing the limit value of remuneration under the agreement on the provision of microloans.”

The limit applies to microloans issued up to 45 days and of a value of up to 50 monthly calculation index (MCI) units, which currently corresponds to 126,250 tenge (US$326). The MCI index is used in Kazakhstan to calculate pensions, allowances and other social payments, fines and calculating taxes and other payments. If approved, the limit will go into effect Jan. 1, 2020.

Over the past few years, organisations providing microloans to individuals have become increasingly popular in Kazakhstan, as they  offer the opportunity to borrow a small amount of money for a short period of time. The service is convenient for those who need money more quickly than provided by normal bank loan processes.

The maximum annual effective interest rate on bank loans, microloans, loans provided by second-tier banks, organisations engaged in certain types of banking operations, microfinance and microloan organisations and loan partnerships is 56 percent.

Since 2014, Kazakh banks have been required to refuse to issue loans to potential borrowers if the monthly payment for them and other previously issued loans exceeds 50 percent of the borrower’s average income.

The National Bank also adopted Jan. 21 amendments to the law “On Banks and Banking Activities in Kazakhstan,” according to which a ban was imposed on the collection of fees for maintaining a bank account concerning the issuance and servicing of a bank loan, as well as for crediting a bank loan the account. The law has been extended to bank loan agreements concluded with individuals for the purchase of goods, works and services not relevant to entrepreneurial activities.

The rule applies only to bank loan agreements that have been concluded with individuals after March 4.