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Banking

Dollarization in Kyrgyzstan Declines as Banks Report Lower Profits

The National Bank of the Kyrgyz Republic (NBKR) has reported a continued decline in dollarization within the country’s banking sector, reflecting growing public confidence in the national currency. As of early September, the share of foreign currency loans in the banking sector dropped to 18%, down from over 20% at the start of the year. The decrease is even more pronounced in the deposit base: the share of foreign currency deposits fell from 43% to 38% during the first eight months of 2025. NBKR officials say households are increasingly moving away from the U.S. dollar and other foreign currencies as trust in the national currency, the som, strengthens. Despite the reduction in foreign currency lending and deposits, the sector overall continues to grow. Since the beginning of the year, deposits in Kyrgyz soms have increased by 21%, reaching 717.6 billion KGS ($8.2 billion). The total loan portfolio rose by 26% to 430 billion KGS ($4.9 billion). However, commercial banks are reporting weaker profitability. Financial statements for January to August 2025 indicate a steep drop in earnings from foreign exchange operations. During this period, turnover in foreign currencies fell by more than 2 billion KGS ($23 million), totaling 18 billion KGS ($206.5 million). Analysts note that the current environment contrasts sharply with conditions just a few years ago. After the onset of Russia's war in Ukraine in 2022 and the introduction of Western sanctions, Kyrgyzstan’s currency market experienced significant volatility. Banks then benefited from heightened demand for exchange operations. But with today’s more stable ruble and reduced fluctuations, those profits have diminished. Just five years ago, the National Bank was actively urging citizens to use the som more broadly. At the time, dollar-denominated loans were more expensive, yet remained popular among Kyrgyz borrowers. Now, the trend has reversed, with households increasingly choosing the national currency over foreign alternatives.

Trade

Kazakhstan Trade Deficit with China Quadruples in 2025

Kazakhstan’s trade deficit with China reached $1.8 billion in the first half of 2025, a sharp increase compared to $400 million for the whole of 2024. According to the Association of Financiers of Kazakhstan (AFK), the growth in trade turnover was driven almost entirely by rising imports of Chinese goods. A review published by AFK noted that Kazakhstan’s trade balance with China has remained in deficit since 2023, with the gap continuing to widen. Despite this, China remains Kazakhstan’s largest trading partner, accounting for more than 20% of the country’s total foreign trade. From January to June 2025, mutual trade between the two countries increased by 5.9% to $14.9 billion. However, Kazakhstan’s exports fell nearly 10%, while imports surged by 22.8%. “The decline in export revenues is mainly due to falling oil and metal prices and weaker demand from China, which increases the vulnerability of Kazakhstan’s export-oriented raw materials model,” AFK experts stated. Imports are expanding in line with rising domestic consumption and the rollout of large-scale infrastructure projects. China’s share of Kazakhstan’s trade turnover rose to 22.6% in the first half of 2025, up from 20.7% a year earlier. The growth was fueled by imports, which increased their share to 28.6% from 23.9%, while exports fell to 17.8% from 18.4%. Kazakhstan did record modest export gains in certain categories, including animal and plant products (+$164 million) and vehicles (+$160 million). These, however, were outweighed by sharp declines in mineral product exports (-$599 million) and metals (-$408 million). Imports from China grew most significantly in vehicles (+$1.2 billion), metals (+$279 million), and chemical products (+$231 million). The increase in vehicle imports was aided by a 14% drop in average car prices from China. Imports of food, furniture, construction materials, and consumer goods also rose. Trade settlements are also shifting. While the dollar remains the dominant contract currency, the yuan is gaining ground in import transactions, with the euro ranking third due to Kazakhstan’s ongoing trade ties with Europe. As a result, Kazakhstan’s trade deficit with China widened to $1.8 billion in January-June 2025, compared to $0.4 billion in the whole of 2024. “Imports are likely to continue to grow amid high consumer and investment demand, while exports will remain dependent on commodity prices and industrial dynamics in China. China is becoming an increasingly pronounced ‘economic magnet’ for Kazakhstan,” the AFK report concluded. As The Times of Central Asia previously reported, Kazakhstan is experiencing a slowdown in manufacturing activity in 2025 following record growth at the end of last year.

Green economy

UNDP and Eldik Bank Partner to Advance Green Finance in Kyrgyzstan

Kyrgyzstan is taking a significant step toward building a greener and more resilient economy. On September 9, state-owned Eldik Bank and the United Nations Development Programme (UNDP) signed a memorandum of understanding to deepen cooperation in sustainable finance. The agreement aims to mobilize climate-related investments, develop sustainable financial products, and integrate Environmental, Social, and Governance (ESG) principles into Kyrgyzstan’s banking sector. It also outlines plans for joint research and knowledge exchange in climate finance, including the creation of tools to assess climate risks in lending operations. This initiative supports Kyrgyzstan’s updated Nationally Determined Contributions (NDC 3.0) under the Paris Agreement, which commit the country to reducing greenhouse gas emissions, expanding renewable energy, and enhancing climate resilience. It also aligns with the National Development Program through 2030, which prioritizes expanding the regulatory framework for green finance. “UNDP supports the development of sustainable finance solutions that reduce the carbon footprint of the economy, enable the green transformation of businesses, and create new opportunities for investment,” said Alexandra Solovieva, UNDP Resident Representative in Kyrgyzstan. For Eldik Bank, the partnership represents more than a financial commitment; it is a strategic step toward becoming a catalyst for climate-conscious economic development. “Together with UNDP, we aim to introduce products that promote green growth and sustainable business development for our clients,” said Ulanbek Nogaev, Chair of the bank’s Management Board. Green finance is gaining traction across Central Asia, a region still heavily reliant on extractive industries but increasingly vulnerable to climate risks such as water scarcity, extreme weather, and glacial melt. Kyrgyzstan’s efforts to empower domestic financial institutions signal that achieving climate goals will require more than policy declarations; it will demand concrete investments and innovation. The Eldik Bank-UNDP partnership also underscores the importance of regional cooperation. Similar initiatives are under discussion in neighboring countries, as Central Asia seeks to attract international capital for renewable energy, sustainable agriculture, and green infrastructure projects. If effectively implemented, Kyrgyzstan’s model could serve as a regional benchmark, demonstrating how national banks can help transform global climate commitments into tangible, growth-oriented outcomes.

Bilateral Relations

Uzbekistan and United States Leaders Discuss Expanding Strategic Partnership

According to the office of President Shavkat Mirziyoyev, the Uzbek and U.S. presidents held a telephone conversation on Friday, focusing on ways to deepen their countries’ strategic partnership across economic, security, and cultural fields. The details of the call were provided by the Uzbek president’s office. Strengthening Economic Ties The presidential office reported that both leaders emphasized opportunities to expand trade and investment. Bilateral trade grew by 15% in 2024, and the two sides signaled interest in building on that momentum. Prospective projects span civil aviation, mineral resources, energy, agriculture, digital technologies, finance, and education. Later this month, meetings are expected between Uzbek representatives and leading U.S. companies to explore long-term cooperation. Security and Regional Cooperation According to the statement, security issues also featured prominently in the conversation. The two presidents noted ongoing joint work against terrorism, extremism, and illegal migration. They also exchanged views on regional cooperation in Central Asia, highlighting the role of the “C5+1” dialogue format that brings together the United States and five Central Asian countries. Cultural and Humanitarian Exchanges The Uzbek president’s office noted that the discussion touched on expanding cultural and educational links. Branches of U.S. universities are operating in Tashkent, providing new opportunities for academic exchange. Looking ahead, the leaders noted with satisfaction that Uzbekistan’s national football team will participate for the first time in the 2026 World Cup, which the United States will be the main host of. A Growing Partnership Since Mirziyoyev assumed the presidency in 2016, Uzbekistan has pursued a more open foreign policy and a program of internal reforms aimed at modernizing the economy and improving governance. These changes have created new opportunities for cooperation with Washington. The United States, for its part, has supported regional initiatives through the C5+1 framework, while also seeking closer ties with Tashkent in areas such as counterterrorism, economic development, and education. American universities and companies have increased their presence in Uzbekistan, and cultural exchanges have expanded steadily in recent years. Next Steps The president’s office stated that President Mirziyoyev invited President Trump to pay an official visit to Uzbekistan. Both leaders agreed to maintain high-level contacts and continue advancing joint projects and programs. According to the Uzbek president’s office, the conversation was held in a constructive and friendly atmosphere, underscoring a shared interest in further strengthening Uzbek-American relations.

Finance

Kyrgyzstan Enacts Code to Boost Financing for Female Entrepreneurs

Kyrgyzstan has officially enacted the Code on Financing Women Entrepreneurs, a regulatory framework aimed at expanding women’s access to financial products from banks and microfinance institutions. The National Bank of the Kyrgyz Republic (NBKR) will oversee the implementation of the Code, which it regards as a milestone in institutional support for women’s entrepreneurship. Speaking at the launch ceremony, NBKR Chairman Melis Turgunbaev emphasized the crucial role of women in the country’s economy, particularly within the small and medium-sized business sector. “The launch of the Code, backed by the recent legislative recognition of the concept of ‘women’s entrepreneurship,’ creates a solid institutional foundation for mobilizing financial sector resources and directing them toward the development of this strategically important segment of the economy,” Turgunbaev said. The legal definition of women’s entrepreneurship was introduced into Kyrgyz legislation only last year. Lawmakers noted that female entrepreneurs often face structural challenges, such as balancing business activities with domestic responsibilities and limited access to property assets that can serve as loan collateral. According to the Ministry of Economy and Commerce, the typical Kyrgyz female entrepreneur is between 40 and 50 years old, has a secondary education, runs a small or medium-sized enterprise, often individually and began her business career before turning 30. The new Code modifies financial regulations to simplify access to credit for women. Key provisions include expanded opportunities for unsecured lending and the removal of a previous requirement for financial institutions to set aside 1% of the loan amount for potential losses when lending to women. The NBKR believes these changes will make financing for women both strategically and commercially attractive across the banking sector. “Our actions are not just advocacy, they are about building sustainable market mechanisms,” said Turgunbaev. “The National Bank is establishing economically sound conditions that incentivize the entire financial sector to support women entrepreneurs.” According to the NBKR, the Code applies specifically to enterprises in which women own at least 51% of the capital and make up at least 51% of the workforce. Financial institutions are encouraged to offer more accessible, long-term loans to qualifying women-led businesses on preferential terms. However, The Times of Central Asia has learned that the Code currently lacks a dedicated mechanism to support women facing loan repayment difficulties. Nonetheless, the regulator clarified that this does not restrict banks from granting relief measures. “The NBKR will not prevent commercial banks from offering concessions to women entrepreneurs with overdue loans under programs focused on financing women-led businesses,” a spokesperson said. The National Bank plans to coordinate the Code’s rollout and ongoing refinement, emphasizing that support for women entrepreneurs is viewed as a long-term institutional priority.

Digitalization

The Next Steps for Central Asian Finance: Interview with Azerbaijani Fintech Leader Dr. Fuad Karimov

This week The Times of Central Asia will be attending the CAMCA Regional Forum, which this year is being held in Ulaanbaatar, Mongolia. The CAMCA network is a collection of professionals and policymakers dedicated to sharing ideas, knowledge and inspiration to accelerate the development of the Eurasia region; its name stands for Central Asia, Mongolia, the Caucasus and Afghanistan. Ahead of the Forum, The Times of Central Asia spoke with Dr. Fuad Karimov, Regional Managing Director of the payment software company Xsolla, about what the CAMCA program means for the Eurasian finance industry, and how Azerbaijan can work more closely with Central Asia. TCA: What condition do you feel fintech spaces are currently in, particularly in the Eurasia region? FK: Fintech [financial technology] across the CAMCA region is accelerating. Countries like Kazakhstan and Uzbekistan have made significant progress in regulation and adoption. In Azerbaijan, key drivers include state-led digitalization and innovative companies like PashaPay and Birbank, which are transforming consumer payment behavior. Cross-border transfers, mobile banking, and contactless solutions are increasingly common across the region. In what areas do you think CAMCA initiatives can help them improve? CAMCA can create platforms to harmonize financial regulations, facilitate cross-border fintech testing, and promote knowledge exchange. It can also help reduce friction in currency conversion. Regional collaboration can attract investors from the West and Asia. Priorities should include cybersecurity, financial literacy, AI in finance, and coordinated exploration of digital currency pilots like e-Manat, e-Tenge, and e-Soum. You're moderating a session on harnessing fintech in CAMCA markets. What topics do you expect to touch upon, and who are you looking forward to hearing from? We’ll cover the rise of digital national currencies (CBDCs), crypto regulation, exchange rate risk, and the impact of AI on lending, compliance, and fraud prevention. I’m especially looking forward to hearing from fintech leaders in the CAMCA region — each representing diverse policy environments and innovation models. Where do you see opportunities for Central Asia to work more closely with Azerbaijan? There’s strong potential in co-developing cross-border payment systems, digital identity frameworks, and startup accelerators. Azerbaijan can share experience in building public-private fintech partnerships, while Central Asia offers scale and growing demand. Aligning exchange rate mechanisms, regulatory approaches, and education systems will enhance regional integration. The CAMCA platform is an ideal space to turn these synergies into actionable policy and investment opportunities.