Kyrgyz Banks Hold $1.3 Billion in Liquidity, but Businesses Lack Long-Term Financing
Kyrgyzstan’s banking sector holds a substantial volume of liquidity, yet small and medium-sized enterprises (SMEs) continue to face a shortage of development financing, according to a report by the Asian Development Bank. The ADB estimates that the system has accumulated around $1.3 billion in excess liquidity. At the same time, more than 45% of bank loans, and a similar share of microloans, are directed toward consumer needs, while lending to industry has steadily declined. Representatives of the banking sector say they are familiar with the report’s findings but consider them only partially accurate. “Commercial banks in Kyrgyzstan do indeed have sufficient funds, but the bulk of these deposits are short-term. The figures mentioned in the report mainly refer to balances on corporate accounts that are not time-bound, they are demand deposits and can be withdrawn at any moment. As for long-term funding for large-scale projects in industry and agriculture, banks lack such resources,” Anvar Abdraev, President of the Union of Banks of Kyrgyzstan, told The Times of Central Asia. According to Abdraev, this helps explain the perception that banks are reluctant to lend to industry and SMEs. He added that large businesses generally do not face financing constraints, as they tend to secure funding from international financial institutions and intergovernmental funds on concessional terms, often bypassing commercial banks. Banking sector representatives also point to structural challenges on the borrowers’ side, including underdeveloped business plans, which increase credit risk. In addition, a significant share of applications comes from startups, which banks classify as high-risk projects. Another limiting factor is the lack of sufficient liquid collateral among entrepreneurs. Banks also emphasize that non-performing loans in their portfolios are maintained at around 5-6%, prompting stricter borrower assessment criteria. As a result, the loan approval process for businesses can be lengthy, and rejection rates remain high. “The growth rate of consumer lending does indeed exceed the volume of loans directed toward business development. This is primarily because consumer loans are much easier to obtain today. This has largely been made possible by new banking technologies. Consumer loans can be issued online using remote identity verification. Moreover, the average size of such loans is significantly smaller than that of business loans,” Abdraev added. Thus, despite the high level of liquidity in the banking system, the shortage of long-term funding, combined with borrower-related risks, continues to constrain lending to Kyrgyzstan’s real sector.
