By the end of 2024, the banking sector of Kazakhstan issued 18.9 trillion tenge in new loans to businesses, reports the Association of Financiers of Kazakhstan. This marks an increase of 18.5% or 3.0 trillion tenge compared to 2023. Notably, 96% of the new loans issued to businesses were provided by second-tier banks.
The primary driver of credit growth for businesses, categorized by borrower type, was large enterprises (+23%), spurred by a gradual decline in the cost of borrowed funds, increased average loan application sizes (rising to 8.8 billion tenge from 7.3 billion tenge at the beginning of the year), the execution of investment projects, deferred demand from 2023, and a higher approval rate.
In terms of economic sectors, the entire growth for large businesses was concentrated in three areas: trade (+816 billion tenge), industry (+503 billion tenge), and transportation (+104 billion tenge), reflecting positive dynamics in their contributions to GDP (trade grew by 9.1%, industry by 2.8%, and transportation by 8.5%) and significant shares in the economy (19%, 26%, and 6%, respectively).
The issuance of new loans in the small and medium-sized business segment increased by 15% and 18%, respectively, against the backdrop of mixed changes in resource costs, a decline in loan applications (due to the temporary unavailability of funding under government programs as limits were utilized), deteriorating financial conditions, and lower approval rates.
According to the statistical analysis by the National Bank of Kazakhstan for 2024, the share of stable enterprises among small businesses dropped to 17.6% (from 19.5% at the beginning of the year), while for medium-sized enterprises it fell to 16.9% (from 17.4%).
Amid the implementation of large investment projects, a higher relative growth was observed in the acquisition of fixed assets (+37%), although replenishing working capital still accounted for the largest share (66% of all issued loans) due to persistently high rates in the system and the necessity of ensuring operational activities (purchasing raw materials, materials, and goods, covering logistics costs, maintaining necessary liquidity levels, etc.).
Meanwhile, the pricing conditions for loans to large businesses were the most sensitive to changes in the base rate (see below), while for SMEs, there was no clear transmission, likely due to available subsidized guarantees that significantly reduce the final cost of their loans.
Against the backdrop of the availability of government programs, the majority of loans to small businesses were long-term (52%), whereas the shares for medium and large businesses were significantly lower.
In the current quarter, a decrease in loan demand from SMEs is expected due to the temporary unavailability of funding under certain government programs and the traditional slowdown in business and consumer activity. However, demand from large businesses may remain stable due to the implementation of significant investment and infrastructure projects.
Double-digit growth in business lending continues across all business segments (small, medium, large) and across nearly all economic sectors (with a decline only recorded in construction at 4.7%), attributed to the easing of pricing conditions for loans (for certain entities), the launch of new products (collateralized and non-collateralized scoring products for businesses), and the active penetration of lending among entrepreneurs (the number of business borrowers rose to 531.7 thousand from 440.8 thousand at the beginning of the year), alongside regulatory measures to stimulate business lending.
Moreover, two-thirds of the attracted business loans (66% of all loans issued to businesses) are intended for replenishing working capital due to the impracticality of taking "long-term" loans and the predominance of the trade sector in the economy (26%).
Following the increase in the base rate, businesses' assessments of the pricing conditions for loans (interest rates, additional fees) and non-pricing conditions (loan amount and term, requirements for the borrower's financial condition and collateral) have worsened.
At the same time, high pro-inflationary risks in the economy (due to rising prices for regulated services, increased business costs from higher prices for raw materials, electricity, and imported components, high fiscal expenditures, and the ongoing transfer of currency depreciation into prices) are likely to hinder the normalization of monetary conditions in the first half of the year, restraining any improvement in loan pricing conditions. Nevertheless, an increase in loan demand among enterprises in the manufacturing, agriculture, and construction sectors is forecasted for the current quarter.