Lending to agrarian sector in focus of kazakh banks

Kazakhstan’s agrarian sector has become the most dynamic one on the country’s credit market thanks to the state support.

As of February 2015, the portfolio of bank loans to the agrarian sector amounted to 480 billion tenge with the 12.2-percent growth during the year or 52.3 billion tenge (185.8 tenge = $1), , Ranking.kz analytical service reported.

The gross profit of Kazakhstan’s medium and large agrarian companies exceeded 20 billion tenge, increasing by 66 percent in 2014 compared to the same period of 2013. The profitability of the sphere was 8.2 percent in 2014.

The availability of loans for Kazakhstan’s agricultural enterprises in 2014 was the highest one for the last five years, the statement said.

The average yearly fee rate on the long-term loans in this area stood in Jan.-Dec. 2014 at 10.4 percent.

Between 2010 and 2013, the said rate remained within the 12-13 percent range.

According to Kazakhstan’s National Bank, in Feb. 2015, the average weighted cost of loans for large agrarian enterprises rose up to 13.9 percent, as in winter the lending of this area traditionally becomes more expensive.

The Kazakh banks’ interest in this area is fueled by large-scale support from the state, said the report.

In 2014, Kazakhstan registered the record state budget expenditures on agriculture, i.e., some 349 billion tenges, or 35 percent more than in 2013.

The state will in 2015 additionally allocate about $200 billion tenges (to cut the credit load) for the financial improvement of the companies in the agro-industrial sector.

The main tools of recovery will be the extension of the period of repayment and reducing the interest rate on the loan and leasing obligations.

KazAgro holding is the main operator of the program for financial recovery of the agricultural business. It sets the interest rate on problem loans at no higher that 3 percent per annum (in Kazakh tenge) and seven percent of these funds are repaid by the state in the form of subsidies.

Further, KazAgro refinances the obligations of the agricultural complex entities by signing new loan agreements with rate of return of no more than seven percent per annum.

The period of repayment of loans is extended to nine years, fines and penalties are written off as part of the financial recovery.

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