Exclusive interview on Business Roadmap 202016 september 2011, 02:40
Background: Business Roadmap 2020 is being implemented by the Kazakhstan’s Government to support S&MBs through milder loans in the wake of the global financial crisis. The Government subsidizes new loans and earlier extended loans to S&MBs. At the 1st stage of the Program (2010-2014) the Program seeks to support new business initiatives; resuscitate the S&MBs sector; and bolster exports-related businesses. By July 25 a total of 484 applications had been approved, with the loans totally worth $1.1 billion, according to Economy Development Minister Kairat Kelimbetov. With 60 projects, Karaganda oblast was the leader by the number of approved applications for loans by July 25, followed by Aktyubinsk oblast (59 projects), Pavlodar oblast (50 projects), and Almaty (44 projects).
Stanislav Kossobokov, Vice Chairman of the Board at Halyk Bank of Kazakhstan, talks to Tengrinews.kz on advantages of the Program for prospective borrowers and the Bank.
Question: What are the major benefits of the Program for S&MBs? Could you compare a conventional loan and a loan under the Program?
Answer: The major benefit is the opportunity to get a loan, with 5-7% of the annual percentage rate (APR) subsidized by the state. For instance, you apply for a loan of $68 000 for a three-year period at 14%. Should the borrower rely on conventional Equal Monthly Installment (EMI) scheme, the interest payable to the bank will make up $15 600. With 7% of the APR subsidized by the state, the interest payable to the bank will only make up $7 400. The subsidy period makes up 3 years and may be further prolonged up to 10 years. An individual loan amount should not exceed $30.6 million for one particular project (in line with the Governmental decree of July 11, 2011).
Businesses facing difficulty paying back loans in the wake of the global financial crisis can apply for state subsidies to cover part of the APR on loans obtained before January 1. 2010. Alternatively, they can apply for tax deferrals of up to three years with no penalties imposed. The state subsidizes tenge-denominated loans obtained at up to 12%: the state subsidizes 5%, with the rest 7% payable by the business. Besides, the state also subsidizes foreign currency-denominated loans with the APR of up to 10%: the state covers 5%, with the other 5% payable by the business.
Exports-related businesses can also apply for the state support to their operations. The Government subsidizes 5-8% of the APR for earlier obtained loans.
Q: How big is the share of Halyk Bank’s participation in the Program? (list of participating banks)
A: We had received 164 applications (including 144 from S&MBs) by early August. As of early August the Bank approved 150 of them (including 130 from S&MBs). 87 (75 from S&MBs) of the applications approved by the Bank were granted a green light by the Ministry of Economic Development and Trade [ultimate administrator of the Program]. As of early August 63 (54 from S&MBs) were already receiving subsidies within the Program. By early August actual subsidies received totaled $8.84 million. As of July 20, 2011 the Bank accounted for 15% of all applications approved under the Program across the country from those seeking support to new business initiatives; 40% of all applications by those seeking economic resuscitation; 34% of all applications to get support to exports-related businesses.
Q: What is the breakdown of businesses turning to the Bank for subsidies by their form of incorporation?
A: About 70% of applications were submitted by LLPs; 14% were filed by sole proprietors; there is a minor amount of applications from OJSCs and farmers.
Q: Could you name some businesses that obtained subsidies under the Program?
A: ShinLine LLP [ice cream making facility], Kiliko Tun [construction and architectural design services], Kirov machinery building plant, Mediker LLP [medical service for voluntary insurance policy holders]; Ust-Kamenogorsk Condenser Plant…
Q: What are benefits for the Bank?
A: The Bank has quite a substantial amount of liquidity; however it is short. The Bank can only provide long-term loans at 14-15%. With the Program in place, the Bank can offer its clients a perfect loan at just 7%.
Q: What are the regular procedures to obtain a loan under the Program?
A: A prospective client can apply directly to the Bank with all the documents listed on the Bank’s website. The Bank carefully considers both the application and the Project to be financed. In case the project is approved by the Bank, the applicant turns to his or her respective regional governor’s office [regional governors’ offices coordinate the Program locally]. The Governor’s Office forwards the application to the Regional Coordination Council. Should the said Council approve the application, it is further forwarded to the Ministry of Economic Development and Trade for the final consent. If the Ministry approves the project, the Bank and the applicant proceed with signing a respective agreement to formalize the loan.
According to the recent statistics of the National Bank, 86% out of 100% borrowers applying for loans do obtain them.