Impact Story

The National bank of Kyrgyz Republic (NBKR) requested FIRST assistance to design a medium-term microfinance strategy to influence the development of the sector. Following the design of the strategy, a Working Group worked on monitoring and overseeing its implementation. This group consisted of donor, government and microfinance institution (MFI) representatives and they met once a month. A local technical secretary coordinated the meetings and reported to FIRST monthly on the progress.

The consultants surveyed the microfinance sector, largely by comprehensive interviews with all stakeholders including many of the donors such as Asian Development Bank, European Bank for Reconstruction and Development, United States Agency for International Development, World Bank Group and many others. Secondly, they developed a SWOT analysis for the sector and this in turn drove the development of the strategy. Finally, they developed an action plan for implementation of the Strategy. The Government formally adopted the strategy by decree on December 30, 2005.

FIRST’s technical assistance to the Working Group ended as of 31 January 2007, however the group will continue to meet to address the issues in the sector.

Microfinance sector

In 2002, the law on microfinance organizations in the Kyrgyz Republic was adopted and NBKR was given regulatory and supervisory authority over these institutions and exchange offices. 18 regulations have been issued regarding non-bank financial institutions (NBFIs) by the NBKR since this law was adopted.

The Kyrgyz Republic’s microfinance sector is comprised of microfinance organizations and specialized finance and credit institutions, including the Kyrgyz Agricultural and Finance Corporation (KAFC), the Financial Company on Supporting and Developing Credit Unions (FCSDCU), credit unions and pawnshops.  In 2004, 104 microfinance organizations were registered (78 micro-credit companies and 26 micro-credit agencies), 305 credit unions, 116 pawnshops, the KAFC and FCSDCU. Small MFOs, having small staff and less than 100 borrowers, operated in the market alongside large MFOs like FINCA with more than 20 thousand borrowers. There were also more than 300 CUs operating in the country.

Thus, the microfinance market was not clearly segmented from the rest of the financial market. Although there was a common understanding about the type of clients - consumers of microfinance services, there were no specific providers of these services that monopolized this market.

Over ten years of the development, the microfinance sector achieved significant success. Kyrgyzstan is the first country in Central Asia where both the law on microfinance organizations and the law on credit unions have been adopted. This demonstrates significance that the state attaches to the development of the microfinance sector. The microfinance market in this country is characterized by a wide diversity of participants engaged, and the Government of the Kyrgyz Republic, the National Bank of the Kyrgyz Republic and international donors actively support the development of this sector.

Lessons Learned

• This project is another good example where FIRST could fill a gap not covered by other donors. Despite almost $86 million invested in the sector in recent years by bi-lateral donors (including SECO, GTZ, DFID, USAID) and multi-lateral development banks (including ADB, World Bank, EBRD), FIRST was the program that developed a strategy for development of the sector.
• The establishment of a Working Group comprising key stakeholders (and donors) was a major factor in ensuring the development of a comprehensive strategy and a rapid buy-in to support it.
• This technical assistance was also an excellent example of a “short, sharp intervention” by FIRST, delivered through excellent consultants, with a substantial outcome.

Reports

• The Final Report which describes the sector, analyses strengths, weaknesses and opportunities and threats (SWOT analysis), proposes the strategy and include an Action Plan
• A second report “Prilogeniya” that repeats the Action Plan (in table format) but also adds a useful summary of technical assistance for other donors in the past and a summary, donor by donor, of their future plans, if any, to continue to support growth of the microfinance sector