The Chairman of NurBank, Gulnara Musataeva, in an interview with inbusiness.kz, discussed the terms under which the bank finances MSMEs, the types of business projects eligible for funding, and the advantages of syndicated and collateralized lending.
– Gulnara Abaevna, how was the year 2023 for NurBank?
– The past year has been quite successful for NurBank. According to the audited consolidated financial statements, the net profit of the bank amounted to over 7.7 billion tenge. By the end of 2023, our loan portfolio grew to 300.9 billion tenge (gross). The bank maintains sufficient capital reserves and liquidity. As of the beginning of 2024, NurBank's capital adequacy level stood at 24.8% under the standard of 10%, and the current liquidity level under the standard of 30% was 234%. These financial indicators confirm the bank's stability.
– The central bank continues to gradually lower the base rate. Does this affect business demand for credit products? Will loan rates decrease?
– The reduction in the base rate in 2023 cannot be considered significant; funding remains quite expensive for banks. The high base rate makes the average weighted market rates high. As a result, there is deferred demand for credit funds in corporate business today. Additionally, the corporate lending market has a high concentration of demand for borrowed funds in certain sectors of the economy and a need for long-term funding. The MSME sector also has deferred demand for borrowed funds. Assuming the current state of the global economy and political climate continues, the trend towards lowering the base rate will persist, and we hope that credit products will become more accessible to businesses this year.
– What projects are currently in NurBank's credit portfolio?
– We strive to diversify the credit portfolio across industries and production segments. The structure of the corporate loan portfolio includes food and beverage manufacturing, construction, communication services provision, extraction, and processing.
Recently, NurBank financed the construction of a large poultry farm belonging to LLP "AiMar Kus" in the city of Shymkent. The poultry farm's design capacity is 72 million table eggs per year, with plans to expand to 220 million eggs. In the future, the enterprise will significantly contribute to the region's food security and create new jobs. The project's total cost, including equipment and necessary infrastructure development, amounts to almost 4.8 billion tenge. The complex is situated on a 5-hectare site. The total building area is nearly 13,000 square meters. NurBank funded the project with 3.5 billion tenge, opening a credit line where 3 billion tenge was allocated for the construction of the poultry farm, purchasing equipment, and 500 million tenge for replenishing working capital. The project is part of the National Project for Entrepreneurship Development for 2021-2025.
Traditionally, the priority for NurBank is MSME financing. The MSME unit's range of work is extensive, and we finance a variety of business projects: from small coffee shops to production plants. However, the priority is given to financing socially significant projects. NurBank actively lends to dental and medical clinics, private schools, kindergartens, educational and development centers. Often, these fields achieve success thanks to women entrepreneurs. We associate this trend with the creative aspect of women's entrepreneurship. It is not surprising that we emphasize lending to women entrepreneurs, as we understand their needs well. Loans enable our clients to acquire equipment, purchase goods, or lease premises. Statistics show that women are very disciplined in meeting their loan obligations and are interested in building long-term partnership relations with the bank. We have noticed that women often start businesses based on problems they themselves encounter. Today, women are becoming a point of growth for stable and reliable MSMEs.
– Gulnara Abaevna, you mentioned financing startups? Is NurBank willing to lend to startups?
– We fund startup businesses provided there is adequate collateral coverage, continuous operational activity for at least the last 12 months, and one of the conditions: in case of reorganization of a running organization, if an existing organization plans to conduct a new activity, or if the organization seeking funding is affiliated with existing organizations.
Often, startup founders are young, ambitious individuals. They possess a lot of energy and enthusiasm, but sometimes lack financial knowledge. At NurBank, we are interested in reviewing projects and startups by young, proactive entrepreneurs. Our main advantage is a personalized approach. Our specialists strive to understand the client's business nuances and propose the most suitable financing conditions. They are pleased to consult and assist in preparing a business plan. We fund very "unusual" startups. For example, in Kostanay, we provided a loan to a veterinary clinic for acquiring modern diagnostic equipment. At the time of purchase, such advanced ultrasound diagnostic equipment was not yet used in the city, allowing examinations for cats, dogs, rodents, and even some exotic animals. The clinic's founder is a young and highly professional veterinarian.
– The President of Kazakhstan highlighted the necessity of more actively applying syndicated lending mechanisms, with which the Agency of Regulation and Development of Financial Market plans to expand the use of syndicated loans. What work is being conducted by NurBank in this area?
– We believe that the loan portfolio of the second-tier banks could be broader, but the capabilities of state programs through the "Damu" fund are limited. To expand financing for investment projects, often planned for an extended period and requiring significant borrowed funds, syndicated loans have been authorized at the legislative level in Kazakhstan. Syndicated loans are interesting as they allow banks to pool their resources to finance large projects. Several banks can share the risks, and consequently, the financing volumes for a project. "Syndicates" are efficient with their collaboration.
Last year, NurBank, in partnership with the Development Bank of Kazakhstan and Bank CenterCredit, signed a tripartite letter of intent to provide funding within the framework of a syndicated loan to RG Brands Kazakhstan LLP. The funding will be directed towards expanding the capacities of new production lines and exporting products to the Republic of Uzbekistan. The total financing volume is 30.4 billion tenge.
– Are there any other ways to reduce loan rates for MSME representatives?
– Government programs help mitigate rates. We actively lend to MSMEs within government programs supporting domestic businesses, implemented by the "Damu" fund. Typically, through the "Damu" fund, we subsidize the interest rate, reducing it for our clients to 7-8% per annum (APRC from 7.2%, from 8.2%). Additionally, the "Damu" fund guarantees MSME loans up to 85% of their amount. Loan issuance volumes are growing annually: according to our statistics, every second project is financed under government programs through subsidies/guarantees, or both financial tools are used simultaneously.
– Do you think it is necessary to reduce the state's presence in the credit market today?
– Reducing the state's presence in the credit market is an evolutionary process, and over time, the presence will transform, setting the development direction defined within the overall market and state development strategy.
– Are there prerequisites for banks, including NurBank, to more actively lend to businesses today?
– As we mentioned earlier, there is deferred demand for credit funds in the market, so there are, of course, prerequisites. However, there are also checks and balances in the financial market established by the regulator to maintain market stability. For example, the regulator has changed the approach to assessing the creditworthiness and financial stability of borrowers in MSME financing projects, resulting in the need for higher reserves for them. Reserves are created at the expense of banks' profits, thereby reducing the profitability of lending. In addition, regulatory demands on funding sources have changed, affecting banks' ability to direct resources to lending in various areas. Concurrently, with the fintech and digital service developments, the borrower’s customer journey becomes simpler, and over time, banks' service costs for clients will diminish, boosting lending growth.
Today, NurBank is focused on building a robust foundation for digital business development, following the classic approach of people, processes, and technology. This basis will facilitate expanding MSME and corporate business lending in the future.