Nurbank's Head, Gulnara Musatayeva, explained the benefits of this product and under what conditions retail borrowers and SMEs can ease their credit burden.
Today, in Kazakhstan, loan refinancing is a highly sought-after banking product. According to the CEO of Nurbank JSC, Gulnara Musatayeva, this is due to two main factors. Firstly, during the COVID-19 pandemic, some Kazakhs lost part of their income, while consumer expenses continue to rise. Secondly, entrepreneurs faced increased logistics costs, component parts' expenses, and currency market instability. To somehow reduce their budget strain, they opted for loan refinancing. In a conversation with a Kapital.kz business information center correspondent, the head of Nurbank shared when it is profitable to decide on loan refinancing and under what conditions it can be done at the bank.
— Gulnara, can it be said that the demand for loan refinancing in your bank has increased?
— In 2022, our bank refinanced 30% more retail loans than in 2021. This data undoubtedly confirms the demand for this banking product. We assume borrowers choose Nurbank for refinancing due to the absence of loan arrangement fees and attractive rates.
In the SME sector, refinancing occurs when an entrepreneur needs additional business financing or to reduce their credit load. Recall that last year was quite turbulent for entrepreneurs: due to logistics disruptions, dollar exchange rate fluctuations, and market uncertainties, many companies suffered financial losses. As a result, many SMEs decided to refinance their loans.
— Under what conditions do you refinance loans at your bank?
— For retail clients, when refinancing another bank's loan, the loan arrangement fee is 0 tenge, with a rate of 1% lower than our bank's standard lending terms from 2023.
SME loan refinancing is carried out for loans intended for working capital increase, repair and reconstruction of fixed assets, and investment purposes. Considering the base rate increase, Nurbank considers reducing the refinancing rate individually, focusing on business specifics. Overall, we always offer borrowers the optimal conditions tailored to them: extending the loan term, reducing monthly payments, improving current loan terms, and providing a flexible schedule.
— Let's focus on retail borrowers. What kinds of loans can they reduce their credit load on? Can you give an example of why it's beneficial for borrowers to go through this procedure?
— Mortgages, car loans, secured and unsecured loans can be refinanced. Refinancing will benefit those borrowers whose interest rate difference between the initially taken and refinanced loans is 2-3% or more annually. Ideally, the loan should be taken for several years. There is no point in refinancing if the rate difference is below the mentioned level.
Borrowers need to carefully study the refinancing conditions offered. To avoid paying for hidden fees, we recommend they find out the monthly payment size upon refinancing. For example, at Nurbank, an arrangement fee applies only to the "additional" amount, not the whole loan amount. This is our competitive advantage. Our bank's borrower can not only close existing loans from other banks but also receive a certain amount to cover their current financial needs. A car loan can be refinanced as an unsecured loan, releasing the vehicle from pledged obligations.
Our average amount for refinancing unsecured loans is 2.9 million tenge, and for secured loans—9 million tenge.
— Please clarify, can your bank refinance a loan with overdue debt or adverse credit history? How does credit history, in general, affect refinancing terms?
— Objectively, overdue debt presents challenges, yet Nurbank always considers each project individually. Key conditions positively influencing the review of SME projects are the presence of liquid collateral and a detailed, effective business plan. Retail clients with adverse credit history can refinance a loan if the delay does not exceed 60 days.
— Based on your experience, can refinancing reduce a loan's burden by several million...
— Let's provide an example. If a loan is taken from another bank for 1 million tenge over 48 months, the monthly payment would be 45,250 tenge, with a total overpayment of 1,172,000 tenge. When refinancing this loan at Nurbank, the monthly payment will not exceed 34,852 tenge, with an overpayment of 672,896 tenge. The benefit is evident.
— How many retail borrowers have already used refinancing at your bank last year?
— In 2022, 1,921 Kazakhstanis refinanced retail loans for a total of 7.4 billion tenge.
— Are there any limits on loan amounts or terms when refinancing?
— For retail borrowers, limits depend on the type of credit product—usually for unsecured loans, the limit is up to 5 million tenge, and for secured loans—up to 50 million tenge. Beyond this amount, we consider applications on an individual basis. There are no such limit restrictions for SMEs; we assess the business plan and available collateral.
— In your estimation, will demand for such a service grow?
— According to the First Credit Bureau, the volume of consumer unsecured loans issued in 2022 was 6.7 trillion tenge, which is 16.8% higher than in 2021. As of January 1, 2023, the portfolio of unsecured loans previously issued by banks, MFIs, and credit partnerships reached 7.4 trillion tenge.
Statistics show that every fifth car is sold on credit, and a huge amount of household appliances and furniture is purchased daily on installment plans. Therefore, we hypothesize that refinancing will be in demand in the future as well. It can be said with confidence that this is an important product for our market.
Overall, SMEs always want to improve business conditions and appreciate our loyal attitude towards them.
Source: https://kapital.kz
