ADBI Working Paper 904
Y. Dosmagambet et al.
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The seemingly simple procedure for obtaining a credit guarantee is actually quite
complex due to the multiple levels of approval from the banks, the Fund itself, and
the regional and central governing bodies, which Figure 3 summarizes and is still
applicable. The Government insists that multiple evaluation stages are necessary to
ensure the successful process of the selection to minimize the risks for all parties;
however, it also creates challenges, such as increased red tape and bribery
opportunities, at both the regional and the central government level.
2.4 Challenges of the CGS that the “Damu” Fund Provides
The credit guarantee system is facing several challenges based on the way in which the
“Damu” Fund established it:
(i)
Strict eligibility and low coverage
: Now, the government requires no arrears
on other loans or leasing contracts as well as no tax arrears or debts in pension
or social contributions to the budget. There have been positive movements to
expand the list of sectors eligible for a credit guarantee through pilot programs
such as “Damu-Optima,” which allows entrepreneurs from sectors such as
services, trade, catering, construction, and so on that are not part of the prioritized
sectors of the “Business Road Map 2020” program. In 2016, this program
covered 63 projects with a total loan amount of KZT1 bln, KZT320 mln of which
was mostly in the trade sector. However, the small share of guaranteed loans in
the overall portfolio shows that the strict conditions for eligibility drive most
entrepreneurs to take out subsidized and conditional loans, and the use of loan
guarantees has not caught up yet.
(ii)
