亚开行-吉尔吉斯共和国的金融包容性，金融监管，金融知识和金融教育（英文）-2018.7-35页

Summary of Financial Inclusion, Financial Regulation, Financial Literacy, and Financial Education in the Kyrgyz Republic

Core Content

This working paper provides an analysis of the financial inclusion, financial regulation, financial literacy, and financial education landscape in the Kyrgyz Republic. It highlights the challenges and opportunities in the financial sector, focusing on the banking and microfinance sectors, as well as the broader financial market environment.

Main Points

Financial Inclusion

• Financial inclusion is a relatively new concept in the Kyrgyz Republic, with initial efforts emerging after the political upheaval of 2010.
• The country has seen some progress, with the banking sector rebounding and savings mobilization increasing.
• However, financial inclusion remains limited due to structural and socioeconomic challenges.
• Over 25% of the population lives below the poverty line, and 13.9% live in multidimensional poverty.
• Income inequality is significant, especially between rural and urban areas, which restricts access to financial services for rural populations.
• Only 3% of the population saves at financial institutions, and 10% borrows from formal financial institutions.
• The population prefers to borrow rather than save, with the ratio of debt to disposable income increasing from 13.2% in 2008 to 26% in 2016.

Financial Sector Overview

• The financial sector in the Kyrgyz Republic includes the banking sector and non-bank financial institutions such as microfinance organizations (MFOs), insurance companies, and the stock exchange.
• Banks dominate the financial sector, with 91.2% of total financial assets held by banks.
• The banking sector has grown steadily, with assets reaching 42.6% of GDP in 2016.
• As of 2016, the number of commercial banks was 25, with two being state-owned. The five largest banks hold 55% of the sector's assets and 49% of the credit portfolio.
• The level of financial intermediation has increased, with loans and deposits growing in relation to GDP.
• Non-performing loans (NPLs) amounted to 8% of total loans in 2016, with 3% being overdue for over 90 days.
• Dollarization of loans is still high, with 44.5% of the credit portfolio in USD as of 2016.
• Credit concentration is a key vulnerability, with 68% of total credit going to retail, agriculture, and industry.

Microfinance Sector

• The microfinance sector started developing in the mid-1990s with support from international donors.
• The number of MFOs peaked at 651 in 2011, but declined due to regulatory tightening and transformation into banks.
• As of 2016, the number of MFOs was 278, with 162 being microfinance organizations and 116 credit unions.
• Group lending is a common practice, with 53–71% of MFOs' credit portfolios being collateral-free.
• Women make up 70% of MFO borrowers on average from 2006 to 2016.
• MFOs face challenges such as high operating costs (20% of credit portfolio) and limited access to capital, leading to higher interest rates (31.42% in 2016).
• Some MFOs have transitioned into banks to access broader financing sources, but this trend is slowing as fewer MFOs meet the licensing criteria.

Other Financial Institutions and Markets

• Capital markets and the insurance sector are underdeveloped.
• The stock market's market capitalization is only 4% of GDP in 2017.
• The insurance sector's assets constitute 0.6% of GDP.
• The insurance market is limited by low income levels, lack of demand, and absence of an insurance culture.
• There are also legislative gaps and lack of trust in the financial system, which hinder development.

Key Vulnerabilities

• Unstable economic growth and high poverty rates are major obstacles to financial inclusion.
• Weak governance and income inequality limit the accessibility and inclusivity of financial services.
• Low financial literacy and lack of trust in the financial system prevent people from using formal financial services.
• High credit concentration and lack of long-term finance pose risks to the banking sector.
• High operating costs and limited access to capital restrict microfinance organizations' ability to expand and serve more clients.

Policy Recommendations

• Consolidated efforts are needed to include more people and businesses in financial activities.
• Financial literacy programs should be expanded to increase public understanding and trust in financial services.
• Support for SMEs and agricultural sector is crucial for improving access to credit and promoting financial inclusion.
• Guarantee funds and de-dollarization initiatives can help reduce risks and increase the availability of long-term finance.
• Government support should focus on creating a more inclusive financial environment by improving access to credit, increasing financial literacy, and strengthening the regulatory framework.

Conclusion

The Kyrgyz Republic has made progress in financial inclusion and regulation, but significant challenges remain. The country needs to address structural issues, improve financial literacy, and ensure that financial services are accessible and inclusive for all segments of the population, particularly the rural and low-income communities. Strengthening the financial sector and promoting trust in the system are essential for sustainable economic development.