B&E | Kazakhstan : Analysis of Credit Policy Reforms

Kazakhstan has a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new firm and in support to that two types of frameworks are needed which can facilitate access to credit and improve its allocation: credit information systems and borrowers and lenders in collateral and bankruptcy laws.

By World Bank Group

Introduction:

Economies around the world have taken steps making it easier to start a business—streamlining procedures by setting up a one-stop shop, making procedures simpler or faster by introducing technology and reducing or eliminating minimum capital requirements. Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been greater firm satisfaction and savings and more registered businesses, financial resources and job opportunities. What business registration reforms has Doing Business recorded in Kazakhstan?

2011 - Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 Tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized.

2012 - Kazakhstan made starting a business easier by eliminating the requirement to pay in minimum capital within 3 months after incorporation.

2013 - Kazakhstan made starting a business easier by reducing the time it takes to register a company at the Public Registration Center.

2015-2016 - Kazakhstan made starting a business simpler by eliminating registration fees for small and medium-size firms, shortening registration times and eliminating the legal requirement to use a company seal.[1]

Kazakhstan has a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new firm. These are identified through collaboration with relevant local professionals and the study of laws, regulations and publicly available information on business entry in that economy. Following is a detailed summary of those procedures, along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by us in collecting the data (see the section in this chapter on what the indicators measure)

Kazakhstan and Credit Policy Reforms?

Two types of frameworks can facilitate access to credit and improve its allocation: credit information systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to consider when assessing risk. And they permit borrowers to establish a good credit history that will allow easier access to credit. Sound collateral laws enable businesses to use their assets, especially movable property, as security to generate capital— while strong creditors’ rights have been associated with higher ratios of private sector credit to GDP.

How well do the credit information system and collateral and bankruptcy laws in Kazakhstan facilitate access to credit? The economy has a score of 7.00 on the depth of credit information index and a score of 4.00 on the strength of legal rights index (see the summary of scoring at the end of this article for details). Higher scores indicate more credit information and stronger legal rights for borrowers and lenders. Globally, Kazakhstan stands at 70 in the ranking of 189 economies on the ease of getting credit.The rankings for comparator economies provide other useful information for assessing how well regulations and institutions in Kazakhstan support lending and borrowing.

One way to put an economy’s score on the getting credit indicators into context is to see where the economy stands in the distribution of scores across economies. Figure 6.2 highlights the score on the strength of legal rights index for Kazakhstan and shows the scores for comparator economies as well as the regional average score. Figure 6.3 shows the same for the depth of credit information index.

When economies strengthen the legal rights of lenders and borrowers under collateral and bankruptcy laws, and increase the scope, coverage and accessibility of credit information, they can increase entrepreneurs’ access to credit.

Conclusion:

2013 - Kazakhstan strengthened secured creditor rights by introducing new grounds for relief from an automatic stay during rehabilitation proceedings.

2016 - Kazakhstan improved access to credit by adopting a new law on secured transactions allowing a general description of a combined category of assets granted as collateral. 

References:

1. Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org.

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Publication Details:

This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. This work is available under the Creative Commons Attribution 33.0 IGO license (CC BY 3.0 IGO). http://creativecommons.org/licenses/by/3.0/igo. Download the Complete DB Report on Kazakhstan 2016