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Historical Trend and Current Status of Smes Credit Guarantee Scheme in Kazakhstan

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I.Historical trend and current status of SMEs credit guarantee scheme in Kazakhstan

1.Support and development programs for SME in Kazakhstan

According to Abdirasilova et al. (2018), since the beginning of formation of Kazakhstan as an independent state, six main phases of state support for entrepreneurship is distinguished. There are

?period from 1992 to 1994;

?from 1994 to 1996;

?from 1997 to 2000;

?from 2001 to 2003;

?from 2004 to 2007;

?and the last one, from 2008 to the present.

The State Program of Support and Development of Entrepreneurship in Kazakhstan were adopted for 1992-1994 as a first decision for developing SME. At that time, the basic problem was the lack of a mechanism for state support for entrepreneurship, which, according to the government's intention, had to be resolved through the introduction of the Program.

Further, to supplement the 1992-1994 Program, the Program for the Development of Private Entrepreneurship for 1994-1996 was developed and adopted. The main objective of this phase of business development was to reduce the tax burden for SMEs by reducing taxes and fees. During the period, in the process of reforming the country's economy, the state has put small and medium-sized businesses to the forefront of the country's development strategy.

Next phase, from 1997 to 2000, based on the still pressing problems that have not been resolved since the previous Government Programs, the following decisions were made:

?status of SME support and development measure was identified by applying presidential Decree of March 6, 1997 No. 3398 "About measures on strengthening of state support and activation of development of small entrepreneurship";

?decree of the Government of the Republic of Kazakhstan from April 26, 1997 No. 665 "About creation of Fund of development of small entrepreneurship" determined the main aspects of the creation of the SME development Fund;

?special position of SMEs in the country's market economy through government support was proposed by the State program of development and support of entrepreneurship in Kazakhstan for 1999-2000.

The next phase in development of Kazakhstani small and medium-sized business was conducted in 2001-2002. The main purpose of the program was finalization of all previous decisions concerning SMEs. To be more specific, according to the state, increasing of the efficiency of support and protection infrastructure management levers for SME, improvement the legal privileged status, introducing of changes in financial and investments policy to simplify the loan procedure, application of governmental support of SME, and regional SME development were priority objectives that lead to the further success in the development of SMEs.

The development of a competitive environment for small- and medium-sized businesses was the main priority of the 2004-2007. This was facilitated by the state program on accelerated measures for the development of SMEs, approved in 2005 and operating until 2007. The main objective of this program was to improve the current model of financing, crediting and leasing of SMEs and create a basis for the development of this sphere in the future. In other words, this period was marked by active improvement of the banking sector to facilitate the process of lending to SMEs.

Changes in the most recent and significant period determined the “Damu” Fund as the main operator of lending and guaranteeing to SMEs. Since 2008, the loan and loan guarantee scheme has not suffered much change, the basis for concessional lending conditions for SMEs, which was determined at the end of 2007, is being promoted and improved to this day.

2.Credit problems arising in the development of SMEs

A characteristic feature of small business is limited financial resources. It is necessary to find the fixed capital for business developing and, in the future, working capital to provide funds for operational and project activities. Thus, the main problem for modern business is the sources of financing that correspond to the needs. Based on the statement, crediting of small- and medium-sized enterprises should be one of the most important and promising areas of the credit policy of domestic banks. Reasonable and correct decisions in the financing of SMEs have a positive impact on the development of business, and therefore, the economy as a whole.

In that way, residual problems of small business are formed from the absence of a balanced and appropriate way of financing and crediting of such enterprises. The figure below identifies the problem related to the Kazakhstani financial sector in the field of SMEs support, and also causes and effects.

Souce: Asian Development Bank

Based on data taken from second-tier banks for the period 2004-2009, the credit risk for enterprises was more than KZT 429 million and USD 102 million. Moreover, from the beginning of 2008, the amount of loans for small businesses (especially, in foreign currency) was decreased. The situation occurred because of the imprint of the global crisis on the economy of Kazakhstan (Abdikadyrova & Danabayeva, 2015).

Source: Collection of materials of the International Scientific and Practical Conference: "Theoretical and practical view on the current state of science"

According to DAMU Annual Report (2016), today, SMEs have the lack of foreign financing. The lending takes place mainly at the expense of domestic resources. However, funds allocated for small businesses are insufficient because, first of all, large enterprises are considered due to their more profitable projects with a low level of risk and reliable collateral that SMEs do not have. Therefore, small- and medium-sized enterprises do not rush to go to banks. Another reason that influences the availability of bank loans is the global financial crisis. Unsustainable growth in bank lending, including lending to the SME sector, from 2005-2007 was due to access to foreign borrowing. The growth in lending was stalled at the beginning of the economic crisis in August 2007, when international credit dried up, which led to a liquidity crisis. Most local banks were badly hit by cutting off international capital markets and slowing economic growth, and also reduced their credit books to repay their debts. The banking sector continues to face serious problems and is expected to recover slowly.

Generally, Kazakhstani firms, that have a need for funding, take a loan in the



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