IFC to boost private sector-led growth in Kazakhstan through financial support - country officer (Exclusive interview)

Kazakhstan Materials 30 November 2023 10:15 (UTC +04:00)
IFC to boost private sector-led growth in Kazakhstan through financial support - country officer (Exclusive interview)
Ali Gasimov
Ali Gasimov
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BAKU, Azerbaijan, November 30. The International Finance Corporation (IFC) will boost private sector-led growth in Kazakhstan through financial support, Ekaterina Benjamin, International Finance Corporation's (IFC) Country Officer for Kazakhstan, told Trend in an exclusive interview.

IFC's strategy and main areas of activity in Kazakhstan

"IFC recognizes Kazakhstan's substantial potential, and we are pleased to witness the country’s robust economic growth, fueled by market reforms and foreign investments, since gaining independence. Despite recent slowing growth, income inequality, and weak institutions, IFC believes that Kazakhstan can overcome these challenges through measures such as investing in human capital, enhancing public sector efficiency, and reforming state-owned enterprises. Overall, IFC is committed to supporting Kazakhstan's transition towards a resilient private sector-driven economy and is consistently working towards this goal," she said.

IFC, she says, highlights the significance of preparing for climate adaptation.

She said as the largest global development institution dedicated exclusively to supporting the private sector in developing nations, IFC's mission is to collaborate with the country's private sector to create new markets and opportunities for all. Benjamin pointed out that in Kazakhstan, IFC's strategy is to boost private sector-led growth through support to the financial sector and investments in manufacturing, infrastructure, and the service sector.

Ekaterina Benjamin pointed out that one of the areas IFC is strongly advocating for is financial inclusion.

"We are committed to promoting inclusive economic growth by enhancing financial access for smaller businesses, including businesses led by women and in rural places. Over the past several years, IFC has supported KMF, a leading microfinance organization in the country, with a range of financial products totaling $237 million, as well as it also provides expertise in risk management and corporate governance. We also recently announced investments in other microfinance institutions such as Arnur Credit and Shinhan Finance," she said.

According to her, IFC also strives to unlock the immense potential of Kazakhstan's agribusiness sector.

"For instance, Kazakhstan remains Central Asia’s largest grain producer, capable of exporting approximately half of all the grain it produces each year. Notably, the majority of the wheat cultivated in Kazakhstan is of high quality, with durum and spring varieties standing out as particularly renowned. One of our recent investments to support the sector is KazFoodProducts, a notable agribusiness company in the region," Benjamin said.

As she noted, another area where IFC sees potential for the country is logistics.

"IFC has provided advisory services for the BAKAD project, one of the most significant infrastructure public-private partnership projects in Central Asia. Our experts aided in shaping the project, aligning stakeholders, and facilitating legislative changes to make this ambitious undertaking a reality. IFC has also spearheaded a $450-million financing package to support the construction of a new international terminal at the Almaty airport, the busiest air transportation hub in Central Asia. It is expected that the upgraded airport will be more energy efficient, produce less waste, and emit fewer greenhouse gases," Ekaterina Benjamin said.

IFC's contribution to achieving environmentally sustainable economic growth

IFC is engaging with the Kazakh government to promote environmentally sustainable, resilient, and inclusive economic growth.

"The country's commitment to achieve carbon neutrality by 2060, announced in December 2020, is a commendable but complex objective," she said.

Benjamin noted that a carbon neutrality strategy is now being created, and the transition entails a gradual shift toward a more sustainable economy, reducing dependency on energy and hydrocarbons and dramatically lowering greenhouse gas emissions.

"This shift will enable Kazakhstan to achieve its long-term environmental and climate objectives while preserving its economic and developmental interests," the country officer said.

According to her, a recent World Bank Group study indicates that significant adjustments must be made across key economic sectors in order for the country to address climate change.

"Specifically, the country will need to incentivize climate-smart agriculture practices, invest in efficient water infrastructure to conserve its water supply, and strengthen other infrastructure to build resilience. These changes could unlock a wave of investment in projects like solar plants and wind farms that help Kazakhstan both reduce its carbon footprint and lessen its reliance on often expensive imported fossil fuels," Ekaterina Benjamin noted.

Kazakhstan's potential in agriculture

"Kazakhstan's food sector holds significant promise, given its dominant role in wheat and flour manufacturing, extensive land reserves, and substantial capacity for producing and exporting organic goods," she said.

According to her, Kazakhstan remains Central Asia’s largest grain producer, capable of exporting approximately half of all the grain it produces each year.

"Indeed, wheat currently accounts for 80 percent of grain production in the country. However, Kazakhstan also cultivates crops like barley, cotton, sunflower seeds, and rice, offering substantial opportunities for production. We believe that the agricultural sector's potential has yet to be fully realized. Although around 75 percent of the country's land is suitable for farming, only about 30 percent is currently utilized for agriculture. Expanding agricultural output could bolster regional food security and generate employment, as agriculture provides a livelihood for approximately one in three Kazakhs," Benjamin said.

She noted that investments of IFC in KazFoodProduct is a significant stride in supporting agribusiness in Kazakhstan.

"Our funding will assist the group in its sustainable expansion, thereby enhancing food security and job prospects. Additionally, we're aiding the company in becoming the first in the country to attain an EDGE Gender Equality Certification, which establishes benchmarks and standards for workplace gender parity," she noted.

Ekaterina Benjamin pointed out that in March, IFC also hosted a workshop on food safety, bringing together industry leaders and IFC regional specialists to exchange insights and expertise on contemporary, globally acknowledged food safety management standards.

"This initiative aims to empower local businesses to fortify their presence in the domestic market, expand into new markets, and mitigate costs and risks. We believe that prioritizing knowledge dissemination, active public awareness, and fostering unity within the food industry will propel the country forward, ensuring that products labeled "Made in Kazakhstan" will be highly sought after both domestically and internationally," she said.

IFC & women entrepreneurship in Kazakhstan

"At IFC we are convinced that women’s entrepreneurship and economic empowerment are critical to inclusive economic growth. Where women are empowered, they can contribute their full potential - leading to a more diverse and dynamic workforce," she said.

According to Ekaterina Benjamin, nations that demonstrate greater gender parity enjoy increased per capita national income and experience accelerated economic expansion.

"According to statistics from the Fund for Sustainable Development and Support of Women's Entrepreneurship in Kazakhstan, women constitute 51.8 percent of the population and play a significant role in generating about 40 percent of the country's total Gross Domestic Product. Additionally, they manage approximately 42 percent of small and medium enterprises, and female entrepreneurs contribute to 30 percent of employment within this sector," she said.

As Benjamin noted, this was one of the reasons IFC’s funding to microfinance organizations such as KMF, Arnur Credit, and Shinhan Finance included a gender component.

"For instance, at least half of the funds provided to KMF are earmarked for women-owned small enterprises, while at least 25 percent of the investment in Shinhan Finance will be earmarked for women-owned small businesses," Ekaterina Benjamin noted.

Expanding access to finance for Kazakhstani SMEs

Benjamin pointed out that despite playing a crucial role and contributing about 27 percent to Kazakhstan's GDP, smaller enterprises face significant hurdles in accessing finance.

"Challenges such as inadequate documentation, unestablished credit histories, and complications with property titles as collateral hinder their financial support. Moreover, these businesses have suffered substantial income disruptions due to the economic slowdown post-pandemic, compounded by the geopolitical uncertainty sparked by Russia's invasion of Ukraine. This creates a pressing need for tailored support to help them bounce back and thrive," Ekaterina Benjamin explained.

According to the country officer, as the economy works to recover from these setbacks, small firms urgently need access to finance for inventory investments, resuming operations, and adapting to the new post-crisis economic landscape.

"To increase their access to finance, we work through local financial institutions to provide much-needed access to finance to millions of individuals and smaller enterprises that IFC would never be able to reach directly on its own. Through our collaboration with microfinance institutions, IFC is poised to ignite growth, foster job creation, and alleviate poverty in Kazakhstan, with a particular focus on underserved segments. Our outreach extends not only to women-led businesses but also encompasses rural-based businesses spread across various regions," she noted.

IFC's future plans in Kazakhstan

"Looking ahead, IFC remains committed to supporting private sector development in Kazakhstan and broader Central Asia, with a continued focus on key sectors such as agribusiness, financial services, infrastructure, and manufacturing, while promoting sustainability and climate change mitigation and adaptation," Ekaterina Benjamin said.