ASTANA, Kazakhstan, February 21. The authoritative international rating agency Moody's expects that over the long term, in five years or more, economic growth coupled with monetary stability will provide stimulus for Kazakhstan's banks to diversify and expand their portfolios, Trend reports.
According to report of Moody's, banks in Kazakhstan are limited by a relatively narrow lending market. This is due to the fact that the country's domestic economy is focused on hydrocarbon production and mining. These sectors are dominated by a small number of large companies.
As the Moody's noted, this situation reduces the pool of quality borrowers and limits the demand for corporate loans from local banks. Lending options are also limited by a lack of cheap long-term financing.
In addition, banks in Kazakhstan also face stiff competition from sources of cheaper financing abroad. This reduces the profitability of banks and forces them to look for lending opportunities in other areas.
However, the gradual diversification of the Kazakhstan's economy away from hydrocarbons and mining will provide more earning opportunities for local banks. Growth in the non-oil sector is also supported by Kazakhstan's new role as one of the largest business hubs in the region since trade flows started to divert from Russia in response to Western sanctions.
"Still, the process of diversification in Kazakhstan is gradual and unlikely to provide banks with significantly increased lending opportunities over the next year or two. Over the long term, in five years or more, we expect economic expansion and diversification, along with monetary stability, will provide the stimulus for banks in Kazakhstan to diversify and grow their portfolios, but this trend will be gradual," the report said.