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Down-Scaling Commercial Banks into MFIs: A Case Study from Kazakhstan

Leveraging pre-existing infrastructures in commercial banking to tackle poverty through microfinance
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This case study of the Kazakhstan Small Business Programme (KSBP) discusses the success of the program in downscaling a commercial bank to deliver micro and small enterprise loans. KSBP began in 1998. It was established by European Bank for Reconstruction and Development (EBDR) in response to the governments request to institute a credit line for small and medium enterprise loans. KSBP initiated a slow growth plan. It operated in a favorable macroeconomic environment.

KSBP's first expansion phase in 1999 saw the program expand both horizontally and vertically. In its second expansion phase during 2000-02, KSBP focused on regional, product, and partner bank expansion, and expansion of training and monitoring. KSBP's institutionalization phase during 2003-04 focused on streamlining partner banks' operations, auditing, and advanced training of organically grown professionals. Commitment to political and economic change and institutional innovation were the driving factors of the program's success. Lessons include:

  • Intelligent project design is key to the success of any downscaling project;
  • Conditions for successful downscaling include economic stability, liberal financial market, a competitive banking sector, and a market for MSE loans that is not over-saturated by NGOs;
  • Project should use profit-center accounting.

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