Countries & Regions

The Kyrqyz microfinance market has benefitted greatly over the last decade from the support of the government and the establishment of a legal and regulatory framework for microfinance that is considered the best in the region. This support has led to high growth levels of outreach, with much of that growth occurring in rural areas. This rapid growth, in conjunction with a variety of other factors, has also contributed to increasing concern about over-indebtedness in the market. A detailed analysis of the elements contributing to the threat of over-indebtedness afflicting the Kyrgyz microfinance market can be found in the Kyrgyzstan Country Briefing.

• Overview:  The Kyrgyz Republic maintains what has been considered the best legal and regulatory framework for microfinance in the Eastern Europe and Central Asia region and also established the first post-Soviet credit bureau within the Commonwealth of Independent States to issue credit reports. Despite these developments, over-indebtedness remains a crucial perceived threat to the market.
• Supply & Demand: Outreach of microfinance services has grown steadily over the last decade, with the vast majority of this growth accounted for by just five MFIs. This, coupled with a low penetration rate of services, has led to widespread concern about the overall quality of the loan portfolio at a country level. 
• Funding:  MFI growth is primarily financed by both borrowings and equity, although Kyrgyzstan’s debt-to-equity ratio is relatively low for the ECA region. This is due in part to a wariness of international funders to lend in a country that is seen as having an unstable currency.
• Performance:  MFI profitability has remained high relative to other countries in the region despite political instabilities and volatile inflation rates over the past few years. The strong performance has come at the expense of increasing risk levels and further raises the concern of significant over-indebtedness occurring throughout the sector.

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