Financial Inclusion, Financial Regulation, Financial Literacy, and Financial Education in the KYRGYZ Republic

Abstract

This paper discusses recent developments in financial inclusion and financial literacy in Kyrgyz Republic. While financial inclusion is considered one of the key drivers of today’s development, it is quite new to Kyrgyz Republic. The first attempts to introduce the notion of financial inclusion arose after a violent power shift in 2010. The economy experienced an overall decline, the banking sector shrank, and financial intermediation slowed down. The National Bank introduced a number of regulatory measures to tighten the supervision of financial sector and increase consumer protection. Some of the efforts have worked well: the banking sector has rebounded, savings have been mobilized, and financial markets have started developing. However, national development patterns, such as unstable economic growth, a high poverty rate, and weak governance are the key vulnerabilities for increasing inclusivity of financial products and services. Income inequality, especially when comparing rural versus urban areas, is substantial and restricts access to financial services for the rural population. Small and medium-sized enterprises face barriers for getting sufficient financing because of high collateral requirements. The population has a low level of financial literacy and is reluctant to use modern financial services. Our analysis suggests that there is an urgent need for consolidated efforts to include more people and businesses into financial activities, mobilize their savings, and improve access to credit.