Oil Price Fluctuations, Creditworthiness of the Financial Systems, and SME Financing in Kazakhstan
Dosmagambet, Yergali; Oskenbayev, Yessengali; Taghizadeh-Hesary, Farhad; Mukan, Moldir | December 2018
Abstract
Kazakhstan remains a resource-dependent country, and the overall economy experiences external commodity price volatility. Oil export revenue exerts a positive effect on the economic development of oil-producing countries; however, depending only on oil revenue will make the economy vulnerable to oil price shocks, especially in the case of an oil price recession. This is forcing the Kazakhstan Government to pursue industrial diversification to accomplish sustainable and balanced economic development, particularly concentrating on the diversification and expansion of the SME sector. Second-tier banks remain SMEs’ main source of financing. Due to the higher risks associated with SMEs, they have to borrow money at high interest rates that endanger their growth. Since the global crisis in 2008 and the adoption of the Basel capital requirement, banks have become more reluctant to lend funds to SMEs. The government’s use of a credit guarantee scheme (CGS) relies on the willingness of second-tier banks to lend to SMEs, since they decide which SMEs to lend to and the effective interest rate. Second-tier banks, on the other hand, are dependent on the oil price volatility. This paper examines the status of the CGS in SME financing in Kazakhstan. In addition, it provides an empirical analysis using the structural VAR method that shows that the creditworthiness of the whole financial system in Kazakhstan is dependent on oil prices. Moreover, there is an effect from oil price volatility on currency value change, which also influences the financial situation of SMEs.
Citation
Dosmagambet, Yergali; Oskenbayev, Yessengali; Taghizadeh-Hesary, Farhad; Mukan, Moldir. 2018. Oil Price Fluctuations, Creditworthiness of the Financial Systems, and SME Financing in Kazakhstan. © Asian Development Bank Institute. http://hdl.handle.net/11540/9476.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
Financial Analysis
Banking Finance And Investment
SMEs
Small Business Finance
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
International Monetary Relations
International Financial Market
Exchange Rate
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
Foreign investment
Equity Finance
International banks and banking
Stock exchanges
Grants
Loans
Communication in rural development
Communication in community development
Economic development projects
Development banks
Economic forecasting
Environmental auditing
Cumulative effects assessment
Human rights and globalization
Small business
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