Kazakhstan’s banks: the wild east for consumer loans | beyondbrics

Kazakhstan’s banks: the wild east for consumer loans | beyondbrics:



"Something strange is happening in Kazakhstan. Over 12 per cent of consumer loans are non-performing and yet the banks are dishing out more consumer credit than ever.



Lending increased 37 per cent between July 2011 and November last year. It was over four times greater in November 2013 than at the beginning of 2006.



It turns out, in fact, that the explanation to this puzzle is fairly straightforward. A quick glance at the prevailing interest rate structure shows that banks in Kazakhstan are making a killing, in spite of the high default rates. Many of them pay out around 8 per cent in interest on one-year deposits, but lend at between 25-40 per cent per annum to people throwing a party, buying a car or snapping up the latest cool kitchen gadget. The upper limit interest rate on consumer loans is 56 per cent."



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