Blog: A general introduction to the banking regulatory regime in Kazakhstan – Lexology

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Events in 2021 resulted in the Kazakh economy, in particular the financial sector, having to face the combined challenge of a continued reduction in oil prices and new strains of covid-19. However, according to the Agency for Regulation and Development of the Financial Market (AFR), the negative impact of these challenges on the Kazakh banking sector was not as severe as expected, and in 2021 banking sector started gradually to recover. In 2021, annual lending to the Kazakh economy amounted to 18.5 trillion tenge, which was a 26.5 per cent increase on the previous year. The net income of banking sector increased by 77.6 per cent as compared with the previous year.2 The level of non-performing loans decreased from 6.8 per cent to 3.9 per cent in 2021.3 The beginning of 2022 added new challenges, such as unrest in Almaty in January and war in Ukraine with subsequent sanctions upon Russia, which will definitely impact Kazakhstan due to close connection of Kazakhstan’s economy with Russia’s economy. Local currency has already dropped dramatically. Time will test the stability of the Kazakh banking system in the face of these unprecedented challenges.

The Kazakh banking services market is represented by various players, including banks, organisations that perform certain types of banking operations (banking organisations), payment services providers and microfinance organisations (MFOs). In line with the global trend, fintech companies are also becoming crucial players in the market. Banks operating in Kazakhstan include local banks (conventional and Islamic) and subsidiaries of foreign banks operating as Kazakh legal entities under Kazakh law. Following recent law amendments, foreign banks can now carry out banking business not only through their subsidiaries but also through branches, which was previously prohibited. There are currently 22 banks in Kazakhstan; of these, 14 banks have foreign participation, including 11 subsidiary banks, and one bank is 100 per cent owned by the state.4 The top five banks by assets are Halyk Bank, Sberbank, Kaspi Bank, Otbasy Bank and First Heartland Jysan Bank.5

The regulatory regime applicable to banks

i Regulators

There are three financial regulators in Kazakhstan: the AFR, the National Bank of Kazakhstan (NBK) and the Astana Financial Services Authority (AFSA). The AFR is responsible for the regulation of banks, branches of foreign banks, banking organisations, MFOs, insurance organisations, pension funds and securities market subjects. The NBK, as the central bank of Kazakhstan, is responsible for monetary policy, stability of financial and payment systems, currency control and regulation, and regulation of payment systems, payment system operators and payment organisations. The AFSA regulates financial and payment services provided within the Astana International Financial Centre (AIFC) framework; namely, the financial and payment services provided by AIFC entities to other AIFC entities.

ii Key players in Kazakhstan’s banking business

Banking business in Kazakhstan is made up of banks, banking organisations, MFOs and, more recently, fintech companies (without banking licences) that provide traditional banking services, such as payments and transfers of money. In addition, some special entities (mostly quasi-state) (e.g., the Development Bank of Kazakhstan, the national post operator, KazPost, and Agrarian Credit Corporation) can also conduct banking operations without a banking licence provided that authority is expressly granted to them by the legislation.

Banks and banking organisations

Banks and banking organisations can perform banking activity based on licences issued by the AFR or the NBK, or the AFSA for banks established and operating within the AIFC. The list of banking operations permitted for each particular bank or banking organisation is detailed in its banking licence. Banks are generally prohibited from performing any type of business activity other than banking activity, subject to certain exceptions. Banks, banking organisations and their shareholders are also subject to stringent regulatory requirements, including a minimal regulatory capital requirement, prudential ratios and other norms, requirements in terms of management and premises, and assets in which they are permitted to invest.

Islamic banks

In Kazakhstan, local Islamic banks and branches of foreign Islamic banks can operate alongside conventional banks. Islamic banks are subject to separate regulation by the AFR. Generally, they are prohibited to charge interest on loans and pay guaranteed interest on deposits. Islamic banks are prohibited from investing in businesses related to tobacco, alcohol, weapons, gaming and certain other activities prohibited by the Council on principles of Islamic financing (the Islamic Council). The Islamic Council is a mandatory corporate body of an Islamic bank that determines key issues of the bank’s activity, including permitted transactions, rules of conduct and internal credit policies.6

Branches of foreign banks

Since December 2020, branches of foreign banks have been allowed to perform banking business in Kazakhstan, subject to extensive AFR requirements.


MFOs hold a solid position in the Kazakh financial market. Following recent law amendments, only MFOs, pawnshops and credit partnerships are entitled to issue microcredit. Microlending activity by any other legal entities is prohibited.

Fintech companies

Fintech companies are becoming key players in the financial services market. Initially, fintech companies in Kazakhstan operated in the microlending and payments sphere. However, in 2020, the regulator forced companies providing online loans to undergo reregistration as MFOs, which are subject to regulation by the AFR. Consequently, most fintech companies now operate in the payments sphere only. As at February 2022, there were 81 payment organisations in Kazakhstan.7 According to the NBK, in 2021, the value of cashless payments increased by 2.1 times to 73.1 trillion tenge.8

Payment systems

The payments industry in Kazakhstan is represented by both local payment systems, such as the interbank payment system operated by the NBK, and international payment systems, such as Mastercard, Visa and UnionPay. Payment systems provide payment infrastructure and various high-technology services associated with payments to Kazakh banks. Operators of foreign payment systems must notify the NBK on commencement of their operations in Kazakhstan and must comply with general requirements of Kazakh law, such as regarding reporting, personal data and antitrust regulation. However, as yet there is no detailed regulation applicable to foreign payment systems and their services, which provides them with great opportunities in the Kazakh market.

Cross-border lending to Kazakh borrowers by foreign banks

In practice, it is common for Kazakh borrowers to attract financing from foreign banks that have no presence in Kazakhstan on a cross-border basis. The provision of a loan or other financial service by a foreign bank located outside Kazakhstan to a Kazakh customer is, generally, not considered as banking activity for the purposes of Kazakh law and, accordingly, can be performed without a Kazakh banking licence. However, foreign banks that intend to market and provide loans and other services to Kazakh customers on a cross-border basis must take into account mandatory provisions of Kazakh law, such as advertising restrictions, securities market regulation and currency control regulation.

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