On February 5, World Bank reported that recent years have witnessed a significant surge in the debt burden on the populations of Kazakhstan and Uzbekistan. As lending to individuals has soared, concerns have been raised regarding the escalating levels of non-performing debts and their implications for household welfare and economic stability.
Similarly, the Kazakh banking sector has witnessed a notable expansion in loans to the population, with the total volume increasing by 41% in 2021 and a further 31% in the subsequent year. However, the proliferation of non-performing consumer loans has raised concerns, with growth rates reaching 40% in 2022 and 31% in the first eight months of 2023. Approximately 1.5 mn Kazakhstanis find themselves grappling with debts that have overdue payments.
The World Bank has highlighted the adverse impact of the escalating debt burden and defaults on household welfare and economic stability. Experts emphasize the critical need for a robust legislative framework regarding insolvency to mitigate these negative effects.
Debt restructuring presents a viable solution to alleviate the burden on debtors and their families, while also facilitating their reintegration into the economy. A well-designed scheme can enable banks to optimize rates, enhancing the accessibility of loans for individuals.
In response to the mounting debt crisis, both Uzbekistan and Kazakhstan have introduced legislative measures aimed at addressing insolvency issues. Uzbekistan enacted the law in 2022, outlining procedures for individuals facing financial distress. The legislation allows debtors to propose debt restructuring plans, subject to court approval if creditors refuse to cooperate.
Similarly, Kazakhstan has implemented a new bankruptcy procedure for individuals, albeit with more stringent requirements. However, experts have criticized the Kazakhstani approach for its restrictive nature, particularly regarding eligibility criteria and procedural complexities.
Earlier Daryo reported that the Central Bank of Uzbekistan has announced intentions to strengthen criteria for granting consumer, mortgage, and auto loans to individuals. These proposed adjustments seek to tackle apprehensions regarding escalating debt levels among borrowers and foster prudent lending standards. Sanjar Nosirov, the head of the department overseeing the regulation of credit institution activities at the Central Bank, emphasized the introduction of a novel metric, termed the population's debt burden, as a fundamental aspect of this endeavor.
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