How Development Bank supports borrowers

The consequences of the pandemic, which resulted in lower prices for commodities, reduced demand and a significant depreciation of the national currency, brought a number of serious challenges for the clients of Development Bank. In order to support existing borrowers, Development Bank has developed an anti-crisis plan, which is regularly updated to reflect changes. These support measures were described by Deputy Chief Executive Officer of Development Bank of Kazakhstan JSC D.B. Aubakirov.

- What measures does DBK take as part of the anti-crisis plan to support the country's economy and its clients during the state of emergency?

According to the developed anti-crisis plan, the Bank provides for the implementation of the following measures:

1. The Bank will restructure loans for projects financed in KZT. It involves changing the repayment schedule of the principal and interest, increasing the loan term while maintaining the current interest rate. The possibility of converting the loan for projects financed in foreign currency will be considered subject to the availability of funding, as well as the transfer of payments.

2. A pool of projects has been formed that require the necessary measures in case of increased negative influence of external factors and require enhanced monitoring.

3. In order to reduce collateral requirements for funded projects, DBK makes changes to its collateral policy and other internal acts.

4. The possibility of financing projects with the use of new financing instruments. We are talking about attracting second-tier banks (STBs) to co-finance market investment projects, as well as syndicated financing of DBK investment projects together with STBs and other lenders. At the same time, DBK will participate as the Managing Bank.

- What projects are we talking about, in what areas of the economy?

The impact of the pandemic and the exchange rate of the national currency affected almost all sectors of the economy, to a greater or lesser extent. Therefore, DBK individually considered the existing problems and potential risks for each project and formed an anti-crisis plan broken down by groups, regardless of the scope of activity.

The first group includes projects that require priority actions. A Road Map has been developed for each project and DBK will assist borrowers as a lender.

The second group includes projects that require activities and enhanced monitoring, this is a kind of watch-list. This pool is also under close attention and is regularly monitored by DBK experts.

The third group includes projects that do not yet require special measures, but are monitored in accordance with the procedure established by the Bank. In current conditions, all projects are subjected to a stress test in one way or another, but we believe that this group is quite stable, continues to operate and is able to independently service the Bank's loans.

I would like to note that Development Bank is 19 years old this year, and despite the fact that we are relatively young, we have accumulated experience in crisis situations, including global ones. 2008 was a crisis year, the country's economic activity declined in the following years, and 2015 is memorized for a significant devaluation. Over the years, DBK has accumulated experience and developed mechanisms and tools to support borrowers, including dialogue platforms with relevant ministries. The Bank constantly conducts testing for each project and, if necessary, provides assistance. Since 2013, the Bank has introduced the practice of creating Road Maps for projects to get out of a crisis situation.

I have already mentioned our anti-crisis measures. I will add that during the pandemic, we canceled all penalties against borrowers related to non-financial obligations; the cancellation of penalties for financial obligations is considered individually, if necessary, we postpone the payment dates to a later date.

Projects that are under construction and equipment delivery are particularly affected by the pandemic. Foreign companies can be equipment suppliers, so the closure of borders affects the implementation of these projects. We review deadlines and interact with government agencies if the future revenue of these companies depends on public/quasi-public structures.

And if we talk about economic sectors, I understand that DBK is working with system-forming projects. In which sectors projects need support, and which are sufficiently independent ones and can manage themselves?

The closure of borders and the decline in economic activity in all regions primarily affects the raw materials markets; oil is only one direction. Food industry is also subject to a negative impact, since the level of purchasing power of the population is a direct factor affecting the success of projects that implemented in the production of food. Deterioration of KZT value results in deterioration of the collateral value for USD-denominated loans. In this regard, taking into account the current situation, the Bank eases requirements for projects in the construction phase in order to prevent the termination of financing; it is important to bring the construction of production facilities to commissioning.

At the same time, I would like to note that there are many state programs that cover various sectors with support measures, such as the SPIID, housing construction programs, support for car manufacturers, and assistance to exporters. However, to date, there is no separate state program to support infrastructure projects. In this regard, DBK as a development institution carries out its mission, being exactly where its activities are needed and at a time when it is extremely important. Today, commercial banks are not interested in financing projects that are related to infrastructure facilities. The country's stock market also reacts to the crisis and it is unrealistic to finance infrastructure projects at current market rates, because infrastructure facilities do not assume a high level of profitability. Therefore, the anti-crisis program of the Bank provides for measures to initiate programs for infrastructure projects financing. In our opinion, funding in KZT should be lower than market rates that do not exceed the level of inflation, as this ultimately affects the rates of services provided to all subjects of the economy of the Republic of Kazakhstan.

- Are your anti-crisis measures directed only to clients or are they valid for other organizations that are not clients of the Bank?

The Bank has strategic goals for financing the economy of the Republic of Kazakhstan, deviation from this plan is not considered by the Bank. The Bank continues to review and finance new projects continuously, regardless of the quarantine. To do this, the Bank has all the necessary regulations and tools. Since the introduction of the state of emergency in our country due to coronavirus infection, the Bank has been successfully operating in remote operation mode from March 15 to the current day and without the physical presence of borrowers. Today, loans in the amount of KZT 63.6 bln. have been issued.

DBK was and continues to be a customer-oriented bank. We change our business processes, optimize procedures, making them convenient for customers, adjust our activities based on our experience and listening to the client's wishes. Providing quality services is essential for us. The Bank is open and transparent to the client.

АО «Банк Развития Казахстана»
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