- How is the analytical work of one of the main domestic development institutions - the Development Bank of Kazakhstan carried out? What are the most important discoveries, studies and proposals of DBK that have changed business processes both within the Bank and in the financial sector of the country in general?
-I believe that research has not had a significant impact on the Bank's business processes. The real economic situation in the world and in Kazakhstan, as a part of the world economy, became such "discoveries" for the Bank, if they can be called that, which influenced its business processes and regulations.
For almost 20 years of its activity, the Development Bank, together with the entire country, has gone through a series of economic crises. This is the crisis of 2009 and 2015, and the current crisis caused by the disruption of supply chains and reduced demand due to the coronavirus pandemic and a number of other factors. This difficult experience now allows DBK to respond quickly to challenges from the external environment. And taking into account the current economic situation, support its borrowers by creating credit conditions acceptable for both parties, as well as broadcasting the problems of projects and the necessary measures of administrative and financial incentives to the level of the country's government.
- Can you tell us about interesting deals when analyzing projects?
-For me, all transactions are interesting in their own way. Sometimes the more difficult it is to structure a deal, the more interesting it is. I like that recently the Bank's portfolio has included projects for the construction of renewable energy sources with so-called “green” technologies. These projects use the DBK instrument “project financing”, where the source of credit risk coverage is only future cash flows. We are also planning to introduce a new financial instrument, which has so far been called Bank & Bank 2 Client. This is when our Development Bank, together with second-tier banks (STB) finances a project or issues a guarantee for STBs for the project. Thus, DBK stimulates the development of long-term financing of investment projects from second-tier banks, minimizing the risk for them until the completion of construction and reaching the planned production indicators..
- What difficulties can you face when analyzing a project, because the projects of the Development Bank are complex and capital-intensive and many parameters of the project must be taken into account: from the construction of a plant and hiring of qualified workers to the sale of products?
-Indeed, the specificity of the Bank is such that the complexity of projects financed with its participation can be quite high. Analysis of investment projects is in itself a complex process, consisting of analysis, project management, technical part, marketing, experience of the client's previous activities and financial forecast for the project. Therefore, the Development Bank structured this work by creating three specialized divisions, closely interacting with each other. These are technical analysis and project procurement specialists, industry analysts and credit analysts. The latter unite the entire information picture for the project, model cash flows for the project, carry out stress testing, and, as a result, form the financing conditions and other conditions for the transaction.
At the same time, the number of DBK analysts is very limited, and there is a wide variety of project activities. Analysts cannot be professionals in all of them. Therefore, at the final stage of the project consideration, the client must bring two very important documents for analysis: the assessment of independent experts on the technical and marketing development of the project. The task of independent experts specializing in the industry is to give an objective assessment of all the data that the client provides to justify the effectiveness of his project, which will allow the Bank to draw final conclusions.
- What Kazakh and foreign resources do you use in your daily work? What would you recommend for novice analysts?
-When I came to the Development Bank in 2003, only 2 years have passed since the establishment of the Bank and we were at the stage of forming a methodology. In those years, I very actively used the site of the American professor Aswat Damodaran, who kept and maintains a large database of useful data for financial analysts, allowing them to make certain calculations, publishes training materials, analysis tools. I would recommend this resource to novice analysts.
The level of development of the methodology of credit analysis and internal regulations for today in the Bank is very high and at the same time it is constantly being improved, and it is enough for an analyst to be guided only by internal acts to perform a very high-quality examination. We also have access to the Bloomberg information system at the Development Bank, which allows us to provide data on current and historical prices on almost all world exchanges and many over-the-counter markets, news feeds, economic data on listed companies at the global level, electronic bond trading systems and other securities.
Moreover, if the analyst sometimes needs to understand in a short time the previously unexplored specifics of the client's activities or his future project, various reliable specialized industry sources can come in handy. These are, for example, information platforms from Fitch Solutions Group Limited, ARGUS, Metalexpert, Chem-courier and others.
- What difficulties do you face when analyzing projects?
-I have observed for many years that only those people who are inclined to study and structure large amounts of information and who, as a rule, either love this type of activity, or at least, prefer it to everyone else. Therefore, even if voluminous material is provided on the project, it will not be difficult for DBK analyst.
Difficulties arise when there is a limited amount of information on a project or when information contains conflicting information. In conditions of limited information, the analyst will make conservative assumptions about the project and as a result, the initiator of the project may be offered less favorable conditions for the structure of the transaction.
Therefore, I want to inform the initiators of projects who plan to contact the Development Bank that a thorough study of the project, the client's openness to cooperation and interaction with the Bank, as well as the willingness to quickly work out DBK issues on the project, is the key to obtaining a positive decision on financing, with the most optimal conditions for project implementation.
- The good news is that DBK keeps up with the time and standards of international companies. How do you stimulate the professional and personal growth of your colleagues? What events do you most often take part in and with which organizations you work more closely?
- I believe that, first of all, the person himself should be interested in professional and personal growth. If there is such a desire, then the Bank has a huge field for the development of such specialists. It has been proven many times that the best skills are formed as a result of the constant practical application of the knowledge gained. We recruit children motivated for professional and personal growth into our team with good fundamental knowledge in the field of economics and finance, financial modeling. Our team has many graduates from the Bolashak program; there are specialists from the personnel reserve of the President of Kazakhstan. Based on the experience of considering projects of the Development Bank, they receive a unique experience that may be in great demand in the future. It should be noted that our specialists are in good demand in the labor market. Also, for the development of employees, we organize internal training programs for the transfer of knowledge. And, of course, the Bank, as a responsible and progressive employer, invests in the professional development of its personnel, organizing corporate training at our requests.
Regarding external events, DBK analysts, as a rule, take part in specialized industry conferences, as well as events of development institutions and business forums.
- How do you see the development of DBK in the coming years? What new services will the Bank develop? For example, international development banks provide paid advisory services while continuing their core project financing activities. Can DBK provide additional consulting services as a development institution?
- Other services of the Bank may include consulting and educational services. Over the years, the Development Bank has accumulated significant experience both in successful projects and projects with realized risks, which can be transferred to project initiators. Proposals were made to expand the types of the Bank's activities, which will allow to carry out the specified types of activities.
In the development of our analytical unit there is a concept called "start-up consultant", which is aimed at the pre-project preparation and strengthening of the documentation submitted to DBK for consideration. There are certain resource and other limitations that need to be worked out to implement this concept.
At the same time, I believe that the market for consulting services is already sufficiently developed in Kazakhstan today, having formed, among other things, due to the demand initiated by our Bank. I have already mentioned the need to provide evaluations by independent experts specializing in technical and marketing research when considering projects. We would like to continue to receive the views of such independent specialized experts. And our concept "Start-up Consultant" involves further interaction with specialized consulting companies.
In general, I see the Development Bank as a financial institution specializing in long-term projects, with experience in structuring such projects open to the business community. And in our plans, as part of a common event for existing and potential clients of the Bank, to hold a master class explaining approaches to the analysis of projects and the impact of the level of development of the project on the final terms of financing, and etc.
- How do you think the consulting and market analysis industry is changing today? Does the domestic consulting industry have a chance to enter foreign markets and compete with international companies? For example, in our country there are such organizations as McKinsey, BCG, the Big Four, international organizations, as well as Kazakhstani private consulting companies. Does the country have prospects for the export of analytical services?
-The consulting and market analysis industry in Kazakhstan has grown very strong in recent years. If earlier the provision of consulting services was dominated by the Big Four companies and representative offices of international companies, now we see growing demand for the services of domestic consulting companies with a methodology based on the best world standards with the proven quality of independent expertise. However, in my opinion, it is too early to say that domestic companies compete on equal terms with international ones. In terms of price policy, of course, the advantage is on the side of domestic companies. However, even so, the choice may not be in their favor due to the lack of international authority, and possibility to transfer international experience on providing consulting services. Nevertheless, I believe that a single export of consulting services of domestic companies is already possible, but for highly specialized engineering services. In the loan portfolio of our Bank there is a company that successfully exports such services, since it has competencies in the design and construction of mining and processing enterprises, in the calculation of reserves according to JORK standards, and so on.
- There are a lot of consulting companies on the market today. Many organizations do not have organizational units that deal with analytics. DBK has always had departments that analyzed the market, monitored projects and predicted trends. How important it is to have your own experts in the field of consulting and research?
-In DBK, the presence of special analytical departments is an inevitable necessity due to the specifics of its main activity - project financing. When deciding on financing a project, it is important to understand long-term trends and trends in the development of the industry for the implementation of this particular project, and possibly related industries. For this, as I mentioned, we use available or specialized sources of information, as well as expert opinions of independent specialized consulting companies on projects submitted to the Bank for consideration. On the basis of them, using their analytical competencies, the Bank's employees form judgments and conclusions that form the basis for the Bank's decision-making, the basis of the terms of the structure of transactions. Which means, by carrying out a comprehensive analysis of projects, and offering our own terms of project implementation, in which there are ways to reduce project risks, we, in fact, carry out research work, as well as, to some extent, consulting work for our clients. Therefore, it is certainly important for us to have analysts in our team who are able to work with large amounts of data and form a vision in the research perimeter. And, we would like and aim to transmit our competencies, experience in analyzing and structuring projects to the entire business community interested in developing the industry through the implementation of investment projects.
