Kazakhstan Community Loan Fund Offers New Opportunities to Entrepreneurs

Once a part of the former Soviet Union, Kazakhstan is emerging from a state-run economic system to form a free-market economy. ACDI/VOCA is supporting this transition through a number of programs that encourage entrepreneurs. In October 1996, ACDI/VOCA launched an innovative credit program for micro-entrepreneurs called the Kazakhstan Community Loan Fund (KCLF).

Funded by the U.S. Agency for International Development, the Open Door Society, and the Eurasia Foundation, KCLF provides entrepreneurs with the training and credit opportunities they require to take full advantage of the economic possibilities in the market system. The project is specifically targeted toward women, who make up 81 percent of the clientele. The program utilizes the “peer lending model,” which requires all members to assume equal rights and responsibilities. Loans, beginning at $200, are given to aspiring businesspeople, and upon repayment of the first loan, the individual becomes eligible for larger and larger credit limits, up to $3,000. If a group member defaults, the entire group absorbs the loss, a system that encourages responsibility. The fund manager, Shalkar Zhusupov, asserts that "the group knows how crucial it is that everyone makes payments on time and there is considerable peer pressure to make sure that is what happens.”

The program has proven to be highly effective and successful. Since ACDI/VOCA began the program, the Kazakhstan Community Loan Fund has distributed over 23,968 loans, amounting to more than $6.2 million, making it the premier micro-credit program in Central Asia. They currently have 3,500 clients and have opened a second office in southern Kazakhstan and have plans to open more offices.

Armen Gasparyan was operating his fledgling bakery business out of his apartment in Taldykorgan when he heard about the Kazakhstan Community Loan Program. Over two years, Mr. Gasparyan received seven loans, from $200 to $2000, and he has moved his business, which now boasts 22 employees, into a former sewing factory. His bakery now supplies 43 stores and 12 supermarket chains. Most importantly, his products are receiving a lot of attention in Almaty, Kazakhstan’s primary marketing center.

Lyudmila Im was working in the town bazaar selling imported shoes and clothing when she heard about the remarkable opportunities offered by KCLF. After receiving three loans from the fund, she was able to start her own café and is already thinking of expanding to a new location. She had been unable to obtain credit from a traditional financial institution, and KCLF offered her the freedom to begin her own business.