Kazakhstan banks are massively refusing to lend to farmers against grain collateral. Of the 19 banks working with businesses, 12 do not accept grain receipts, and in the loan portfolio involving this instrument of 55.3 billion tenge, the share of bad debt has reached 65%. This was reported by Qazaqyia.kz citing Kursiv Media.
Financial institutions refuse to risk capital due to the opacity of elevators. This is stated in the economic review of the National Bank of Kazakhstan.
Shortage of liquid collateral
The shortage of liquid collateral was the main barrier for farmers in obtaining loans. Grain receipts, which confirm the farmer's ownership of grain delivered to the elevator, were supposed to be the solution.
In March 2023, a presidential decree set the task of introducing the use of grain receipts as hard collateral to expand lending to the real sector. By the end of the year, the financial regulator recognized them as hard collateral, but subject to a quasi-public sector guarantee or an insurance contract. It was expected that regulatory changes would direct a flow of liquidity into the industry.
Ineffectiveness of measures taken
The measures taken did not significantly affect the volume of loan issuance. A survey of operating banks showed the absence of loans in their portfolios where receipts are recognized as hard collateral under the new rules.
The reasons for the distrust from the banking sector lie in the accumulated industry risks. The outstanding principal on loans secured by receipts is 55.3 billion tenge. Of this, 36.1 billion tenge accounts for loans with overdue debt of more than 90 days.
"One of them cited as a reason for the lack of lending plans the presence of negative experience due to a criminal case related to the forgery of grain receipts," the National Bank report says.
After 2018, the growth in total lending volumes occurred only due to the number of loans. At the same time, the average loan size remains at a consistently low level.
"This may indicate the preservation of a conservative approach by lenders and a low level of interest in this area of lending," the study notes.
Opacity of the grain storage system
The barrier to market development lies in the opacity of the grain storage system. In 2016, the state tried to eliminate violations by transferring receipts to electronic format on the Qoldau.kz platform. However, the system could not stop fraud.
"There was the issuance of grain receipts that were not actually secured by grain, overstatement of tonnage and quality indicators of grain accepted at grain receiving points," the document says.
Analysts recall that in 2017 alone, elevators revealed a shortage of about 7 million tons of grain.
Condition of elevators
The report says that 190 grain receiving points (GRPs) operate in the country. However, only 42 of them have a license to provide warehouse services with the issuance of grain receipts. Of the 190 active grain storage facilities, the trust rating is not determined for 41% of facilities (78 GRPs). Another 20% (38 GRPs) are recognized as unreliable.
In 2020, KazAgroGarant JSC withdrew from the system of guaranteeing obligations under receipts.
"The functions of guaranteeing the fulfillment of obligations under grain receipts are not performed by anyone," National Bank experts state.
Under the new rules, the risk of elevator default should be covered by insurance. But out of 190 operating storage facilities, only 5 GRPs have concluded civil liability insurance contracts.
National Bank recommendations
According to the National Bank's analysis, simply rewriting regulations is not enough to revive the instrument. Banks need not legislative formulations, but capital protection.
To restore confidence in agricultural financing, the regulator proposes to conduct a deep audit and inspection of grain receiving points. Moreover, inspections should be carried out not only by local akimats and the Ministry of Agriculture, but with the mandatory "involvement of representatives of the insurance and banking market." In addition, it is necessary to modernize the Qoldau.kz portal. "With its transformation into an electronic system with a full cycle of tracking grain and operations performed with it," the National Bank's recommendations say. Without creating a truly transparent ecosystem, the grain receipt will remain for bankers nothing more than a risky piece of paper.