Kyrgyzstan's financial sector grew at a record pace in Q1 2026. According to statistics from the regulator, the stock exchange, and bank reports, the market owes this dynamic to the state, which is actively financing housing construction and other infrastructure projects. This was reported by Qazaqyia.kz citing Kursiv Media.

Bank assets: plus 23%

The beginning of the current year was significant for Kyrgyzstan's banking system. Total assets at the end of the first three months of 2026 reached nearly 1.5 trillion soms (about $17 billion). In quarterly terms, the figure increased by 23.0% (or 278 billion soms). Banks have not accelerated to such rates in the last 17 years – this is the period covered by the statistics of the National Bank of the Kyrgyz Republic on its website.

About half of the total growth came from cash. Their volume increased 2.7 times, or by 151 billion soms. This dynamic is atypical for Kyrgyzstan's banking system and is fully explained by the operations of just three players.

At Keremet, which has been under US sanctions since early 2025, the volume of cash in assets soared from 903 million soms at the end of 2025 to 75.9 billion soms at the end of March 2026, or 84 times, with a comparable increase in debt to banks and other financial institutions. The bank did not notify the Kyrgyz Stock Exchange (where its shares were recently listed) of this large transaction and did not publish any press releases.

Nothing is known about the reasons for the explosive growth of assets at Kapital – another Kyrgyz bank under sanctions, which the UK added to its list in August 2025, and a year earlier the bank came under the control of the Kyrgyz government. In Q1 2026, cash and funds in accounts with the National Bank of the Kyrgyz Republic increased from 1.3 billion to 68.3 billion soms (+66.9 billion), with an almost similar increase in other liabilities.

In contrast, at Abank (formerly Aiyi), the largest bank in the republic by assets, the improvement in indicators is explained by market factors. Cash and cash equivalents increased from 72.8 billion to 93.8 billion soms (+20.9 billion), with an even more significant increase in funds on client accounts and deposits.

In total, these three banks alone showed an inflow of cash of 163 billion soms, which more than covers the overall increase in the system (+151 billion), given that some other banks may have seen a decline in liquidity.

The remaining part of the quarterly growth in bank assets came from securities (+93.8 billion soms), other assets (+45.7 billion), and loans to customers (+33.1 billion). The reporting of individual banks does not allow us to determine the reasons for the notable increase in the "other assets" item in the National Bank's statistics – this aggregate indicator combines different operations, and banks' approaches to their classification may differ.

However, in the last 17 years, the securities portfolio of Kyrgyz banks has never grown as fast as now (the previous record of 68.9 billion soms was set in Q2 2025). The main reason for the current record is how the state finances subsidized mortgages.

First, a brief overview of bank lending. Banks are clearly slowing down: at the end of Q1 2026, the total loan portfolio of the sector grew by only 6.5% (by 33.1 billion soms). This is half the average rate of last year. Moreover, for the first time in two years, the portfolio's dynamics were below the inflation rate. Notably, this slowdown occurs against the backdrop of continued double-digit economic growth in Kyrgyzstan.

Of the four largest segments with a share of more than 10% (together they formed 80% of the portfolio in the reporting period), only consumer loans showed growth above inflation. Over the quarter, Kyrgyz banks managed to increase the portfolio of these loans by 16.6% (+28.2 billion soms). At the same time, lending in trade grew by 7.5% (+8.8 billion), and in agriculture by only 1.4% (+748 million).

In contrast, banks failed to reverse the decline in mortgage lending that began in January 2026. As a result, the mortgage loan portfolio decreased by 16.4% (–10.6 billion) at the end of Q1. However, this does not indicate a stagnation of the market – it's just that the State Mortgage Company (SMC) is increasingly setting the tone there. It should be clarified that SMC lending under partnership programs with banks is decreasing (these are included in the regulator's statistics), while direct non-bank disbursements, on the contrary, are growing at a faster pace.

Recall that until 2023, the SMC mainly acted as an operator of budget funds, distributing them to banks to subsidize mortgages. At the end of 2022, with assets of 12.5 billion soms, the share of "loans provided to commercial banks and financial institutions for refinancing" reached 80%. But in 2023, the SMC began to change its operating model, and the growth of these operations first slowed, and from 2025 their volumes began to decline. This trend continued: at the end of March 2026, loans to commercial banks and financial institutions decreased to 9.5 billion soms, or by 2.5% in quarterly terms (11.5% in annual terms). Moreover, as new directions developed, the share of loans to commercial banks in the SMC's balance sheet fell to 6%.

For more than two years, the SMC has been building housing itself. This allowed the state company to provide more apartments for rent with the right of subsequent purchase – a product whose share in its portfolio was previously negligible. Now both directions – construction and rental – form the basis of the portfolio. At the end of March 2026, the item "loans for financial lease (leasing) to resident clients" on the balance sheet increased to 11.0 billion soms. In quarterly terms, the increase was 19.4%, and in annual terms, 3.5 times. Construction assets grew even faster. In the reporting period, their volume reached 18.9 billion soms, soaring 3.6 times over the quarter and 23 times over the year.

Both the construction of houses and the mechanism of subsidized rent with the right of purchase require huge investments. This financing is provided by the state: as a result, in just three years (from 2023 to 2025), the company's authorized capital increased 7.3 times, to 78 billion soms. At the same time, the role of the state company also increased.

This was reported by Qazaqyia.kz citing Kursiv Media.