Kazakhstan’s Credit Trap

Dmitriy Mazorenko and Paolo Sorbello.

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Consumer lending could become a significant problem for Kazakhstan's economy, experts believe. In recent years, this type of lending has become a driver of GDP growth, as well as a mechanism that hides weak or absent growth in real household incomes.

Average per capita debt increased by more than 50% between 2019 and 2023, and the number of borrowers with overdue loans (NPLs) is now close to half a million.

Next year’s VAT rate increase will further weaken purchasing power, and residents have shown vulnerability to external and internal shocks. Despite this, the banking sector continues to reap super profits, and the government faces a difficult choice between the need to contain credit risks and somehow compensate for the declining standard of living of the population.

Photo by Zhanara Karimova.

Is a Financial Crisis Approaching?

The rapid growth of consumer loans is leading to overheating in the lending market in Kazakhstan. According to data from the Central Bank, as of November 2025, loans to the economy amounted to 41.9 trillion tenge ($81 billion), with the retail portfolio accounting for more than half (24.2 trillion tenge, or $47 billion) and growing faster than the corporate portfolio.

The largest contribution to the growth of consumer lending comes from installment plans, also known as BNPL (“buy now, pay later”).

According to economist Eldar Shamsutdinov, in their statistics, the Central Bank and the Agency for the Regulation of the Financial Market do not single out BNPL as a separate item, instead lumping them together with other unsecured loans in the structure of the consumer portfolio. Banks classify installment plans as “card loans.”

In a report by the National Payment Corporation of Kazakhstan, installment plans account for more than 50% of new consumer loans. This is particularly alarming given that consumer lending grew by 34-42% per year in 2022-2023, significantly outpacing GDP growth and real household income.

The World Bank has recorded abnormal growth in debt burden in Kazakhstan: from 2019 to mid-2023, household debt on consumer loans grew by 112%, the number of borrowers increased by 50%, and the average debt per person jumped from 780,000 to 1.2 million tenge (from $1,500 to $2,300).

According to Shamsutdinov, this creates a situation of three-level destabilization. The first is growing expenses.

“Installment plans increase total household expenses by 20-30% and reduce their sensitivity to the price of goods and their own income,” the economist pointed out in an interview, referring to a study by Harvard Business School.

The second level is macroeconomic. According to an IMF study, the growing debt burden from consumer loans is worsening the quality of economic growth and increasing its sensitivity to shocks. Moreover, overheating consumer lending negatively affects future GDP growth rates, because borrowers spend more on servicing debt for past purchases rather than on current consumption.

Third, given Kazakhstan’s dependence on imports and the sensitivity of the tenge to external shocks, consumer lending accelerates inflation, posing a major threat to the stability of the financial system and the economy.

Photo from a roundtable on BNPL payments. Credit: Kursiv Media.

This set of issues was also discussed at a roundtable organized by Kursiv at the end of November.

Murat Temirkhanov, advisor to the CEO at Halyk Finance, believes that the population is not heavily indebted.

According to him, consumer loans account for 15% of Kazakhstan’s GDP, compared to 25% in Russia and 50-100% in Western countries. He also considers the level of non-performing loans (NPLs) to be low, and the segment of low-income people with loans to be narrow.

“From the point of view of financial stability, there are no problems. Our regulators—the Agency and the Central Bank—are doing a good job of limiting lending to subprime borrowers,” he said at the roundtable. “50% of the value of all consumer debt sits in the portfolio of 10% of the debtors.”

Yet, the issue of BNPL schemes was at the top of the Central Bank’s agenda in October, when it decided to raise interest rates by 1.5 percentage points to 18%.

“Together with the government and the Agency, approaches are planned to be developed to regulate the installment and ‘buy-now-pay-later’ (BNPL) markets,” chairman Timur Suleimenov said.

In November, Suleimenov directed yet another plea for regulation of the BNPL environment to Prime Minister Olzhas Bektenov, explicitly mentioning “the inflationary effect of installment plans.”

Elena Bakhmutova, chair of the Association of Financiers of Kazakhstan, noted that although inflation trends are mainly linked to exchange rate fluctuations, the impact of installment plans may not be apparent when analyzing bank debt indicators.

“From my point of view, BNPL does have an impact. And it is very significant. Restrictive measures are needed here, but not hasty ones and not in the form in which they are currently being applied by regulators,” Bakhmutova said at the roundtable.

In particular, Bakhmutova was critical of the current method of determining a borrower’s debt burden. Today, this definition fails to take into account all types of loans that a person has taken out. Along with consumer loans, these may include car loans, housing loans, and microloans. As a result, the state does not have a comprehensive understanding of the degree of indebtedness of the population, and regulators must correct this.

“It is possible that the problem of consumer loans could quickly become systemic.” –  Shamsutdinov.

Bakhmutova also noted that the 32% approval rate for consumer loans keeps liquidity out of reach for many borrowers, who often resort to BNPL schemes. However, expanding access to credit could create a bubble, skeptics argue, recalling the global financial crisis of twenty years ago.

The state of the overall loan portfolio is already deteriorating. Loans overdue for more than 90 days increased by almost 0.5% over the first 11 months of this year, from 1.1 trillion tenge to 1.5 trillion tenge (from $2.1 billion to $2.9 billion). Approximately 575,000 people are experiencing difficulties in repaying their debts.

“This is a classic sign that households are already operating at their limit, and the slightest shock to income or interest rates will quickly cause [installment plans and consumer loans] to default,” Shamsutdinov told Vlast.

Buying Forward

Because of the announced VAT increase, people in Kazakhstan have rushed to buy especially durable goods, Dmitry Dolgin, chief economist for the CIS region at ING Bank, told Vlast.

“This is more or less in line with historical and academic evidence when it comes to pre-announced increases in VAT, because everyone knows that the new rate passes through to households. The current acceleration in consumption is normal, and represents a shift to the left on the timeline,” Dolgin said.

“We see front-loading consumption right now. In the second quarter, household consumption was up 13% in real terms, and it is accelerating. More recent trends suggest a 8-9% growth, which is also an acceleration compared to the beginning of the year, which indirectly supports the idea of a front-loaded consumption horizon ahead of the VAT hike,” Dolgin said.

This trend might slow down in the first months of 2026, once the new VAT rate of 16% comes into force.

“Historical evidence from other countries indicates that this is usually followed by a sharp dip in consumption of durable goods, in the first couple of months [after the new rate comes into effect], followed by some stagnation after three to six months. For Kazakhstan, an emerging market with high growth rates, we may not see negative numbers, but it is reasonable to expect some deceleration,” Dolgin said.

The VAT increase will inevitably have an effect on inflation, boosting consumer prices.

“VAT typically passes through into consumer prices quite strongly, and Kazakhstan is unlikely to be an exception,” Dolgin said. “Due to consumption, we have already seen some of the effects in the form of accelerating inflation, which prompted the Central Bank to increase interest rates above market expectations.”

While unlikely to stifle long-term economic growth projections for Kazakhstan, the tax reform will have a net-negative effect in the short term, according to Dolgin.

“In the short term, consumption trends will be damaged: it’s inevitable. This is the effect of any tax increase, especially one that taxes consumption.”

Bank Profits vs Regulation

According to Shamsutdinov, the only sector of Kazakhstan’s economy that is showing unprecedented growth in the current conditions is banking. Banks’ return on equity (ROE) is 30.8% with a net interest margin of around 7%. In other emerging markets, ROE usually stands at 12-18%, with 3-4% margins.

“Such profits amid relatively moderate GDP growth (around 6%) mean that the financial sector is doing significantly better than the rest of the economy, and it is doing so at the expense of households,” Shamsutdinov notes.

The loan portfolio of banks today accounts for 28.1% of GDP, and consumer loans account for more than 10% of GDP. This is happening in a situation where assets are highly concentrated among the country’s five largest banks, which control 69% of assets, 75.7% of the loan portfolio, and 72.9% of deposits.

“With the top five banks holding most of the assets and dominating the retail segment, it is possible that the problem of consumer loans could quickly become systemic,” the economist said.

Shamsutdinov believes that the government allowed the installment loan portfolio and, as a result, the consumer loan portfolio to grow so much because it was a convenient way to compensate for the decline in real incomes of the population in the context of the COVID-19 pandemic and external shocks of the early 2020s.

In addition, high consumption financed by credit resources ensured growth in retail trade turnover and GDP without direct budget injections.

The economist believes that the government fell into its own trap: “If they sharply reduce consumer lending, it will cause social discontent because real incomes are not growing. And if they do not curb lending, they will face macroeconomic instability.”

Now, according to Shamsutdinov, the government needs to switch to investing in productive sectors, while simultaneously shifting the focus of bank lending to the corporate sector. Instead, officials keep pledging budget cuts, even though this will directly hit people’s incomes.

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