The "Economy of Simple Things" Program in Kazakhstan

Since 2018, Kazakhstan has been implementing the "Economy of Simple Things" program. In 2023, the fifth package of amendments was introduced, which resulted from close cooperation between the government and the business community.

The program is a testament to the country's adaptation to new external economic conditions. Instead of purchasing foreign goods, the government focused on creating conditions for the development of local businesses and the production of domestic products. For this purpose, 600 billion tenge was allocated. The program sets ambitious goals: to reduce the share of imports by 15% and to increase the production of local goods by 20%.

The "Economy of Simple Things" program is being implemented with the support of the Samruk-Kazyna Investment Fund.

What is the "Economy of Simple Things"?

The "Economy of Simple Things" is a state program that allows entrepreneurs to obtain preferential loans to develop their businesses. In essence, the program addresses two key objectives:

1. Stimulating entrepreneurial activity: By supporting businesses, the program strengthens the economy;
2. Promoting import substitution: The program actively encourages the production of goods domestically, reducing reliance on imported goods.

The project is not aimed at just any goods and services but specifically at those that are in daily demand by Kazakhstan's citizens yet do not require large-scale global financing. These goods and services are collectively referred to as "simple things." The list of goods under the "Economy of Simple Things" program includes clothing and footwear, food, and building materials. Additionally, essential services like the construction of social facilities—such as schools, kindergartens, and more—are included.

Who is Eligible for Preferential Lending?

Companies of various sizes—from small businesses to large enterprises—working in priority sectors (such as the production of food products, industrial goods, agricultural products, etc.) are eligible for preferential lending. However, companies must meet specific requirements:

• Small Businesses: Organizations with fewer than 100 employees can receive preferential loans. The average annual income of such a company should not exceed 300,000 MRP (in 2024, equivalent to 1.107 billion tenge).
• Medium Businesses: Companies with no more than 250 employees and an average annual income not exceeding 3 million MRP (11.076 billion tenge) are eligible.
• Large Businesses: Enterprises with more than 250 employees and an average annual income exceeding 3 million MRP can participate in the project.

What Are the Lending Terms?

The program operates in two directions. First, entrepreneurs can obtain loans at a minimal interest rate. Second, the program offers subsidies. In other words, one part of the interest is paid by the entrepreneur, while the other part, equal to the paid portion, is covered by the state.

Let's consider a specific example. Many banks offer business loans at a rate of 21.25%. Of this, 13.25% is paid by the state, and the remaining 8% is covered by the entrepreneur.

What Can the Loan Funds Be Used For?

Loan funds can be used to effectively address the tasks facing the business. An entrepreneur can:

1. Invest in modernization, real estate or equipment purchases, or business expansion.
2. Replenish working capital, meaning they can buy raw materials, pay suppliers and employees, cover taxes, or rent workshop space.
3. Replenish working capital under a revolving credit line, meaning that after repaying the debt, the entrepreneur can take out another loan.

What Are the Loan Terms?

The maximum financing limit cannot exceed 5 billion tenge, with the loan amount determined based on the borrower's needs and the bank's analysis of their creditworthiness.

The interest rate consists of several components: the base rate set by the National Bank of Kazakhstan plus 4.5%. As mentioned earlier, the entrepreneur only pays 8% of the interest, while the state covers the remaining 13.25%.

Subsidies are provided for up to 5 years (if the loan is for investment purposes). For working capital loans, the subsidy period is limited to 3 years.

What Are the Requirements for Borrowers?

There are basic and additional requirements.

The basic requirement is that within two years of using the loan, the entrepreneur must improve the economic performance of their business: they need to increase profits by 10% and either raise employee wages or expand their workforce.

There are also 6 additional requirements:

1. The entrepreneur must have a business plan with specific forecasts for expenses and income.
2. The entrepreneur must invest at least 20% of their own funds into the business.
3. The company must have no debts, either to employees or to the tax authorities.
4. The company must have no overdue loan payments exceeding 90 days.
5. The entrepreneur must not have undergone loan restructuring in the past year.
6. The collateral must equal 100% of the loan amount. If the entrepreneur does not have sufficient collateral, they can apply to the Damu Entrepreneurship Development Fund for a guarantee (in this case, the loan amount should not exceed 1 billion tenge).

Steps to Obtain a Subsidy

Step 1: The entrepreneur submits an application to the bank.

Step 2: The bank provides the entrepreneur with a written response confirming their willingness to issue a preferential loan.

Step 3: The entrepreneur submits an application to the Damu Fund. This can be done online via the official Fund website or through the e-government portal Egov.kz.

Step 4: The entrepreneur waits for the Fund's decision.

Step 5: If the decision is favorable, the entrepreneur signs an agreement with both the Fund and the bank.

Who Is Not Eligible for Subsidies?

The following cannot apply for preferential loans:

• Entrepreneurs producing excisable goods, except for alcohol-containing medical products;
• Entrepreneurs with loans overdue by more than 90 days;
• Individuals with special relationships with the bank where the loan is being issued;
• Companies in which the state owns at least 50% of the shares, as well as companies with poor credit histories.

The "Economy of Simple Things" program is an excellent opportunity for business development. However, entrepreneurs should remember that the project requires the funds to be used exclusively for their intended purpose. This means that loan funds can only be spent on the items listed in the business plan, and all expenses must be supported by invoices and receipts—this is important for auditing. If the entrepreneur misuses the funds, the subsidy will be canceled, and the entrepreneur will have to reimburse the state for the expenses.

This article has been translated from its original language using neural network-based translation technology.