Prime Minister gave 1B soms to ordinary citizen of Kyrgyzstan
25/04-2012 08:27, Bishkek – 24.kg news agency , by Irina DUDKA
A month ago Youth Labor and Employment Ministry presented a promising project aimed at budget release from benefit for unemployed. The project initiators offer to give unemployed loans under 7 per cent of annual interest. Shares of Ala Too Finance microcredit agency which has been arranged by Government’s decree under Youth Ministry will be equal 1B soms. These money are from Centerra Gold Inc. A necessary memorandum was signed yesterday.
In accordance with Ala Too Finance Code the company can give money with interest, take and sell charges, consult and inform about microcredit system, take loans from international donors, banks and credit institutions. Also it will attract grants and investments for cheap loans system development, initiate factoring and offers finance leasing services. Besides, Ala Too Finance can give loans to other state-owned microfinance organizations. Also, this is non-commercial organization and established not for profit.
By the way, it is not the first microcredit company at Youth Labor and Employment Ministry. It is the ninth. So, there are a lot of questions like: why we need so many microcredit companies? How 1B soms will be distributed? Who will trace money transfers and guarantee its proper usage? How many employees requires Ala Too Finance and who will pay salaries? And the final but most important question: who will be the “main accountant”? Newly appointed Ala Too Finance director Ilyaz Pakirov answered 24.kg news agency on some of these questions.
- First I’d like to understand the most unclear moment: why the company which is commercial de-facto is non-commercial de-jure?
- Well, this very project was established in framework of 100-days Reform Program. Youth Labor and Employment Ministry has been promoting several project simultaneously, and the microcredit company is one of them. The decree on the company officially called: on measures employment increase and poverty reduction. This is the main goal of the project, not profits.
- You give money with interest, you can do factoring and leasing – all this is direct commercial profit. So, about what “non-commercial character of activity” are we talking about?
- There is no any net profit distribution in our company. All profits will be aimed at goals written in the company’s code: money will be reinvested. In classic commercial organization the profit can be distributed as benefits. And this is the main lineament of Ala Too Finance Microcredit Company.
24.kg news agency note: the above-said definition does not contradict to the National Bank of Kyrgyzstan decree On Microcredit Companies and Agencies Establishment from September 11, 2001. According the decree, microcredit organization is non-commercial specialized institutions with National Bank license which give small loans to physical and legal bodies at the expense of donors, local and international finance companies in accordance with organizations’ codes which don’t contradict with Kyrgyz legislation. Microcredit Company is established as legal non-commercial organization (exceptional forms: political party, union and religious community).
We have preferential rates for directed credits. Any incomes will be used to cover operational outcomes including employees’ salaries. Factoring and leasing are common operations which recorded in all microcredit companies’ codes and our company is not exception. However, we are not going to do it in near future.
- Why it needs to establish a new company if there are 3 state-owned banks with all necessary infrastructure and experienced staff.
Well, ordinary classic banking differs from microcredit business. One loan specialist can put to billions of soms in one bank. It is enough for 5 large clients. In our case we are talking about loans in 50K soms and about 20K clients. In worldwide practice, it is normal for one clerk to have 350-400 clients. That’s why bank should have big staff, and there is another specification.
- And how many people will you recruit?
- The microcredit company which will concentrate on small loans only is very effective way of the program realization. I can’t say right now how many people we need. We well use existing financial infrastructure. 8 microcredit companies work under Youth Labor and Employment Ministry and everything will depend on how we will build cooperation with each other. They work well enough since the end of 1990s.
- So, why we need to establish the ninth instead of distributing 1B soms to existing organizations?
- Loan schemes are different. Other companies give loans to unemployed but receive information directly from employment bureaus and use hybrid group and hypothecary loans. They appoint leader for such group who give pledges. Such scheme is unacceptable for our company. Companies’ common budgets are 80M soms and have different specialties. Moreover they are situated in different regions.
- But they can see local situation clearly. Your program aimed at villages, isn’t it?
- We are planning to open regional offices of Ala Too Finance.
- There is a point in your company’s code on possible loans for other state-owned microcredit companies. What does this mean? And what interest will be from such loans?
- It is about the above-said companies under the ministry. As far as I know the same organizations exists under another public bodies and employment bureaus. We will work as financial hub which accumulates necessary sums of money. We will discuss operational schemes of money transfers but our clients will receive loans with 7 per cent interest. Thus, other microcredit companies are providers of national financial system. We are building working chain without duplication and additional expenditures for infrastructure.
- These additional element of the chain will have desire to gain loan under cheap interest in 3-5% and give it under 7% to employed clients. Ordinary loaners will gain it under 25 per cent. Why don’t we exclude any mediators since the beginning?
- Any conditions are being discussed exactly. Such process should be slow as it is impossible to build infrastructure immediately by own forces. The final sum is large and everything must be planned.
- Will Ala Too Finance exist on their own money?
- We will try to use money which will come as interest from loans.
- But such benefits will appear only in a year as loans will be given for plant and kettle breeding. Before this will happen where will you get money?
- Our agency will have watch committees which will define development concept, approve budget and accept reports. It will define a necessary budget for infrastructure establishment and primary investments. So, the first money will come from there.
- You mean from the state budget or 1B soms grant from Centerra Gold Co.?
- The latter source.
- It means that the microcredit company needs to be maintained for one year and your loaners’ were promised 8 months. What will you do?
- Loans return mechanism is being discussed and as far as I know interest per cents payment will be realized like in other microcredit companies – monthly payments. If money are taken for trade then there is no need to wait a whole year. if it is for plant breeding then there will be some respite. Credit experts of our company, who would give loans, will watch for their proper usage. Special so-called credit councils will create loaners’ lists and watch for them too.
- Where will your office be?
- According the official decree we should have some office. However, we won’t be satisfied with by several rooms which have been given to us. As we are a social-oriented organization we are going to optimize outcomes: refusal from big office buildings, expensive cars and gadgets. And the optimization won’t be realized at the expense of operational effectiveness. We will also implement a new approach to personnel recruiting and I sincerely hope that we will find professionals and patriots.
- Could you, please, tell me your employees’ salaries? They say that it will about $500.
Currently, there is a process of watch committee members’ approval. After, it will be possible to speak about personnel and salaries. Salaries will depend from position and functions of personnel. I can tell confidently that the salary won’t be higher of current market salary in Kyrgyzstan. Also, we will recruit people who are not interested in money at first place.
- And where will you find people working in the name of idea? Especially in villages?
- I’m the one of them. My specialty is Credits and Finance Studies. Before I have taken this position I was working at Treasury and monitored analytical and planning department at one of the largest microcredit companies of Kyrgyzstan. I was receiving good salary but I have realized that there are some changes in the country and I need to work. Kyrgyzstan has many patriotic citizens and their possible salary isn’t low. We should understand: if credit experts have small salary they will have motivation to find other sources of money. Therefore, we will provide them with average salary at least.
- From personal sources I found out that your salary is $8K. Is it true?
Nonsense! (laugh). Only top-managers of local Great 4 of microcredit companies may have such salary and it means a big social provision. We are non-commercial organization and people who are going to work there must understand that salary is not the main motivation.
- People tolerate with small salary if their job give them some benefits apart from money…
- We have positions where salary will be good but it won’t be higher than average market salary. We will have internal audit, check buying and other mechanisms.
- Prime Minister appoints Ala Too Finance director. Are you his friend?
I don’t know him personally. I am ordinary citizen of Kyrgyzstan. I’m honored to be in charge of this project.
- Among all the Kyrgyz citizens, you are the luckiest. Why is that so?
I just participated in competition. As far as I know there were 3 men and even some institute. I don’t know them. I came to interview and surprised when they chose me.
- What is your future plans. I mean when 1B soms will be distributed and the microfinance company will close?
- No I have thought about it yet. I consider that it is prospective project and now we are working out the issue of further financing. Money can be found anyway.
- From Kumtor again?
It is not necessary. There is a lot of social money which can be obtained by us. The only thing we have to do – to give results.
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