In Kazakhstan, the possibility of creating specialised sectoral banks — agricultural, construction and others — is being discussed. Members of the Mazhilis see this as a way to reduce capital concentration and lend to the economy more precisely. However, experts recall the unfortunate experience of «Nauryz Bank», which ended in bankruptcy and multi-billion dollar losses. Is the country not at risk of making the same mistakes?
A working group of the Mazhilis, discussing the new law on banks, has proposed lifting the ban on creating specialised sectoral banks in Kazakhstan. This was reported by MP Tatyana Savelyeva during a meeting of the public chamber.
According to her, agricultural, construction, and other sectoral banks could become a tool for more precise lending to the economy and help reduce excessive capital concentration in universal banks.
The group held ten meetings with key market representatives, discussing various issues of the banking system, including criteria for assessing systemically important financial institutions and the reorientation of banks from consumer lending to financing the real sector of the economy.
The idea sounds logical: a specialised bank knows its sector better, understands the specific risks, and can offer more flexible lending terms. MPs hope that such institutions will help small and medium-sized businesses gain access to investment projects, not just consumer loans, which are currently the main focus of large universal banks.
On paper, everything looks convincing, but over the last twenty years, Kazakhstan has already been down this road, and the results were catastrophic.
Founder of the FBRK, agricultural expert Kirill Pavlov recalls:
“We already had a very sad experience with the creation of a sectoral bank in agriculture — ‘Nauryz Bank’ — and I would very much like to avoid repeating it.”
According to him, there were other sectoral banks in Kazakhstan before this. But all these attempts ended the same way:
“The banks began to move into a broader, typical banking sphere. It brought nothing good,” the expert notes.
The story of JSC «Nauryz Bank Kazakhstan» is indeed worth recalling. The bank began operations on the basis of «Kazagroprombank» and grew actively in the early 2000s, positioning itself as an institution to support the agricultural sector. However, by the end of 2004, its equity capital had turned negative — minus almost 2 billion tenge.
By mid-2005, the Agency for Regulation and Supervision of the Financial Market noted that the bank was systematically failing to fulfil its contractual obligations for payment and transfer operations and was violating regulations. The former head of the National Bank later noted that more than 80% of all funds from corporate clients of «Nauryz Bank» belonged to state and semi-state organisations. This meant the bank was effectively serving a limited number of large, state-linked clients, making it extremely vulnerable to risks in a single sector.
The bank's lending policy was no less problematic. «Nauryz Bank» issued loans secured by dubious assets — for example, building materials were used as collateral instead of completed projects. And when a large share of assets proves unrecoverable, the bank is doomed.
But the real problem lay not only in weak risk management. «Nauryz Bank» had close ties with state structures. The board of directors and major clients included representatives of government departments and quasi-state companies, who used the bank to service their own projects and accounts.
This dependence on administrative patrons created a double trap. Firstly, the bank could not be managed effectively on commercial principles because decisions were made not based on financial logic, but under pressure from influential clients. Secondly, during inspections or crises, management relied on protection from above, rather than genuine restructuring.
When the Financial Supervision Agency revoked the bank's license in June 2005, a criminal investigation began. Offices were searched, and executives were questioned as part of abuse-of-power cases. Unofficial reports mentioned that some of those involved were former employees of state bodies, holding military or police ranks. The liquidation process was only completed on 28 March 2019 — almost fourteen years after the license was revoked.
Now, two decades later, the state is once again proposing the creation of sectoral banks. The arguments are similar: targeted lending, support for specific sectors, reducing capital concentration. But what has changed since then? Has the risk management system improved? Have state structures stopped interfering in banks' commercial decisions? Have compliance and corporate governance reached global standards?
Kirill Pavlov offers a simpler solution:
“Actually, it’s enough for existing financial institutions to simply lend to businesses, rather than gamble on the base rate,” the expert says.
In his opinion, the problem is not the lack of specialised structures:
“They need to work with compliance, with risks, with lending to business — as is done all over the world. Only then will the economy ‘turn over’.”
And this really is the key point: the problem is not the absence of sectoral banks, but the fact that existing banks do not want to, or cannot, work effectively with the real sector.
Creating sectoral banks looks like an attempt to solve a systemic problem with targeted measures. Instead of forcing existing banks to lend to the economy, improving regulation, increasing transparency, and reducing administrative interference, the state is once again following the path of creating new institutions. And given Kazakhstan's tradition of merging business and government, there is a high risk that new sectoral banks will repeat the fate of «Nauryz Bank»: becoming a tool for serving the interests of a narrow circle of individuals, accumulating toxic assets, and ultimately going bankrupt at the expense of taxpayers.
After all, the story of «Nauryz Bank» is not just an example of a failed business. It is a reminder of what happens when financial institutions are created not for the market, but for the convenience of certain influential groups. Until Kazakhstan builds a transparent corporate governance system, strict risk control, and genuine independence of banks from state structures, any sectoral banks risk becoming another «Nauryz Bank» — with multi-billion holes in their balance sheets and lengthy liquidation processes. The question is not whether the economy needs specialised banks. The question is whether the system is ready for them to work honestly and effectively. And for now, the answer is far from obvious.