From Survival to Growth: Sharing risks and supporting credit flows to small businesses in Kyrgyz Republic

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A boy carries bread about to be sold
Photo: Nick van Praag /The World Bank

When the COVID-19 pandemic hit the Kyrgyz Republic, a small open economy reliant on services, remittances, and natural resources, Micro, Small and Medium Enterprises (MSMEs) were severely affected. The lockdown measures, border closures and suspension of non-essential businesses led to lay-offs, closure of firms and a constrained supply of MSME finance. For the Kyrgyz government, a public credit guarantee scheme was a priority for maintaining credit flows MSMEs to cope with the COVID-19 shock.

The program, known as the Kyrgyz Open Joint Stock Company Guarantee Fund (GF), has played an increasingly important role in supporting MSMEs’ access to finance since its inception in 2016. However, the COVID-19 shock needed a solution with speed and scale, a response large enough to counter this unprecedented crisis. Against this backdrop, the World Bank Emergency Support to MSMEs – a COVID-19 emergency response operation – was designed to create a portfolio-based credit risk sharing facility. This facility supports GF in scaling up quickly to respond to the COVID-19 crisis.  Under the portfolio approach, the partial guarantee is provided for all credits meeting predefined eligibility criteria. This enables systemic coverage, reduced processing time, and elimination of adverse selection by commercial banks as all eligible credits are automatically included under the guaranteed portfolio.

After extensive preparatory work, the facility was finally launched in January 2022 with three commercial banks initially joining the scheme. Portfolio Risk-Sharing Facility (PRSF) is an innovative credit guarantee instrument in the Kyrgyz market. Being a new instrument in the market, the initial risk was high  and market participants lacked knowledge of the instrument which led to some hesitation among other commercial banks.

The early result shows an impressive growth with high demand. Since its launch in January, PRSF is seeing a monthly increase in the number of loans guaranteed. As of end April 2022, PRSF registered 1,069 borrowers with total cumulative credit of 688 million soms (US$8.4 million), of which 238 million soms (US$ 2.9 million) is covered by guarantee. Of the total borrowers, 23 percent are women-led firms. The cumulative total of 1,069 borrowers is already more than the Guarantee Fund could reach in any given year with their individual guarantee product. The best performing year of 2021 issued 705 individual guarantees. Seeing the initial results, more commercial banks are now interested to join the scheme.

The PRSF aims to incentivize lending by banks to viable businesses through the provision of a partial credit guarantee under a portfolio model, at a time the Kyrgyz economy faces multi-pronged crises.  Not only the persistent COVID-19 pandemic, but also a series of shocks to the world economy—including the current geopolitical situation, have had a negative impact on inflation and non-performing loans, ultimately affecting the sustainable development of the Kyrgyz economy. The PRSF also has ambitious gender targets to include 40 percent women-led firms in the portfolio. The GF has already been successful in scaling up the proportion of women-led firms in its overall portfolio and the PRSF is allowing them to further build on this success.

MSMEs are a key engine of economic growth and job creation in the Kyrgyz Republic, contributing to 42 percent of the GDP. During this uncertainty, the role of the PRSF has become even more important, not only to survive the continued crises, but also to support MSMEs’ growth amid the crises. 


Emiko Todoroki

Senior Financial Sector Specialist

Malik-Aidar Abakirov

Chairman of the Board of the OJSC “Guarantee Fund”

Eric Talasbaev

Deputy Chairman of OJSC Guarantee Fund

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