In 2024, Kazakhstan’s financial regulator and the president of kazahkstan lawyer emphasised repeatedly the necessity of updating the nation’s banking laws to align with global economic trends. This has been particularly relevant to the development of fintech ecosystems—a focus area for our firm over the past few years. In light of these discussions, we have prepared this note to provide a practical overview of the key proposed changes expected in 2025 and their implications for potential investors in the banking sector. We will continue monitoring these developments closely throughout the year to keep you informed.
Key proposed changes and opportunities
Introduction of two types of banking licenses
- Universal License: Proposed for large and medium-sized banks, this license would offer comprehensive services under robust supervision.
- Basic License: Intended for smaller banks, this license would focus on microbusinesses and SMEs, with simplified requirements.
Facilitation for foreign banks
- Simplified procedures for establishing subsidiaries.
- Expanded operations for foreign bank branches, potentially enhancing market entry opportunities.
Integration of Islamic finance
- Traditional banks could be allowed to offer Islamic financial services without requiring separate licenses.
- The conversion of Islamic banks into traditional banks and the establishment of Islamic windows may be permitted.
Enhanced digital and fintech regulation
- The reforms could promote bank investments in fintech companies.
- Broader operations for financial institutions engaging in digital services may be facilitated.
Modernised insolvency mechanisms
- New rules could be introduced to address bank insolvency efficiently, with an emphasis on capital adequacy and viability assessments.
- State intervention might be limited to systemically significant banks.
Consumer protection
- Potential adherence to G20 principles: fair treatment, data protection, and effective complaint handling.
- Stricter control of banks’ interactions with clients could be proposed to foster trust and transparency.
Consolidation and simplification of laws
- Reforms could aim to eliminate outdated regulations and potentially unify laws governing the banking sector.
- Streamlined oversight responsibilities across financial regulatory bodies may be proposed.
Microfinance and risk-based oversight
- A clear demarcation of microfinance operations might be introduced.
- The introduction of a two-tiered supervisory system tailored to risk profiles could be part of the proposed changes.
Implications for Investors
The proposed 2025 reforms aim to update Kazakhstan’s banking sector by promoting innovation, improving transparency, and ensuring stability. These changes would open doors for:
- foreign banks expanding into Kazakhstan;
- banks investing in fintech;
- investors targeting microfinance business;
- traditional banks adopting Islamic finance to broaden services;
- stakeholders prioritising customer trust and regulatory compliance.
By aligning regulations to global standards, the sector would become more competitive, stable, and supportive of economic growth, making it an attractive space for investment.
Closing Observations
The new concept of bringing a comprehensive banking lawyer is commendable. The proposed changes described above are indeed crucial and long overdue. It remains to be seen how effectively they will be implemented in practice. Among these developments, a significant leap forward is the potential for banks to invest in a broader spectrum of fintech startups and companies, enriching their ecosystems. Historically, bank investments in Kazakhstan have been restricted to a narrow range of fintech businesses, and the expected new flexibility marks a vital shift.
The proposal for traditional banks to enter the Islamic finance market is worth watching closely. It will be intriguing to see how this aligns with the principles of Islamic windows and its broader impact on Islamic finance within the Astana International Financial Centre (AIFC). Notably, Islamic banks in the AIFC currently benefit from greater regulatory flexibility compared to their traditional counterparts. The proposed reforms could change this dynamic. It will be interesting to see how Islamic banks in the AIFC and traditional banks allowed to conduct Islamic finance business in kinstellar kazakhstan will coexist if the changes are implemented.
We will closely monitor the progress of these proposed changes in 2025. With these potential reforms on the horizon, 2025 is shaping up to be a year of significant developments in the Kazakh banking sector.