National Bank reported to President on 2022 performance. National Bank added that crediting mass grew by 23% — up to KZT 22.8 trillion. Out of that sum, KZT 9.6 trillion were given to business. The rest of the moneys were gluttoned by population.

Mr. Aidarkhan Kusainov, famous Kazakh economic observer, produced a sophisticated trolling of National Bank Chair Galymzhan Pirmatov’s report to President. Literal translation of the corresponding post in his telegram-channel below:

“Things are positive and shiny…But devil hides in nuances. That means that: a) credits to population grew by one third, b) population incomes and real salaries went down. Taken together, those two factors mean that in 2023, people spend one thirds of their shrunk profits to pay-out credits. In other words, population income is being shrunk from two sides”. 

Expert writes that “Pirmatov’s report looks more attractive that reality, which reality reports that credits into economy grew by 23%, because household debt load grew by one third“.

In May, the First Credit Bureau reported on household debt load, indicating that 77% of economically active residents of Kazakhstan have unsecured loans and credits. 

In March 2023, President Tokayev issued an Edict concerning measures supposed to give more credits to economy and reduce household credit load.

In other words, reality indicates that every year, residents of Kazakhstan only grow more indebted to financial organizations.  At the same time, there are experts in this country who believe that household credit load is a myth.

On the Surface We Are OK

Mr. Kusainov shared his extended observations of the present reality and how it poses threat to economic security of the nation.

— Aidarkhan, in your post you write that population income went down. Official sources insist it is growing.  Where is the truth here?

— Nominal and real income are two different things. Real income went down, as confirmed by the Bureau of National Statistics.  In 2022, the reduction was 0.6%.

— Is it a lot or not, considering that household credit load increased by 30%?

— When an individual plans his incomes against upcoming expenditures, he has to take in account the real growth, not nominal. It does not matter, that Mr. A got his KZT 100 thousand, and then started getting 130, because prices are growing and both sums disappear equally fast. 

Household credit load is always measured nominally. Those, whose salary was KZT 100 thousand had one credit, and when the salary went up to 130, they took another credit, because they do not have other sources to buy things. Nominally expenditures of those taking credits and proportionate to the income growth.

In reality, the prices are growing and people are spending more on food and basic services. Plus, people have credits. 

That is why, when they report that level of household credit load against salary is the same, that is callidity as a minimum.

Installment Plan – Plan of Better Life

— First Credit Bureau report that 77% of economically active population have at least one unsecured consumer credit. Is it a lot nor not, to consider that figure threatening?

— There is nothing detrimental to financial system and its stability there. The problem is, that the prosperity of the population is shrinking, and does so rapidly. 

Household credit load is a peculiar thing. In the first instance, that is not something terrorizing. And the figures shown by the First Credit Bureau confirm that. The crediting model and the credit behavior have changed in our country. For example, a rich person has a deposit and he can use his mobile app to buy something by installments, without overpaying. That will cost him nothing, and his deposit will proceed to bring him incomes. From that standpoint, growing household credit load is not something bad. Before 2019, that growth took place because of those particular changes in credit model.

But at present, the First Credit Bureau has a separate report for 10% of rich borrowers that have biggest credits. 

The credit load on those 10% grows faster than their real incomes. They take credits and loans not because they do not want to withdraw from their deposits, but because they run low on cash to buy things. That load increased by 15% approximately. 

The second thing that concerns me follows from statistics – in 2022, share of profits directed into credit pay-out increased by 5.5%. That is historic maximum, as far as I remember.

— Is it a dangerous indicator?

— No such notion exists, but we see serious aggravation. Three years ago that share was only 4.3%. In reality, population incomes are not growing, they get crunched by inflation. More than that – not only do not incomes grow, but credit service fees are growing.

Trend:  Business Avoids Credits

— In 2019, when credit amnesty was introduced, President ordered to cut insolvent population off from credits.  So, why did the credit load increase?

— On the backs of working citizens, who are not recognized as insolvent. That credit load affair is growing.

— In March, President Tokayev signed the credit load reduction edict. In 2023, they will increase micro-credit interest rates, thus making unsecured consumer crediting sector more robust. They will toughen requirements on banks, micro-crediting entities and collectors. They will limit the credit load on citizens with bad debts.  Will that make a change?

— Those are not measures to reduce credit load. Those are measures to limit credit load growth. Because life by installments is an implication of the economic policy, in general. The core reason is that credits to business are way behind credits to households.

Businessmen do not see opportunity in investing in projects. They are not growing, not creating new workplaces, not paying salaries and more taxes. 

In Kazakhstan, credits to business are slower than credits to individuals.

Conclusion – working masses live by installments. Consumption and growth of same come from credits, not from real income. Concerning is the fact that that indicator grows, instead of reducing.