National Bank launches remote biometric identification service for obtaining financial services

At a government session chaired by Prime Minister Askar Mamin, the results of the country's socio-economic development and the execution of the republican budget for January-September 2020 were considered. Chair of the National Bank Erbolat Dossaev reported on the state of the banking sector.

According to the head of the National Bank, world financial and commodity markets remain quite volatile amid the second wave of coronavirus infection and the introduction of new restrictive measures in the world.

The dynamics of global stock indices is determined by two factors: the spread of the coronavirus in the world and the US presidential elections, which create uncertainty on trade relations between the US and China, as well as the adoption of additional fiscal stimuli in the US and the EU.

“Index of stock markets of developing countries (MSCI Emerging Markets) for September 2020 decreased by 1.77%, the index of stocks of developed countries (MSCI World Index) — by 3.59%. These factors, coupled with weak data in other countries, in particular in Europe, lead to an increase in the value of the dollar and a decrease in the price of gold by 4%,” Dossaev said.

In the Eurozone for September 2020 business activity has deteriorated. In Russia, the PMI index in industry in September of this year decreased to 48.9 points from 51.1 points. In Kazakhstan, the business activity index for September this year rose to 47.6 from 45.4 a month earlier due to growth in construction and services. In the industry, the index fell 0.5 points to 47.8.

According to Dossaev, the share of wage recipients is recovering, while the share of those receiving state benefits is decreasing, the willingness of respondents to large purchases is increasing.

The share of those who made large purchases and expenses in the last 3 months, in September 2020 rose to 17%. However, 46% of respondents consider the current time to be unfavorable for making large purchases.

In September 2020, annual inflation remained at 7%.

“The annual growth in prices for food products slightly slowed down to 10.8% from 10.9% in August of this year. There was a slowdown in the growth of prices for meat and dairy products and eggs. The annual growth in prices for non-food products remained at the level of 5.5%, for paid services — it accelerated from 3.4% in August to 3.6% in September 2020, against the background of rising tariffs for electricity and education services,” said the head of the National Bank.

A survey of households on inflationary expectations conducted by the National Bank for September of this year shows that short-term and long-term assessments of development prospects have become more positive. Estimates of the current and future material situation of households have improved compared to July-August of this year.

“For a gradual deceleration of annual inflation in the medium-term horizon in the context of the existing accelerated inflationary processes, the base rate on Sep. 7, 2020. kept at 9% with an interest rate corridor of +/- 1.5 p.p. The real level of the base rate restrains the growth of inflation and stimulates the recovery of economic activity,” said the chair of the National Bank.

Investors' fears and the strengthening of the dollar also lead to weakening currencies of developing countries and cheaper oil. The latter is fueled by fears of a decrease in oil demand due to the growing risks of a slowdown in the pace of global economic recovery.

In September this year, the tenge exchange rate was under significant pressure from the following external factors.

1. Oil for September 2020 fell by almost 10% (9.56%) due to the growing risks of a slowdown in the global economic recovery amid repeated outbreaks of coronavirus in certain regions of the world, and as a result, weakening demand for oil.

Oil quotes have also been under softening pressure since August this year. limiting OPEC + production, lowering oil prices by Saudi Arabia and restoring production in Libya.

A modest recovery in the global economy could lead to a renewed increase in oil reserves while maintaining current production volumes.

2. Currencies of developing countries in September 2020 weakened against the background of an increase in the number of cases of coronavirus, which led to a decrease in investor interest in risky assets and a strengthening of the US dollar.

The Turkish lira weakened over the month by 5.2%, the Russian ruble — by 4.9%, the Argentine peso — by 2.7%. In general, the index of currencies of developing countries in September added only 0.4%.

The Kazakh tenge against the background of the general movement of currencies of developing countries showed a moderate weakening by 2.8% per month from 420.11 to 431.81 tenge per US dollar.

“The conversion of assets of the National Fund within the framework of the allocation of a guaranteed transfer to the republican budget and extended measures for the mandatory sale of a part of export foreign exchange earnings by companies of the quasi-public sector limited a significant weakening of the tenge,” Dossaev emphasized.

Since the beginning of October 2020, the exchange rate of the tenge against the US dollar is gradually strengthening. On Oct. 12, 2020, strengthening amounted to 1% to 427.83 tenge per US dollar on the background of moderate growth in oil prices.

International reserves of Kazakhstan at the end of September this year, according to preliminary data, amounted to $91.1 billion, having decreased over the past month by 3.1%.

In September, the gold and foreign exchange reserves of the National Bank fell to $33.8 billion, mainly due to a fall in gold prices by 4%, as well as against the background of a reduction in STB funds placed with the National Bank.

The assets of the National Fund amounted to $57.33 billion, having decreased by $1.36 billion over the month due to a negative gap between receipts to the fund and allocations of a guaranteed transfer to the republican budget, as well as a negative adjustment in financial markets due to fears of a second wave of the pandemic.

Despite the negative adjustment in September, investment income from the beginning of 2020 amounted to about $1.5 billion.

Deposits in the banking system at the end of August this year amounted to 20.7 trillion tenge, having increased from the beginning of the year by 8.7%. Tenge deposits increased by 14.2% to 12.4 trillion tenge, foreign currency deposits — by 1.4% to 8.3 trillion tenge. As a result, the level of dollarization of deposits for 8 months of 2020 decreased to 40.2%.

To a large extent, the growth of total deposits is due to the March exchange rate revaluation, as well as the smooth flow of income received from foreign currency deposits in tenge deposits in the future.

At the same time, data from the National Bank's survey on inflationary expectations of the population shows that the share of respondents with savings is declining. The majority of respondents in September of this year. gave a negative assessment of the time for the formation of savings — 42%, however, these negative assessments began to decline compared to 47% in August 2020.

“Loans to the economy since the beginning of the year have increased by 2.4% to 14.2 trillion tenge at the end of August 2020, as a result of an increase in long-term loans by 3.1% or 372.3 billion tenge to 12.2 trillion tenge. Short-term loans decreased by 2.2% or 44.2 billion tenge to 2 trillion tenge,” Dossaev said.

The business loan portfolio since the beginning of the year has increased by 1.2% to 7.3 trillion tenge. The rate on tenge loans to businesses amounted to 11.9% in August 2020, incl. on short-term loans — 11.6%, a decrease on long-term loans to 12.8% from 13.4% in August 2020.

Loans of the population since the beginning of this year increased by 3.7% to 6.9 trillion tenge. In their structure, consumer loans decreased by 0.6% to 4.2 trillion tenge, mortgage loans increased by 14.6% to 2 trillion tenge due to the implementation of state programs.

As the head of the National Bank noted, the implementation of the anti-crisis initiatives of the Head of State continues to support the Kazakh economy.

  1. Under the Economy of Simple Things as of Oct. 9, 2020, banks approved 450 applications for a total amount of 417 billion tenge, issued 661 loans in the amount of 380.4 billion tenge.
  2. Under the Program of concessional lending to SMEs affected by the introduction of the state of emergency, as of Oct. 9, 2020, entrepreneurs submitted 2,275 applications for 563.9 billion tenge, 3,887 applications for 419.5 billion tenge were issued, of which 65.8 billion tenge were paid from money received from the repayment of previously issued loans.

Support for housing construction continues with funding from the National Bank.

  1. Under the program 7-20-25 on Oct. 8, 2020, 23,935 applications for 280.5 billion tenge were approved, of which 18,822 loans were issued for the amount of 219.4 billion tenge.
  2. Under the market mortgage program Baspana Hit for Oct. 8, 2020, 42,736 applications for the amount of 373.8 billion tenge were approved, 34,437 loans were issued for 293.8 billion tenge.

“The spread of the pandemic has accelerated the digitalization of all sectors of the economy. Under the influence of technological trends, financial markets are undergoing a process of radical transformation, in which much depends on the actions of the regulator,” Dossaev said.

In this regard, on Aug. 17, 2020, by the Resolution of the Board of the National Bank, the Concept for the Development of Financial Technologies and Innovations for 2020-2025 was adopted. It identifies key priorities for the development of the financial technology and innovation market in Kazakhstan and sets three main goals:

First, it is building the foundation of the digital financial market in order to provide opportunities for the provision of financial services in a digital format.

Second, the use of technology to restructure the financial market, by reducing overall costs in the industry, increasing efficiency and creating new growth points.

Third, stimulating sustainable market development by creating conditions for healthy competition and improving collaboration between market participants.

“As part of the implementation of this concept from Oct. 1, 2020, the National Bank has launched into commercial operation a developed remote biometric identification service for obtaining financial services without physically visiting a financial institution using the technology of face recognition. In April this year, the system was launched in pilot mode. During this time, the service has allowed 11 second-tier banks to provide the population with 2.8 million banking services,” Dossaev said.

Remote biometric identification allows financial market participants to remotely identify customers and provide them with services such as opening bank accounts and deposits, issuing payment cards, and lending. This development meets new challenges against the background of a complex epidemiological situation in the world.

It is important to note that the service is available to both banks and insurance companies, professional participants in the securities market, payment and microfinance organizations.

“The growth of volatility in external markets will have an impact on the domestic market. In this regard, the National Bank will closely monitor the situation and take all necessary measures to ensure price and financial stability, as well as to create favorable conditions for economic recovery,” Dossaev concluded.

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