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Terms and definitions

In this Development Strategy of JSC “Industrial Development Fund”, the following terms and definitions are used:

The sole shareholder, Development Bank, Bank Joint Stock Company “Development Bank of Kazakhstan”
JSC NMH “Baiterek”, Holding Joint Stock Company "National Managing Holding" Baiterek"
JSC “Industrial Development Fund”, Company JSC “Industrial Development Fund”
Bank development strategy JSC “Development Bank of Kazakhstan" development strategy for 2014-2023
Strategy of JSC “NMH” Baiterek” Development strategy of JSC “National Managing Holding” Baiterek "for 2014-2023, approved by the Government of the Republic of Kazakhstan dated June 18, 2014 No. 674
Company development strategy Development strategy of the JSC “Industrial Development Fund” for 2014-2023
SPIID State program of industrial and innovative development of the Republic of Kazakhstan for 2015-2019, approved by the Decree of the President of the Republic of Kazakhstan dated August 1, 2014 No. 874
“Nurlyzhol” program State program of infrastructure development “Nurlyzhol” for 2015-2019, approved by the Decree of the President of the Republic of Kazakhstan dated April 6, 2015 No. 1030
UBR The unified program for support and development of business "Business Roadmap 2020", approved by the Decree of the Government of the Republic of Kazakhstan dated March 31, 2015 No. 168
VAT Value added tax
NF RK National fond of the Republic of Kazakhstan
UAPF Joint Stock Company "Unified Accumulative Pension Fund"
PPP Public-private partnership
ROА Return on Assets
ROE Return on Equity
KPI Key performance indicator
RILA Rules for the implementation of leasing activities of the JSC “Industrial Development Fund”, approved by the Sole Shareholder of the JSC “Industrial Development Fund” by the JSC “Development Bank of Kazakhstan” as of June 16, 2017 (Minutes No. 194-2017-05)

INTRODUCTION

JSC “Industrial Development Fund” was created on the basis of the decision of the Board of Directors of the Sole Shareholder dated August 5, 2005, state registration was carried out on September 6, 2005 in the justice body, on February 15, 2006 - state re-registration in the justice body due to the change in the name of the Company.

The company provides long-term lease financing in priority sectors of the economy, determined by state and government program documents, as well as decisions of the Government.

The development strategy of the Company was developed on the basis of the following strategic documents of the country and the Sole Shareholder:

1) Message of the President of the Republic of Kazakhstan - Leader of the Nation N.A. Nazarbayev to the people of Kazakhstan “Kazakhstan-2050” Strategy: New political course of the established state”;

2) Message of the Head of State dated January 31, 2017 "The third modernization of Kazakhstan: global competitiveness";

3) Strategic development plan of the Republic of Kazakhstan until 2020, approved by the Decree of the President of the Republic of Kazakhstan dated February 1, 2010 No. 922;

4) State program of industrial and innovative development of the Republic of Kazakhstan for 2015-2019, approved by the Decree of the President of the Republic of Kazakhstan dated August 1, 2014 No. 874;

5) State program of infrastructure development "Nurly Zhol" for 2015-2019, approved by the Decree of the President of the Republic of Kazakhstan dated April 6, 2015 No. 1030;

6) The unified program for support and development of business "Business Roadmap 2020", approved by the Decree of the Government of the Republic of Kazakhstan dated March 31, 2015 No. 168;

7) Forecast of socio-economic development of the Republic of Kazakhstan for 2017-2021, approved at a meeting of the Government of the Republic of Kazakhstan (Protocol No. 29 dated August 31, 2016);

8) The development strategy of the joint-stock company "National Managing Holding" Baiterek "for 2014-2023, approved by the Government of the Republic of Kazakhstan dated June 18, 2014 No. 674;

9) Development strategy of Development Bank of Kazakhstan JSC for 2014-2023, approved by the decision of the Board of Directors of the Development Bank.

These documents define the priority areas of activity and objectives of the Company for 2014-2023 in order to continue the progressive development of priority sectors of the economy of Kazakhstan, financial instruments and mechanisms used to achieve these goals.

The main principles and priorities of the Company's investment policy, sectoral priorities, quantitative restrictions on raising borrowed funds, limits, directions, possible conditions, procedure and timing of financing, placement of investment portfolio assets, co-financing are established by the Rules for Leasing Activities of Industrial Development Fund JSC, approved by the Sole shareholder of the Industrial Development Fund JSC by the Development Bank of Kazakhstan JSC joint-stock company dated June 16, 2017 (minutes No. 194-2017-05).

The Company's development strategy is based on the development forecast of Industrial Development Fund JSC, taking into account the current macroeconomic and marketing conditions in the medium term and strategic documents of the Government of the Republic of Kazakhstan and parent companies represented by NMH Baiterek JSC and the Development Bank.

I. FOREIGN COUNTRIES LEASING MARKET

In order to make an overview of the leasing market in foreign countries, countries were selected with a similar structure of the economy and the period of development of leasing relations, i.e., post-Soviet countries. Data were taken on the leasing market of the Russian Federation, the Republic of Belarus, the Kyrgyz Republic and the Republic of Uzbekistan. Analysis of the leasing market in these countries indicates that the leasing market is developing due to the availability of tax incentives and the implementation of special government programs, as well as to the functioning of special associations of leasing companies.

Leasing operations in the Republic of Belarus are carried out by 94 specialized leasing organizations and 13 banks. 11 companies are subsidiaries of Belarusian and foreign banks, the rest are established by individuals and legal entities that are not related to the banking sector. 5 companies are companies with foreign capital, which own 37.04% of the total new business and 23.32% of the total leasing portfolio.

According to the tax legislation of the Republic of Belarus, during the term of the lease agreement, more than 75% of the cost of equipment must be attributed to the costs of the enterprise. In the current practice, the amount of depreciation is usually 99% of the cost, and the company eventually purchase the leased object for 1%. That is, it gets ownership of almost new equipment at a minimum residual value.

Acquisition of fixed capital on lease allows mainly to reduce the bases for calculating two taxes: property tax and income tax. The key role is played by accelerated depreciation, which allows the cost of the leased object to be attributed to the costs of the lessee at a faster rate. Costs are deducted when forming the base for income tax, which leads to its reduction. Likewise, accelerated depreciation quickly and significantly diminishes the value of the leased asset, which is part of the property tax base.

To solve problems related to the work of the leasing industry in Belarus and the protection of corporate interests by leading leasing companies, the Belarus Association of Lessors has been operating since 2011, which coordinates the activities of its members, represents and protects common interests, and also implements joint programs.

At the end of 2016, the total leasing portfolio amounted to over 750 billion Belarusian rubles, or 0.9% of GDP, 4.2% of investments in fixed capital and 11.9% of the cost of purchasing machinery, equipment, and vehicles. 21.8% of the volume of leasing transactions falls on contracts with individuals and 78.2% - on contracts with legal entities and entrepreneurs.

In the Russian Federation, about 690 companies report and actively work in the leasing market. A number of Russian companies are at the top of the Lease Europe rating.

Companies with state participation include: Sberbank Leasing, Rosagroleasing, VEB-Leasing, VTB Leasing, State Transport Leasing Company, etc. One of the main advantages of state-owned leasing companies is a significant amount of equity capital, as well as access to cheap long-term state funds. This allows state-owned leasing companies to offer very favorable lease financing terms. State-owned leasing companies offer clients both commercial leasing and concessional financing programs.

State-owned leasing companies can be both highly specialized (Rosagroleasing - leasing for agriculture, Ilyushin finance - leasing of aviation equipment, etc.), and universal, leasing any property (Sberbank Leasing, VEB-Leasing, VTB Leasing, etc.). P.).

When granting tax benefits, the Russian Tax Code divides leasing transactions into international (if one of the parties to the leasing transaction is a non-resident of the Russian Federation) and domestic (both parties are residents of the Russian Federation).

During leasing, tax incentives apply to property tax (depreciation with a leading coefficient), VAT (the possibility of deduction), income tax (includes expenses related to the production and sale of goods). At the same time, this type of benefit applies only to domestic leasing transactions.

Many of the largest Russian leasing companies have a well-developed branch network in the regions of Russia. The expansion of the regional presence of leasing companies is associated with a low level of competition in the leasing market in many regions, a high demand for lease financing from clients in remote regions, the need to assess the lessee's business "on the spot" and regularly monitor the condition and operating conditions of the leased asset.

When working with lessees in the regions, leasing companies created at banks use both the branch network of the parent bank (Alfa-Leasing, Gazprombank Leasing, Intesa Leasing, TransCredit Leasing, etc.), and own branches, representative offices (VEB-Leasing, VTB24 Leasing (Sistema Leasing 24), LC Uralsib, Raiffeisen-Leasing, Sberbank Leasing, Unicredit leasing, etc.).

The segment of small and medium-sized businesses at the end of 2014-2016 is dominated in the portfolio of leasing companies. In terms of the number of transactions, it exceeds 90%, in terms of volume, it exceeds 50%. At the same time, the total leasing portfolio of Russian leasing companies in 2017 exceeded 3.3 trillion Russian rubles. rubles.

According to RAEX (Expert RA), the share of leasing in Russia's GDP in 2016 amounted to about 4.6%, leasing provides 25% of the growth in investments in fixed assets. This is due to the liberalization of Russian leasing legislation in 2014. Within the framework of the adopted legislative innovations, namely, the range of lessee entities has been expanded, including municipal organizations and enterprises, as well as the period for financial leasing transactions has been reduced from 3 years to 1 year.

The positive growth is presented by the retail segment, which grew by 33% in 2016. Car leasing has a key positive impact on the retail segment, with a market share of about 35%. In addition, the growth was shown by construction and agricultural machinery, which increased market shares to 7 and 3%, respectively. The increase of leasing transactions in certain sectors, for example, car leasing, is influenced by the state program of preferential car leasing implemented by the Russian Federation, and the growth is shown by aviation leasing, which is influenced by the state support for the lease / leasing of Russian aircraft, including Sukhoi Superjet-100 aircraft.

According to the forecast of RAEX (Expert RA), in 2018 other segments of the leasing market will show positive dynamics (+ 15%) due to the increase in regional transactions.

The first leasing operations in the territory of the Kyrgyz Republic began in 2003. The development of leasing activities became possible due to the Law on Financial Lease, adopted in 2002. From 2003 to 2008, a number of amendments were adopted to the Tax Code of the Kyrgyz Republic "concerning the taxation of leasing. Despite its 12-year history, the leasing market in Kyrgyzstan has not yet developed and is in its infancy.

According to the results of a desk research of the Union of Banks of Kyrgyzstan and ISR Consult within the framework of the USAID BGI Project, presented at one of the meetings of the Private Investors Club, in 2015, only 7 companies were identified that had experience in leasing. During the period from 2003 to 2014, the volume of operations in the leasing market amounted to 31,766 million soms. The most active development of the market was observed in the period from 2011 to 2014, since about 70% of all leasing operations were carried out. This happened because of the entry into the market of Aiyl Bank OJSC with state participation, which in a short period of time managed to take a leading position and increase its share in the leasing market to 94%, since the entry of this company into the market was mainly due to participation in government programs with the purpose to develop leasing relations in Kyrgyzstan.

At the same time, the leasing market of the neighboring state is growing insignificantly. According to the Union of Banks of Kyrgyzstan and the company, ISR Consult this is due to the lack of awareness of the population, lack of experience in banks and other financial institutions, as well as the unattractiveness at the moment of leasing activities in general, both for banks and for consumers of the Kyrgyz Republic due to the high cost of this instrument.

Nowadays, in the Kyrgyz Republic the average term for leasing operations is 3 years, and the interest rate varies from 6% to 28% in national currency. At the same time, the minimum interest rate (6%) can be set only in government projects.

However, despite all the above facts, experts from Kyrgyzstan predict a great potential for possible growth in the leasing market of the Kyrgyz Republic, according to the Ministry of Agriculture of the Kyrgyz Republic, the degree of deterioration of equipment and machinery in the mining, tourism, air, water, agricultural and other sectors is more than 90%. Thus, the demand for leasing operations will grow every year.

The leasing market in Uzbekistan has a huge potential for growth. According to the Association of Lessors of Uzbekistan, based on data from the State Committee of the Republic of Uzbekistan on Statistics, at the end of 2016, 126 financial institutions engaged in leasing activities were registered in Uzbekistan. At the same time, 79 organizations are actively involved in leasing activities, including 22 commercial banks. The market of leasing services is distributed between leasing companies and commercial banks, where the share of leasing companies is 72.15%, the share of commercial banks is 27.84%.

The leasing market of Uzbekistan is diversified, more than 48% of the market is represented by 5 large players, three of which are state specialized leasing companies, 2 wide-profile leasing companies created with the participation of foreign founders and focused on the development of small and medium-sized private businesses.

The Uzbekistan Association of Lessors operates in the Republic of Uzbekistan, which coordinates market participants, analyzes the leasing market.

There is also a package of tax and customs benefits, such as exemption from VAT for financial lease services, reduction of the taxable base for property tax, i.e., in case of leasing, it is possible to attribute these costs to a reduction for the term of the lease agreement, exemption from customs payments for imported technological equipment.

The aggregate portfolio of leasing operations of Uzbek leasing companies and banks at the end of 2016 amounted to about 2.6 trillion Uzbeks. sum. The leasing portfolio of commercial banks amounted to 957.6 billion soums.

During 2014-2015. the volume of the value of property leased out varies at the level of 0.6-0.4% of GDP, and the volume of the total portfolio of leasing transactions - at the level of 1.5-1.4%.

It should be noted that in 2016, for the first time in the distribution of volumes of leasing transactions by types of fixed assets, the technological equipment sector was in the lead with an indicator of 36%. In the market of technological equipment, construction machinery and equipment for the production of building materials - 115.5 billion soums, equipment for the production of food products - 29.2 billion soums and textile equipment - 26.9 billion soums are in special demand.

The distribution of leasing operations in the Republic of Uzbekistan is fairly even, with the exception of the city of Tashkent, which accounts for 38.1% of all new leasing operations carried out on the country's market. Prospects for the growth of the leasing market of Uzbekistan, according to the Association of Leasing Companies of the Republic of Uzbekistan: entry of local leasing companies into international markets / creation of capital leasing companies based on JV MAN Auto-Uzbekistan JV, Samarkand Automobile Plant LLC, General Motors Uzbekistan JSC ; microleasing (support for private and small firms, family entrepreneurship and home-based work, in particular the leasing of small equipment for the processing of vegetables and fruits, food, animal husbandry, sewing equipment); leasing of real estate; operational leasing.

In the future, the leasing market of Uzbekistan, according to Uzbek experts, will actively grow as part of the implementation of the new approved Strategy for Development of Uzbekistan for 2017-2021. Since in the named document, the priorities of the state policy of the Republic of Uzbekistan define the introduction of innovative technologies, the modernization of industries and the economy, the development of new types of competitive products in industry, which will spur the demand for leasing services.

One of the features of the leasing services market of the Republic of Uzbekistan is the provision of advice for small and private businesses on the acquisition of leasing machinery, equipment, vehicles, drawing up leasing contracts and a business plan, accounting and other issues.

Thus, the review of the leasing market of the above countries shows a generally dynamic pace of development, new and ambitious players appear on the market of neighboring countries, there is a rather significant increase in competition between leasing companies, and this, in turn, requires lessors to master additional new types of leasing services. and pursuing a more active development strategy to maintain and strengthen the achieved position in the leasing services market in these countries.

An overview of the leasing market in developed countries shows that leasing accounts for more than 30% of all new investments annually in some of the leading Western countries. In such European countries as Great Britain, Germany, France, Italy, the volume of leasing transactions on movable property in total reaches 73% of the entire market. The same countries, but only with different ratios of the volume of transactions, occupy a dominant position in the real estate market. Their total share in the European leasing market reaches 80%.

The main objects of movable property leasing in European countries are: cars (37-38% of the total volume of leasing transactions); machinery, equipment, devices (24-26%); road vehicles (12-14%); computers, office equipment for offices (4-6%); aircraft, ships, freight and rail transport and other objects (5-6%).

The main objects of real estate leasing on the market are industrial buildings. These objects of leasing account for 25.7% of all leasing operations. Significant objects are shops (22.4%). The leading group among real estate objects are offices, leasing transactions with them account for 34.2%. This is followed by the premises of public services (6.8%), hotels (1.9%) and other facilities (9.0%).

The largest share of leasing supplies falls on the engineering industries and the private services sector. Thus, in Austria the share of leasing in mechanical engineering was 50%, and in Italy - 54%. In the UK, 62% of leasing funds went to the development of the private services sector, more than 50% of funds to this sector go to Germany and Norway.

European leasing companies are united in the Euroleasing association in genera, which represents the interests of 25 European countries. Membership in the Euroleasing Association contributes to the exchange of experience of leasing companies, identification of promising areas of leasing activities.

The analysis of the legislation of the leading Western countries, in which leasing has special regulation, represents that the regulations of these states give a clear definition of leasing, list its characteristic features, the presence of which indicates the conclusion of a lease agreement, form the requirements that the lessor must meet, as well as the ratio between the lease term and the standard service life of the property, the relationship between the lessor, the lessee and the seller of the property is regulated.

As for the participation of banks in financing a leasing instrument, one can cite as an example the activities of a number of Development Banks of other countries in this direction:

- Chinese Development Bank (CDB) - leasing instrument is used as one of the additional types of instrument and often serves as a way to promote the export of Chinese goods with the participation of the China Development Bank in the implementation of projects abroad;

- Business Development Bank of Canada (BDC) as one of the additional types of financial instruments to be provided to small and medium-sized businesses;

- State Corporation "Bank for Development and Foreign Economic Affairs" Vnesheconombank "(VEB) - provides a leasing instrument through a subsidiary of JSC" VEB-Leasing ", the latter, in turn, has an extensive network of branches in the regions of the Russian Federation and works with special government programs, in within which it provides preferential lease financing in transport and industry;

- Brazilian Development Bank (BN DES) - provides a leasing instrument as part of a range of financial services in projects where it is directly involved;

- The European Bank for Reconstruction and Development (EBRD) - through various financial intermediaries, provides access to finance in the form of investments in shares and loans, including leasing through local leasing companies in the form of finance and operating leases for small businesses. The object of such lease can be a variety of goods, such as trucks, machinery and equipment;

- The Eurasian Development Bank (EDB) - through participation in large investment projects as an additional banking product, it offers a leasing instrument, especially in large infrastructure projects, for example, the construction of oil and gas pipelines in the Russian Federation, renewal of communal infrastructure in the regions of the Republic of Kazakhstan ( . Uralsk, Aktau) and others.

In general, leasing relations are the most important means of competitiveness of a country's economy and a review of international experience in this shows that:

- the development of the leasing market is influenced by the presence of an association, the main functions of which are the formation of the leasing market, determining its state and development trends;

- active development of the leasing market directly depends on the level of liberalization of legislative acts regulating leasing relations;

- the demand for leasing services dictates the availability of state support and tax incentives;

- from the point of view of state development banks of various countries - the leasing instrument acts as a mechanism for promoting exports and as part of complex banking services.

II. ANALYSIS OF THE CURRENT SITUATION

Paragraph 2.1 of Chapter 2 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

2.1. Analysis of the external environment

The pace of renewal of the major production is in positive dynamics. Thus, the volume of investments in fixed assets in the Republic of Kazakhstan in 2016 increased by 5.1%, amounting to 7.7 trillion tenge in comparison with 3.7% in 2015.

схема13.png

By types of costs, 57% of investments in the Republic of Kazakhstan are accounted for construction and capital repairs of buildings – the growth in the volume of investments by 2015 amounted to 6.6%, machinery and equipment accounted for 28% of investments, an increase of 9.2%.

At the same time, according to the Institute of Economic Research of Kazakhstan, the coefficient of renewal of fixed assets for all types of activities in the sectors of the country's economy in % for 2010-2015 was 13.4%, in the manufacturing sectors less than 10%, transport only 10%.

According to the forms of business, small and medium-sized businesses do not show investment growth at the end of 2016, which indicates that there are problems with attracting investment or expanding business. About 40% of the investment volume is accounted for by small enterprises. Large enterprises accounted for about 51% of investments in fixed assets in 2016.

схема12.png

In general, despite the low growth of the economy of the Republic of Kazakhstan in 2016, the growth of the indicator of investments in fixed capital is a moderately positive background for leasing activities.

The result of 2016 shows that the leasing market of the Republic of Kazakhstan is mainly developing due to state support measures provided by state leasing companies – JSC "Industrial Development Fund" and JSC "KazAgroFinance".

According to the Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, in 2016 the total value of financial leasing agreements amounted to 166.7 billion tenge, which is 32% higher than in 2015 - 126.6 billion tenge. At the same time, agriculture accounted for 46.7% of the total cost of financial and operational leasing contracts last year, transport and warehousing – 41.1%, mining and quarrying took 6.3%.

According to RAEX (Expert of RA Kazakhstan), the volume of new business of leasing companies increased by 16.5% in 2016. In 2015, the growth was at the level of 26%.

схема11.png

Despite the growth of the total volume of portfolios of leasing companies, there is a steady decline in the leasing portfolio of companies affiliated with second-tier banks and a slight increase in private leasing companies, which is due to a lack of funding for private leasing companies.

схема10.png

In this regard, in the medium term, the dynamics and structure of the leasing market will continue to be determined by large state-owned leasing companies within the framework of the implementation of state and government programs.

According to the results of a study conducted by Expert RA Kazakhstan in 2016, the sources of financing of leasing companies in the course of transactions in 2016 were formed by 52% of their own funds, 37% of borrowed funds, 11% were provided by the republican budget or the National Fund of the Republic of Kazakhstan. The lessor's own funds are mainly used to finance transactions in the field of agricultural machinery, which are 90% financed from the own funds of leasing companies. When financing transactions in the field of vehicles and equipment, meanwhile the share of own funds stand only at 7%. 70% of the sources of financing for these transactions are formed from borrowed funds, another 22% - from the republican budget.

Rating of the leading leasing companies in Kazakhstan in 2016:

A place for a new business

Company

The volume of new business in 2016, million tenge

Current portfolio, million tenge

Place by portfolio

Number of transactions concluded in 2016, units

Place by the number of transactions

01.01.2017

01.01.2016

01.01.2017

01.01.2016

1

1

KazAgroFinance

57 499

202 406

184 883

1

2 409

1

2

2

Industrial Development Fund

49 400

87 653

59 108

2

82

3

3

5

Leasing Group

1 846

1 642

1 041

4

44

4

4

-

KazMedTech

1 778

2 313

2 537

3

88

2

5

4

Al Saqr Finance

464

1 550

2 486

6

18

5

6

6

Raiffeisen Leasing Kazakhstan

-

1 619

4 194

5

-

6

Source: RAEX (Expert of RA Kazakhstan) based on the results of the LC questionnaire

The volume of new business of leasing companies is formed by two leaders from the mentioned rating – JSC "KazAgroFinance" and JSC "Industrial Development Fund".

JSC "KazAgroFinance" is engaged in supporting farmers and the basis of its portfolio consists of leasing transactions for agricultural machinery and breeding cattle. In 2016, the volume of new transactions decreased slightly – by 2%, but it still remains extremely significant for the Kazakh leasing industry – 57.5 billion tenge. At the same time, the portfolio grew by 9%, to more than 202.4 billion tenge. The number of transactions was 2409 – an unattainable level for other market participants.

JSC "Industrial Development Fund" – as a company with state participation in the capital is focused on investing large-scale projects that correspond to the strategy of industrial and innovative development of the Republic of Kazakhstan. The priority sectors of the economy for JSC "Industrial Development Fund" are the manufacturing industry, production and transport infrastructure. The volume of new business of JSC "Industrial Development Fund" in 2016 increased by 25% and amounted to 49.4 billion tenge. The portfolio at the end of 2016 showed a significant growth – 48% and reached 87.7 billion tenge.

While private leasing companies are more focused in the field of vehicle leasing.

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In the industry context, the total leasing portfolio is as follows:

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It is important to note that those sectors supported by the state are still large in the total volume of the portfolio, especially the agricultural sector.

Accordingly, in the regional context, grain-growing regions are leading in terms of leasing volumes. At the same time, the sharp increase in the share of leasing in the North Kazakhstan region was influenced by the implementation of a large leasing transaction in the transport sector related to the sale of domestic railway engineering products.

Name

2015

2016

million tenge

share

million tenge

share

1

North Kazakhstan region

5 410

5%

31 240

28%

2

Astana

5 343

5%

29 207

26%

3

Akmola region

12 242

12%

14 917

13%

4

Kostanay region

5 004

5%

6 371

6%

5

Pavlodar region

4 649

5%

4 781

4%

6

Karaganda region

15 422

15%

4 532

4%

7

Almaty

14 496

14%

3 874

3%

8

East Kazakhstan region

4 468

4%

3 214

3%

9

Kyzylorda region

3 912

4%

3 160

3%

10

Almaty region

12 035

12%

2 858

3%

11

South Kazakhstan region

1 576

2%

2 314

2%

12

Aktobe region

4 750

5%

1 634

1%

13

West Kazakhstan region

974

1%

1 399

1%

14

Jambyl region

3 145

3%

1 082

1%

15

Atyrau region

716

1%

425

0%

16

Mangystau region

148

0%

0

0%

17

Abroad

7 971

8%

0

0%

 

 

102 261

111 006


Source: RAEX (RA Expert of Kazakhstan) based on the results of the LC questionnaire


Thus, the leasing market in the coming years will develop in the trajectory of the set pace by state-owned companies providing leasing financing services. This is facilitated by existing tax benefits, including the possibility of reducing the tax base on corporate income tax, exemption from VAT. The availability of these benefits makes it possible to make the leasing tool attractive.

At the same time, the further development of the leasing market in the Republic of Kazakhstan requires legislative improvement, since the current legal system on financial leasing contains a number of restrictions.

First of all, it is necessary to liberalize the Law "On Financial Leasing", which consists in reducing the term of financial leasing, as well as expanding the range of entities applying for services through the financial leasing instrument, i.e., along with private business entities, it is necessary to give the opportunity to receive financial leasing services to organizations and enterprises with state participation.

It should be noted that, according to the SPIID, the need for updating fixed assets of manufacturing enterprises is more than 4.5 trillion tenge until 2020, within the framework of the Nurly Zhol program, investments in fixed assets require an investment of more than 7 trillion tenge until 2020.

Investment in fixed assets under these programs should contribute to an increase in the productivity of enterprises in the manufacturing industry by 22%, an increase in the value of exports of processed products by 19% compared to 2015. Also, within the framework of the Nurly Zhol program, to reduce the depreciation of capacities in the field of railway transport from 46% to 42% of rolling stock for passenger transportation and from 44% to 40% of rolling stock for cargo transportation, in the field of motor transport, to reduce the share of worn-out buses on regular passenger routes from 65 to 50%.

At the same time, it is necessary to expand the capacity for the transportation of goods and passengers by air and water transport. To do this, it is essential to increase the number of ferries and ships to 27 units, the number of passengers transported by regional air lines to 180 thousand people in 2019.

Based on these needs, the Company can pursue a more active policy of expanding and presenting machinery and equipment (aircraft, ferries, passenger and freight cars, passenger buses, productive machines with numerical control) through a leasing tool to meet the needs of the economy in updating the fixed assets of enterprises both within the framework of state and government programs, as well as through the development and implementation of individual leasing financing programs.

Paragraph 2.1 of Chapter 2 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

2.2. Analysis of the internal environment

The Company's leasing portfolio amounted to KZT 165,425 million by December 31, 2017. In general, there is an active growth of the leasing portfolio in 2017, associated with the financing of transport infrastructure projects and the development of budget credit funds under the EDKB program by financing projects in priority sectors of the economy. Thus, in 2017, compared to 2014, the growth of the leasing portfolio was 6 times.

схема7.png

It should be noted that there is the predominance of projects in the railway transport sector, which require the adoption of measures to diversify and balance the sectoral structure of the leasing portfolio.

Industry structure of approved investment projects as of January 1, 2018:

схема6.png

While the Company is poorly covered by leasing financing in the western and southern macro - regions of the country, traditionally industrialized regions-East Kazakhstan, Karaganda and Pavlodar regions. In this regard, it is necessary to take measures to distribute leasing financing in these regions.

схема5.png

Regional structure of investment projects as of January 1, 2018:

JSC "Industrial Development Fund" is the operator of a long-term leasing financing instrument within the framework of the SPIID, UBR programs, the Company's internal program "Program for supporting domestic automakers". The company mainly finances low-profit projects in priority sectors of the economy, as well as commercial projects focused on investing in high-tech projects.

The company has experience working with large investment and infrastructure projects in the following areas:

- provision of long-term leasing financing. Within the framework of the UBRprogram (the Productivity 2020 program), 13 leasing transactions were approved, financed and commissioned;

- export leasing financing. The first international leasing transaction for the export of Kazakh products to the Republic of Azerbaijan has been financed;

- retail leasing. Since 2015, JSC "Industrial Development Fund" has been the operator of the program to support domestic automakers by providing leasing financing to legal entities and individual entrepreneurs for the purchase of motor vehicles and special-purpose vehicles of domestic production, with the exception of agricultural machinery and passenger cars;

- leasing with the participation of export credit agencies. In December 2016, for the first time, the Company attracted a credit line from a Russian bank for the supply of Russian –made railcars for private Kazakh carrier operators.

- Islamic leasing. In 2016, the Company financed the first leasing transaction under the Islamic leasing "Ijara Muntahiya Bittamlik".

Mentioned should be made of the dynamic growth of the Company's assets and liabilities over the past two years has shown the necessity to expand the staff or open branches/representative offices of the Company in the regions of the Republic of Kazakhstan/neighboring countries. The company has a staff of 63 people over the past five years. While the Company's leasing portfolio increased 6 times in 2017 compared to 2014. This is facilitated by the active participation of the Company in the implementation of state and government programs, as well as the growing interest of state-owned enterprises and business communities in the leasing tool. The increase in the number of projects and the leasing portfolio significantly increases the burden on each employee of the Company. On average, compared to 2014, the Company's document turnover increased by 1.7 times, the leasing portfolio by 6 times, the loan portfolio by almost 5 times, while the average workload of 1 employee of the Company increased by 1.8 times.

Paragraph 2.3 of Chapter 2 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

2.3 Financial activities of the Company

The financial indicators achieved by the Company in 2017 are significantly higher than the results of previous years. Thus, the assets of JSC "Industrial Development Fund" have increased 2.3 times over the past 4 years, the equity capital has increased 3 times.

The Company's liabilities are also growing due to the active growth of the leasing portfolio. The company actively borrows budgetary and extra-budgetary funds to meet the needs for updating and modernizing the fixed assets of transport sector enterprises.

A sharp increase in assets over the past two years has occurred due to the financing of a number of large leasing transactions under the state program "Nurly Zhol" and the government program of the UBR, as well as through the implementation of the Program of leasing financing of vehicles and special equipment of domestic production.

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The income from the main activities of JSC “DBK – Leasing” in 2017 increased by 5.9 times compared to 2014.

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Expenses on reserves illustrate a stable growth of 7.8 times. At the same time, the increase of general administrative expenses is moderate, the salary fund practically does not show growth, against the dynamic growth of the Company's main indicators, which indicates the need to expand the staff number and establish competitive wages

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The net profit indicator also demonstrates positive growth. Compared to 2014, the growth of net profit increased from 166 million tenge to 3,589 million tenge at the end of 2017, an increase of about 21.6 times. The dynamic growth of the indicator was influenced by the policy of active leasing financing of projects in the transport and manufacturing sectors, as well as financial injections from the state into the implementation of investment projects of the Nurly Zhol and EDKB programs on the instrument of long-term leasing financing.

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Paragraph 2.4 of Chapter 2 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

2.4 Analysis of the implementation of key performance indicators

Within the framework of the Development Strategy of JSC "Industrial Development Fund", adopted in 2015, the effectiveness of the implementation of the set goals and objectives was carried out by monitoring the 6 efficiency that were achieved in the period from 2014 to 2017.

Performance of the Company's efficiency in 2014-2017


Indicators

Planned values

Actual values

1.

The volume of the leasing portfolio, billion tenge

2014 y. – 32

2015 y. – 53

2016 y. – 57

2017 y. – 165

2014 y. – 28

2015 y. – 60,6

2016 y. – 87

2017 y. – 165

2.

The share of the leasing portfolio of total assets, %

2014 y. – 52%

2015 y. – 82%

2016 y. – 65%

2017 y. – 60%

2014 y. – 51%

2015 y. – 70%

2016 y. – 71%

2017 y. – 68%

3.

The level of provisions for the leasing portfolio, %

2014 y. – 10%

2015 y. – 15%

2016 y. – 15%

2017 y. – 5,33%

2014 y. – 17,46%

2015 y. – 8,17%

2016 y. – 7,74%

2017 y. – 5,08%

4.

Return on equity, ROE

2014 y. – 2,57%

2015 y. – 2,9%

2016 y. –1,5%

2017 y. – 5,55%

2014 y. – 1,20%

2015 y. – 3,72%

2016 y. – 2,18%

2017 y. – 12,15%

5.

Debt/equity

Not higher than 7

2014 y. –  2,8

2015 y. – 3,7

2016 y. – 7,2

2017 y. – 4,18

6.

Credit rating

Ba3

2014 y. – Ba3

2015 y. – Ba3

2016 y. – Ba3

2017 y. – Ba3


Paragraph 2.5 of Chapter 2 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

2.5 SWOT-analysis

Based on the analysis of the external and internal environment, an overview of the main strengths and weaknesses of the Company, opportunities and threats to achieve the Company's strategic goals is presented.

Strengths

1. The Company's leading position in the leasing market. 

2. Availability of state support and support of the parent Bank. 

3. Availability of tax preferences. 

4. Access to low-cost and long-term funding sources.

5. Availability of low-interest and long-term leasing products within the framework of the UBR and the NurlyZhol Program. 

6. Investment experience in financing low-profit and long-term projects in priority sectors. 

7. Professional staff. 

8. Experience in attracting borrowings on the international market and exporting leasing.

Weaknesses

1. High concentration in certain industries and groups of borrowers. 

2. The presence of problematic projects. 

3. The disproportionality of the authorized number of employees to the volume of the Company's leasing portfolio. 

4. Insufficient interaction with the commercial sector and other development institutions (national, regional). 

5. Weak representation of the Company's instruments in the regions. 

6. The absence of an association of leasing companies representing the interests of leasing companies and determining the trends in the development of the leasing market.

Opportunities

1. Joint implementation of projects with the parent company in order to implement a new stage of the state industrial policy. 

2. Expanding the services provided by type (Islamic finance, export and import of leasing services) and by industry (covering the food processing and communications sectors). 

3. Implementation of PPP projects in the infrastructure sector. 

4. Co-financing of projects with second-tier banks and development institutions.

5. Coverage of micro, small and medium-sized businesses through the creation of joint ventures.

Threats

1. Decrease in the solvency of lessees due to the deterioration of the overall economic situation.

2. Reducing the competitiveness of borrowers of JSC "Industrial Development Fund" in the conditions of the EurAsEC and the WTO. 

3. A steady decline in the activity of private leasing companies (the threat of curtailing retail leasing).

4. Lack of high-quality non-commodity related projects with good business prospects: poor quality of management at enterprises, outdated material and technical base and technologies.

5. Insufficient and low availability of market sources of financing.

III. THE COMPANY'S MISSION AND VISION

Paragraph 3.1 of Chapter 3 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

3.1. The role and place of the Company in the development strategies of JSC " NMH “Baiterek” and JSC “Development Bank of Kazakhstan”

JSC "Industrial Development Fund" is a subsidiary of JSC "Development Bank of Kazakhstan", which is part of “NMH” “Baiterek”.

The strategic directions within the adjusted development strategy of JSC “NMH “Baiterek” for 2014-2023 are:

1) support of entrepreneurship in the large business segment;

2) support of entrepreneurship in the segment of small and medium-sized businesses; 

3) ensuring financial accessibility of housing;

4) increase of export potential;

5) transfer and introduction of innovations.

Taking into account the wide range of tools within the Holding's activities (lending, leasing financing, grants, equity financing, subsidies, etc.), focused on supporting various categories of business entities, as well as in accordance with international experience, the Company will focus on the further development of long-term leasing financing of projects as the most important tool for updating fixed assets of enterprises in priority sectors of the economy.

At the same time, the Company, being an operator of long-term leasing financing according to state and government program documents, does not set itself the goal of maximizing profit. Its activities are carried out on the basis of break-even. The Company's margin provides only reimbursement of its operating expenses and coverage of risks for ongoing projects.

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3.2. Mission

Assistance in the modernization and renewal of fixed assets of enterprises in the industrial and infrastructure sectors.

Paragraph 3.3 of Chapter 3 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

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3.3. Vision

The sole shareholder, management and employees of JSC "Industrial Development Fund" share the following vision of JSC "Industrial Development Fund":

1. The leading leasing company in Kazakhstan, focused on leasing financing of investment projects in the implementation of the state industrial and infrastructure policy;

2. An institute that promotes the export/sale of Kazakh machine-building products within the framework of leasing instruments;

3. An institution that promotes the development of the leasing market through joint financing of investment projects by financial organizations;

4. An institution capable of working with various mechanisms of the leasing instrument.

IV. STRATEGIC DIRECTIONS OF ACTIVITY AND OBJECTIVES OF THE COMPANY

Paragraph 4.1 of Chapter 4 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

         4.1. Strategic direction – lease financing

Lease financing is the main activity of JSC "Industrial Development Fund". An important criterion for the provision of leasing financing is assistance in the implementation of the industrial and innovation policy of the Republic of Kazakhstan, the development of the potential of entrepreneurship, especially, the financing of projects that have a socio-economic effect and provide for an increase in labor productivity, the volume of production of products and their export.

Potential lessees of the Company are active entrepreneurs of the private and public sectors implementing investment projects in priority sectors within the framework of the SPIID, Nurly Zhol and UBR (priority sectors within the SPIID are metallurgy, oil refining, chemistry, mechanical engineering, food processing, within the framework of Nurly Zhol – infrastructure and production projects in the transport industry, within the framework of the UBR – investment projects of subjects of industrial and innovative activity).

Projects implemented in these sectors are low-margin and require a cheap funding base with the participation of budget funds with an interest rate starting from 3.5%, but not more than 11%, and are implemented exclusively within the framework of state and government programs.

The Company will finance investment projects of active entrepreneurs in other sectors of the economy, including oil and gas complex, tourism, communications, where market financing rates will be applied, by attracting borrowed and other funds.

The company will also implement narrow-industry leasing financing programs for the purpose of updating machinery and equipment in the sectors of regional air transportation, municipal passenger road transportation, road construction and for existing enterprises of the machine-building sector.

Thus, according to the RILA, the priority objects of leasing financing of JSC “DBK – Leasing” are the following objects:

1) infrastructure in the energy, communications and transport sectors;

2) agricultural production, including the production and / or purchase, transportation of raw materials, their processing and sale of finished products;

3) industrial production, including extraction, production and / or purchase, transportation of raw materials, its processing and sale of finished products in the following industries:

- metallurgical industry and production of metal products;

- mechanical engineering;

- mining industry;

- chemical and petrochemical industry, production of basic pharmaceutical products and preparations, rubber and plastic products, non-metallic mineral products;

4) in the service sector (on a commercial basis): tourism, environmental, medical, educational, sports and recreation, hotel;

5) projects implemented abroad and contributing to the development of infrastructure, transit potential of the Republic of Kazakhstan, export of Kazakhstani goods, works, services and capital;

6) food and beverage production;

7) other areas that do not contradict the legislation of the Republic of Kazakhstan and internal regulatory documents of the Company.

The company will implement lease financing of investment projects with a minimum amount of financing equivalent to 1.5 billion tenge for a period of up to fourteen years, with the exception of projects financed under the UBR from 150 million tenge (textile industry 75 million tenge)

The strategic goal in this direction is to invest about 550 billion tenge in the development of manufacturing industries of the industrial sector and production capacities of the transport sector in the period 2014-2023. Within the framework of achieving this goal, it is planned to solve the following key tasks:

- provision of leasing financing in the priority sectors of the economy in the national currency, since most of the Company's projects have revenue in tenge, also in the conditions of a free-floating regime of the national currency and in order to avoid currency risks, most projects need tenge funding;

- providing leasing financing at a low interest rate for projects in the manufacturing industry. The company will continue the practice of providing the most favorable conditions for lending to projects implemented within the framework of state initiatives for economic diversification (SPIID, Nurly Zhol Program, UBR);    

At the same time, the provision of low-cost leasing financing on a long-term basis is possible with the support of the Kazakhstan Government and the Sole Shareholder to attract funds from the NF RK, the Republican budget of the Republic of Kazakhstan, the UAPF and other funding sources.

- further improvement and development of new leasing financing instruments. To this end, the Company will continuously work on the development of leasing instruments that meet the needs of the market, including through the implementation of measures to improve the legislation of the Republic of Kazakhstan and the legislative expansion of the activities of DBK – Leasing JSC, providing for the use of new financing mechanisms;

- implementation of projects under the PPP model within the Company's mandate;

- implementation of measures to diversify the structure of the leasing portfolio.In order to implement it, an analysis and assessment of the risk of projects concentration in a certain sector in the Company's leasing portfolio will be carried out on an ongoing basis. Measures will be taken to search for and select projects in priority sectors to increase share in the total volume of the Company's leasing portfolio, as well as to develop and implement leasing financing for oil and gas and oilfield services companies, as well as in the information and communication enterprise;

- maintaining the dynamic growth of the leasing portfolio by financing projects within the framework of support for exporters and projects with the participation of export credit agencies annually at least 7 billion tenge, as well as by developing and implementing separate leasing financing programs for enterprises to upgrade the fleet of aircraft for regional aviation in the amount of more than 40 billion tenge, road equipment about 15 billion tenge, updating machine tools for enterprises of the machine-building sector on a revolving basis with a financing amount of 10 million tenge, also, the renewal of municipal vehicles in the amount of 100 billion tenge;

- improving the quality of project management by improving / introducing new approaches to finding and generating new investment projects, examining new projects and assessing credit risks, improving project selection parameters, by strengthening the project monitoring function by improving regulatory approaches to project management (project prevention), as well as conducting targeted work to reduce problematic projects in the volume of the leasing portfolio.

Effectiveness of the above tasks will be implemented by achieving the following values for key performance indicators in 2023:

- increase in the volume of the leasing portfolio to the level of 378 billion tenge (the value at the end of 2016 is 89 billion tenge);

- the share of the private sector in the leasing portfolio is at least 70% (the value at the end of 2016 is 74.8%);

- maintaining an acceptable level of provisions for the leasing portfolio of no more than 10% (the value at the end of 2016 is 7.74%);

- the share of the leasing portfolio of at least 80% of the total assets annually (the value at the end of 2016 is 71%);

- the number of projects (with the accumulation of 2014) that have received leasing financing will be at least 240 projects by 2023 (the value at the end of 2016 is 29 projects);

- the volume of products (with the accumulation of 2014) produced by business entities that received leasing financing will amount to about 1,690 billion tenge (the value at the end of 2016 is 108.6 billion tenge);

- the volume of export revenue by enterprises (with the accumulation of 2014) that received leasing financing will amount to about 58.4 billion tenge (the value at the end of 2016 is 3.4 billion tenge).

Paragraph 4.2 of Chapter 4 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

.2. Strategic direction - financial resources management

As part of the implementation of this strategic direction, the Company will continuously work on effective asset and liability management, maintaining break-even and financial stability, providing the Company with long-term financial resources for leasing activities by attracting borrowed funds from budgetary and extra-budgetary sources.

Treasury. The Treasury management policy will be aimed at:

- establishing requirements for the safety of existing assets, reducing transaction costs by automating processes;

- ensuring the profitability of temporarily available funds, taking into account the needs of leasing activities in the required volume, currency and time period;

- increasing the economic efficiency of the placement of temporarily free funds by forecasting and redistributing cash flows;

- establishment of monitoring and measurement of the effectiveness of processes for treasury operations, implementation of a risk management system for treasury operations by setting and managing limits on counterparties.

Capitalization.Under deteriorating macroeconomic conditions, there may be a need to support JSC “DBK – Leasing” by increasing its authorized capital. At the same time, the volume of the necessary capitalization should be sufficient to ensure the financial stability and implementation of the leasing activities of JSC “DBK – Leasing”.

Indicators of the financial stability of the Company, which track the need for additional capitalization, are:

- the level of the Company's debt burden, expressed as the ratio of the Company's total debt (liabilities) to its own capital;

- the capital adequacy ratio, calculated as the ratio of equity to risk-weighted assets.

At the same time, the threshold values for these parameters are set by a decision of the Company's Board of Directors.

Funding. There is a decrease in the volume of state revenues of the Republic of Kazakhstan and revenues to the National Fund of the Republic of Kazakhstan against the background of a significant decrease in global prices for raw materials. The continuation of this trend has a negative impact on the volume of public expenditures, including the allocation of budget funds for the implementation of targeted state programs aimed at stimulating the volume of investments in the fixed capital of enterprises of the non-resource sector of the economy. Taking into account the risk of restricting access to public sources of financing, JSC “DBK – Leasing” will focus on finding alternative sources of funding, which will help reduce the share of public funds in the Company's funding.

Funding of the Company's leasing activities with priority on attracting extra-budgetary funds will be carried out by implementing the following measures, but not limited to:

- raising funds on the domestic capital market, including UAPF funds;

- use of intra-group financing opportunities;

- raising funds on the capital markets outside the Republic of Kazakhstan, which do not imply an increase in currency risk when issuing funds to the final borrower in local currency (that is, the exchange rates of countries are consistent in relation to changes in the macroeconomic environment). For example, the Russian ruble can be considered one of the currencies that have the designated characteristic;

- diversification of the loan portfolio in the context of instruments, funding markets through the creation of a network of cooperation with international and domestic financial institutions, and international financial organizations and attracting funding on favorable terms with the possibility of complex financing of projects (issuance of bonds on the domestic market, external borrowing, trade financing under the cover of ECAs, including export support);

While the possibility of attracting borrowed target funds from the National Fund of the Republic of Kazakhstan and the republican budget of the Republic of Kazakhstan for the implementation of investment projects within the framework of state and government programs is not excluded.

The dividend policy. In accordance with the Procedure for determining the amount of dividends paid by subsidiaries of JSC "NMH "Baiterek" (Dividend Policy), the payment of dividends in the amount of 30% of the total net income is established.

At the same time, the decision to pay dividends is made depending on the prevailing financial and economic indicators, based on the indicators of financial stability and liquidity of the Company.

By the decision of the sole shareholder dated April 26, 2017, JSC "Industrial Development Fund" was exempted from paying dividends for a period of 1 (one) year.

The effectiveness of the above tasks will be achieved by ensuring the following values for key performance indicators until 2023:

- maintaining the return on assets (ROA) at a break-even level of at least 0.27 % (the value at the end of 2016 is 0.35%);

- maintaining the return on equity (ROE) at a break-even level of at least 2.0 % (the value at the end of 2016 is 2.18%);

- the share of non-state sources of borrowing in the total structure of borrowing will be at least 80% (the value at the end of 2016 is 31%).

Paragraph 4.3 of Chapter 4 was amended in accordance with the decision of the Board of Directors of JSC "Industrial Development Fund" dated October 26, 2020 (Protocol No. 174)

4.3. Strategic direction – corporate governance and improvement of the organization of work

The implementation of the following tasks is aimed at the successful achievement of the goals and objectives within the first and second strategic directions.

Corporate governance.The Company will continue to work on improving the corporate governance system in accordance with the recommendations of the Sole Shareholder and external consultants in the following areas:

- improving the efficiency of the Board of Directors;

- improvement of internal control systems;

- development of the management evaluation and remuneration system;

- increasing the transparency of the activities of JSC "Industrial Development Fund";

- improving the efficiency of interaction with the Sole Shareholder and the companies of the group of JSC "NMH "Baiterek".

The issue of further improvement of the work of the corporate secretariat service and its professional development will be considered.

The process of increasing the role of independent directors and ensure the quality of the work of the Board of Directors will be continued.

The task is to automate and improve business processes in JSC "Industrial Development Fund" and improve IT, maintain high-level credit ratings from international rating agencies and improve legislation regarding the Company's direct activities.

Personnel policy. Human resources are the most important factor for the success of the implementation of the development strategy. In accordance with the unified personnel policy of the Development Bank of Kazakhstan, the personnel management policy of JSC “the Industrial Development Fund” will continue to develop in the following directions:

- effective planning of labor resources will be carried out through the application of the policy of open competitive selection of personnel;

- ensuring fair and competitive remuneration for work through the introduction of a grading system and taking into account the regular review of wages on the market in a comparable industry, conducting motivational research, responding to changes in the legislation of the Republic of Kazakhstan, etc.;

Human resources are the significant factor for the success of the implementation of the development strategy. In accordance with the unified personnel policy of the Development Bank of Kazakhstan, the personnel management policy of JSC “the Industrial Development Fund” will continue to develop in the following directions:

- effective planning of labor resources will be carried out through the application of the policy of open competitive selection of personnel;

- ensuring fair and competitive remuneration for work through the introduction of a grading system and taking into account the regular review of wages on the market in a comparable industry, conducting motivational research, responding to changes in the legislation of the Republic of Kazakhstan, etc.;

- increasing the level of labor productivity of employees through a fair and systematic assessment of activities by applying the efficiency factor, personnel certification and motivational measures;

- productive human capital management will be provided by a system of continuous training and development of personnel together with the introduction and application of modern technologies and information management systems in labor processes, including through automation of knowledge management processes;

- effective communication and interaction of employees will be ensured by organizing internal corporate communication channels, including through the work of an internal portal (intranet), regular study of employees’ opinions and suggestions.

Risk management and internal control.The Company's strategic aim in the field of risk management is to develop a risk management and internal control system with the adequate scale, nature of its activities and long-term objectives of the Company.

The Company is guided by the following international standards and practices in the field of risk management and internal control:

• COSO "Internal Control-Integrated Model" (2013). Updated version of the 1992 document. COCO 2013 insists that internal control is a process that depends on people at all levels of the organization (not just management, directors, etc.), and should be aimed at achieving the Company's business goals.

• COSO "Risk management of the organization-an integrated model" (2004, is at the stage of revision and updating). Includes "Integrated Model" and "Applied Techniques"). A conceptual model that pays attention to various aspects of risk management. Considers internal control as an important component of risk management in the Company.

• Basel II: International Capital Measurement Standards-revised agreement.

The risk management and internal control system in the Company will be built on a consolidated basis, taking into account the strategy, policies and rules of the Development Bank.

As part of building an effective risk management system, the following activities will be carried out:

- creating a risk culture in the Company that promotes risk analysis when making all management, investment or project decisions;

- development of the operational risk management system by improving the procedures for dealing with realized operational risk events and the introduction of early response/warning tools;

- improvement of information systems for credit risk assessment;

- in order to minimize credit risks, foreign currency attraction should be provided with cash flows of the lessee in a similar currency.

The construction of the internal control system will be aimed at:

- improving the efficiency of operational activities;

- reduction of the probability of realization of risks and the amount of possible losses and losses;

- control over the effective functioning of the main and auxiliary business processes;

- compliance with the requirements of the legislation of the Republic of Kazakhstan and the Company's HPA.

PR policy. The main tools used by the JSC "Industrial Development Fund" in the framework of PR promotion will be the point media activity of the management of the JSC "Industrial Development Fund", communication with the public through media resources, including social networks, image advertising, PR events.

JSC "Industrial Development Fund" pays great attention to the corporate governance system and will continuously work on improvements in this area in accordance with international practice.

Taking into account the operational nature of the above tasks, their effectiveness will be realized through the implementation of measures within the framework of the action plan for the implementation of this development strategy.

At the same time, the corresponding efficiency in this area will be calculated according to the Methodology for assessing the level of corporate governance of JSC "NMH Baiterek" and JSC "Development Bank of Kazakhstan".

V. Expected results

Key performance indicator Unit of measurement Calculation methodology Actual values at the end of 2016 Target value by 2023
1 Increase in the volume of the leasing portfolio billion tenge The leasing portfolio represents the amount of the remaining principal debt (including problem projects) at the reporting date 89 378
2 The share of the private sector in the leasing portfolio % Total volume of the leasing portfolio/for the total amount of the leasing portfolio of private projects 74,8% At least 70%
3 The level of provisions to the leasing portfolio % The level of provisions created under the leasing portfolio, created in accordance with International Financial Reporting Standards /The volume of the leasing portfolio 7,74% No more than 10
4 The share of the leasing portfolio of total assets % The ratio of the leasing portfolio to total assets 71% At least 80%
5 Number of funded projects (with accumulation) by 2023 units The number of projects that received leasing financing for 2014-2023 82 240
6 Maintaining the return on assets (ROA) indicator at the break-even level % Net profit (profit for the year) / The average value between the volumes of assets at the end of the previous period and at the end of the current period 0,35% At least 0,27

7

Maintaining the return on equity (ROE) at the break-even level % Net profit (profit for the year) / Equity at the end of the previous period 2,18% At least 2,0
8 The share of non-state sources of borrowing in the total structure of borrowing by 2023 % Nominal value of non-state borrowing for the reporting year / nominal value of total borrowing for the reporting year 31% At least 80
9 The volume of products produced by business entities that have received leasing financing (with an increase since 2014) billion tenge Total production volumes (fact)* LP growth using basic assumptions (50% of projects will go from the investment phase to production, 10% of the error is applied) 402,7 1 690
10 The volume of export revenue of enterprises that have received leasing financing (with an increase since 2014) billion tenge The share of export revenue in the total volume of production by enterprises that have received lease financing 12,9 58,4

VI. IMPLEMENTATION OF THE DEVELOPMENT STRATEGY, ITS MONITORING AND ADJUSTMENT

The implementation of this development strategy is possible when creating a management system and monitoring its realization through the development and approval of an appropriate consolidation plan with an indication of deadlines and responsible persons or structural units.

Monitoring of the implementation of the Strategy and the implementation of the relevant Action Plan should be carried out on an annual basis after the approval of the Audited Financial Statements and heard by the Company's Management Board and the Board of Directors once a year.

In order to achieve it, the structural divisions of the Company will send on an annual basis, no later than January 30, a report on the assigned activities and on achieving the established efficiency in the Company's Development Strategy to the responsible structural division according to the Consolidation Plan.

The Strategy will be adjusted by the decision of the Board of Directors as necessary.

Министерство индустрии и инфраструктурного развития РК
Baiterek
Банк развития Казахстана