On Setting a Cap on Consumer Lending Rates

Any restriction creates additional barriers for new players and reduces competition. As a result, competition will not grow, and prices, in this case interest rates, will not fall. It should be noted that Kaspi does not earn directly from the interest rate: its earnings are built into the commission paid by the seller when selling goods through Kaspi. This is how classic BNPL (buy now, pay later) works. However, the commission for selling through the marketplace stays not with the bank but with kaspi.kz, which falls outside banking regulation. So even with a cap of 40%, it will be extremely difficult for the regulator to determine the effective rate, and this will only create an additional barrier for new players.

We need to look at the substance: why Kaspi has managed to build a monopoly in this segment. And I must say that the regulator itself is helping it do so.

Let me explain how.

The main reason is Kaspi's data monopoly, which allows it to maintain a high loan approval rate. In this line of business, it is critically important to have an acceptable approval rate (AR).

The approval rate is defined as the ratio of approved loans to the total number of applications submitted. If a bank or lender has a low rate, customers stop using its services.

Approval depends on the borrower's solvency and debt burden. Since customers have many sources of income beyond their official salaries, banks use indirect indicators to assess solvency.

There used to be many sources for assessing solvency, but last year, in its fight against consumer lending, the regulator restricted the indirect income that was taken into account when calculating the debt burden ratio (DBR).

The DBR is calculated as the ratio of monthly loan payments to monthly income.

Kaspi lobbied for a provision under which any receipt to a card from third parties is recognized as income. Kaspi has a monopoly in P2P transfers, and these are its main source for assessing customers' income, so it was not affected by this restriction at all, unlike other second-tier banks and microfinance organizations, which have no such data. As a result, approval rates fell sharply at all second-tier banks, and their customers moved to Kaspi, which gained an additional monopoly position and a further barrier to entry into this market.

Building up such a data set takes years, and any player wishing to replicate it could do so in 5–7 years, with active investment.

Therefore, if we want to reduce interest rates in this segment, we need to:

• Increase the number of sources for determining indirect income, in order to strengthen competition;
• Legally oblige second-tier banks (including Kaspi) to share data on transfers between individuals, so that all market participants can use this data;
• Lower barriers to entry for new players in this segment by creating a separate neobank category and easing licensing requirements for them;
• Introduce regulation of marketplaces in order to determine the real rate on consumer loans.