Methods of Payment
Medium to large companies use bank transfers as the primary method of payment, while small businesses and consumers primarily use cash. In Bishkek, credit and debit cards are widely accepted. The government debt market is small and limited to short maturities, though Kyrgyz bonds are available for foreign ownership. Broadly, credit is allocated on market terms, but with introduced market distortions. Citing the expropriation of the Kumtor gold mine and weak institutions, Moody’s Investors Services downgraded the Kyrgyz Republic’s sovereign credit rating to B3 and changed the outlook to negative from stable in 2022 and it has remained unchanged through their update dated May 2023. Bank loans remain the primary source of private sector credit, and local portfolio investors often highlight the need to develop additional financial instruments in the Kyrgyz Republic. International financial institutions often finance large infrastructure projects when foreign companies are involved. For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.
Foreign Exchange Controls
Foreign residents and non-residents are permitted to buy or sell foreign exchange, but the government can impose limits on transactions, as it did shortly after the Russian invasion of Ukraine in February 2022. From September 2023, the National Bank of the Kyrgyz Republic (NBKR) will lift a ban on currency export for financial institutions, but for individuals-citizens is a limit of $10,000 and for non-citizens $5,000. Banks are permitted to request certification of funds for transaction exceeding $11,900 dollars. The NBKR conducts weekly inter-bank currency auctions, in which competitive bids determine market-based transaction prices. Banks usually clear payments within a single business day. With occasional exceptions in the agricultural and energy sectors, barter transactions have largely been phased out.
Banking System
There are currently 23 commercial banks in the Kyrgyz Republic, with 317[1] operating branches throughout the country; the five largest banks comprise nearly 70 percent of the total market whereas 33.4 percent of assets is held in state own banks. No U.S. bank operates in the Kyrgyz Republic and Kyrgyz banks do not maintain correspondent accounts from U.S. financial institutions, complicating dollar-denominated payments or payments to U.S. entities. There are eight completely foreign owned banks operating in the Kyrgyz Republic: Demir Bank, National Bank of Pakistan, Halyk Bank, Optima Bank, Finca Bank, and Kompanion Bank. Other banks are partially foreign held, including KICB and Kyrgyz-Swiss Bank. KICB has multinational organizations as shareholders including the EBRD, Economic Finance Corporation, the Aga Khan Fund for Economic Development, and others.
The Kyrgyz banking system remains well capitalized with still sizeable, non-performing loans (NPLs). NPLs increased from 11.1percent to 12.8 percent in 2022. Net capital adequacy ratio increased from 22.5 percent to 25.6 percent in 2022. Total assets in the Kyrgyz banking system in 2022 equaled approximately $5.6 billion. Around thirty percent of private loans are dollar denominated. As of December 2022, the Kyrgyz Republic’s three largest banks by total assets were Aiyl Bank (approximately $940.6 million), RSK Bank (approximately $602.3 million), and Bakai Bank (approximately $589 million).
The micro-finance sector in the Kyrgyz Republic is robust, representing nearly 10 percent the market size of the banking sector. Trade accounted for 28.1 percent of the total loan portfolio of the banking sector, followed by consumer loans (18.4 percent) and agriculture (18.2 percent). The microfinance sector in the Kyrgyz Republic is rapidly growing. In 2022, around 130 microfinance companies, 84 credit unions, 412 pawnshops, and 467 currency exchange offices operated in the Kyrgyz Republic. Over the last five years, the three largest microfinance companies (Bai-Tushum, FINCA, and Kompanion) transformed into banks with full banking licenses.
To access Kyrgyz Republic ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.