ORDER OF THE GOVERNMENT OF THE KYRGYZ REPUBLIC

of June 9, 2020 No. 315

About approval of the Financing of Subjects of Entrepreneurship Program

List of amending documents

For the purpose of recovery and ensuring economic and social stability, support of subjects of business activity in coronavirus distribution terms, according to articles 10 and 17 of the constitutional Law of the Kyrgyz Republic "About the Government of the Kyrgyz Republic" the Government of the Kyrgyz Republic decides:

1. Approve the Financing of Subjects of Entrepreneurship Program according to appendix (further - the Program).

2. To the Ministry of Finance of the Kyrgyz Republic:

1) to dig up financial resources from internal and external sources on crediting of subjects of entrepreneurship taking into account budgetary appropriations and arrangements with the international partners in development and to allocate financial resources for crediting of subjects of entrepreneurship according to the Program;

2) to open in National Bank of the Kyrgyz Republic the special account for accumulation of the means arriving from subjects on account of repayment of the credits obtained according to the Program. The means which are saved up on this account are subject to further use according to the decision of the Cabinet of Ministers of the Kyrgyz Republic.

3. Under the Government of the Kyrgyz Republic timely to represent to the State Tax Service to the commercial banks and the microfinancial organizations participating in implementation of the above-stated Program, information on application of components of digitalization of tax procedures by subjects of entrepreneurship.

4. To impose control of execution of this resolution on department of economy and investments, department of financial and credit policy of Government office of the Kyrgyz Republic.

5. This resolution becomes effective from the date of official publication.

Appendix

to the Order of the Government of the Kyrgyz Republic of June 9, 2020 No. 315

Financing of Subjects of Entrepreneurship program

1. Introduction

The pandemic of coronavirus mentioned the whole world. The International Monetary Fund predicts recession of world economy for 3 percent in 2020 - much stronger, than in 2009. According to the forecast of the IMF, in 2020 GDP of Kyrgyzstan will decrease by 4 percent.

Perspectives of growth of world economy in 2020 are extremely uncertain. It is predicted that world trade will be reduced by 10-13 percent that as a result will lead to loss about 45-50 million workplaces, to growth of unemployment and social tension.

Influence of pandemic on economies of state members of EEU will depend substantially on duration of rationing arrangements and speed of recovery of world economy. In this regard impact of pandemic on state members of EEU will be different depending on the taken rationing arrangements. Possibilities of state members of EEU on support of economy are also different: if Russia and Kazakhstan have potential for direct subsidizing of sectors of economy, then Armenia, external sources of support are forced to look for Kyrgyzstan, to address the international organizations.

The Ministry of Economics Kyrgyz the Republic predicts the expected recession of economic development of the Kyrgyz Republic in 2020 and the beginning of recovery from the crisis since 2021.

The introduced restrictions on border with neighboring countries led to reducing the external demand and the offer, and acceptance of necessary measures for control of spread of koronavirusny infection led to decrease in economic activity. Work of small and medium business, in the field of construction, and also number of the companies of industrial production is suspended almost in full, the service industry fell into the most vulnerable state.

2. The business sectors planned to support

Priority business sectors for scope are determined by the Financing of Subjects of Entrepreneurship Program (further - the Program) taking into account the following factors:

- assistance to preserving existing and creation of new workplaces in the conditions of growth of number of the unemployed and return of labor migrants;

- support of the most cost-efficient business areas for forming of perhaps bigger contribution to GDP growth of the country;

- support of the business areas having multiplicative impact on development of other types of economic activity;

- need of improvement of level of food security of the country;

- providing population and health care system with protective equipment and the most demanded medical supplies of internal production.

The research of data of National Statistical Committee of the Kyrgyz Republic shows that in the period of before pandemic the business sector with involvement of large number of workplaces was the processing industry, providing 12 percent from total number occupied in the country and 14,3 of percent of contribution to GDP. Considering the situation connected with spread of coronavirus and the taken measures for fight against koronavirusny infection in the industry in 2020 growth at the percent 95,3 level is expected. Within the project it is planned to cover soft credits the following business sectors:

- production of foodstuff (provides 14,4 of percent of workplaces in the industry). The Ministry of Economics of the Kyrgyz Republic predicts delay of production volumes of foodstuff (including drinks) and tobacco products in 2020 to the percent 103,6 level. The food industry in the conditions of pandemic plays important role in ensuring food security within the country;

- textile production, production of clothes and footwear, skin and other leather products (provides 33 percent of workplaces in the industry). In connection with the current situation and negative effects in the form of restrictions in raw materials supply indicators for 2020 are expected at the level of 90 percent. This sector is the most priority on scope workplaces;

- production of rubber and plastic products, other mineral products (provides 8,7 of percent of workplaces in the industry). Growth rate of production volumes of construction materials in 2020 is planned at the percent 80,2 level because of the expected decrease in business and investment activity in the construction sector. Production of construction materials has multiplicative impact on construction industry;

- for the purpose of assistance to internal production of remedies and medical supplies for health care system support of pharmaceutical industry of processing industry is planned;

- support of service industry where more 1,3 of one million people in case of the total number of occupied population of 2,5 works with one million is planned. In this sphere covering transport, tourist services, services of hotels and restaurants, and also wholesale and retail trade, the number of temporarily released busy workers can constitute more than 500 thousand people. Because of influence of quarantine actions the real surplus in the field of services in 2020 is expected at the % 91,0 level (on gross release). Priority support will be given to the sphere of motor transportation freight transportation and travel business which indicators can become the lowest over the last 10 years.

At initial stage in 2020 general financing of the Program is planned in the amount of at least 14, by 0 billion som with subsequent increase in the amount of financing to 40, in 0 billion som in 2021.

In 2020 within the Program the scope is expected:

- at least 220 production enterprises which obtained modernization loan of fixed assets. At least 2250 people will work at these companies;

- at least 200 production enterprises will obtain soft credit on current assets. At these companies at least 2250 workers will work;

- at least 850 subjects of entrepreneurship, where at least 4200 people work will receive refinancing of the credits;

- at least 20000 subjects of entrepreneurship will obtain the unsecured credits and will provide employment to at least 40000 workers;

- the planned industrial output of the companies which obtained soft credits constitutes at least 80339, 6 million som a year;

- the planned amount of gross value added of the subjects of entrepreneurship covered by projects - 6741, 8 million som a year.

The above-stated indicators of the expected scope will be increased by the Program in 2021 by 3 times.

3. Description of the Program

The purpose of the Financing of Subjects of Entrepreneurship Program is rendering the state financial support to small entrepreneurs, subjects of small and medium entrepreneurship, to large subjects of business, victims of COVID-19, coronavirus pandemic effects by providing with preferential borrowing facilities in the following directions:

- tourism;

- light industry;

- pharmaceutical industry and sphere of medicine;

- freight transportation;

- stimulation of activities of production and processing enterprises, including agricultural industry;

- processing industry, including procurement and preprocessing of agricultural products.

- education;

- services;

- trade;

- agricultural industry.

For the purpose of implementation of digitalization of tax administration soft credits are granted to the subjects of small and medium entrepreneurship applying components of digitalization of tax procedures (electronic invoices, program cash registers (further - KKM), marking of goods) without restrictions on industries.

The program provides refinancing of the credits, in case of positive credit history till March, 2020.

Also the Program provides support of small business which financing is carried out on unsecured basis. Commercial banks and the microfinancial organizations (further - IFI) credit small business on unsecured basis without restrictions on industries, except for consumer loans.

For program implementation financial resources from internal and external sources on crediting of subjects of entrepreneurship taking into account budgetary appropriations and arrangements with the international partners in development will be dug up, and directed to crediting of subjects of entrepreneurship.

In National Bank of the Kyrgyz Republic the special account for accumulation of the means arriving on account of debt repayment of the subjects who obtained the credits will be opened. The means which are saved up on this account go for further crediting of subjects of entrepreneurship through the selected commercial banks. For financing of the Ministry of Finance of the Kyrgyz Republic Program has the right to use in coordination with the international partners the means accumulated on accounts of the Central Treasury of the Ministry of Finance of the Kyrgyz Republic in National Bank of the Kyrgyz Republic (the revolving accounts) which target directions were determined by relevant decisions of the Government of the Kyrgyz Republic by other directions earlier.

Financing sources - the republican budget, means of the international partners in development, commercial banks, IFIs participating in program implementation including at the expense of the means received through credit auctions of National Bank of the Kyrgyz Republic.

The beginning of program implementation - June, 2020.

Executives in charge: The Ministry of Finance of the Kyrgyz Republic, the Ministry of Economics of the Kyrgyz Republic, National Bank of the Kyrgyz Republic (under approval), the commercial banks and IFI participating in program implementation.

The government of the Kyrgyz Republic grants the loans to commercial banks from internal and external sources for crediting on preferential interest rates, by selection of commercial banks and IFI.

Participation of the international partners in development using provision of this Program for support of subjects of entrepreneurship in the Kyrgyz Republic is provided.

In turn, commercial banks and non-bank financial credit institutions grant the loans to small entrepreneurs, subjects of small and medium business, large subjects of business on preferential interest rates according to the Program.

The loans are granted to the commercial banks participating in program implementation, with the following provisions:

1. For acquisition, updating, expansion and upgrade of fixed assets:

- interest rate - annual interest rate 1,5, with the subsequent issuance of credits to subjects of business activity under 6 annual interest rates;

- penalties - 3,0 of annual interest rate, charged on the amount of overdue payment, 10,0 of annual interest rates on the amount of inappropriate use;

- grace period of repayment of principal amount - 18 months, frequency of repayment after the end of grace period - semi-annual equal shares;

- frequency of repayment of the added percent - semi-annual shares;

- return term - 5 years;

- mortgage providing - credit portfolio on the credits issued within the Program.

2. For purchase of raw materials, component parts, spare parts:

- interest rate - annual interest rate 5,5, with the subsequent issuance of credits to subjects of business activity under 10 annual interest rates;

- penalties - 11,0 of the annual interest rates charged on the amount of overdue payment, 15,0 of annual interest rates - on the amount of inappropriate use;

- grace period of repayment of principal amount - 12 months, frequency of repayment after the end of grace period - semi-annual equal shares;

- frequency of repayment of the added percent - semi-annual shares, annually;

- return term - 3 years;

- mortgage providing - credit portfolio on the credits issued within the Program.

3. For acquisition, updating, expansion and upgrade of fixed assets, purchase of goods, raw materials, component parts, spare parts by the subjects of small and medium entrepreneurship applying components of digitalization of tax procedures (electronic invoices, program KKM, marking of goods):

- interest rate - annual interest rate 0,1, with the subsequent issuance of credits to the designated subjects of business activity under 4 annual interest rates;

- penalties - 6,0 of the annual interest rates charged on the amount of overdue payment, 10,0 of annual interest rates - on the amount of inappropriate use;

- grace period of repayment of principal amount - 12 months, frequency of repayment after the end of grace period - semi-annual equal shares;

- frequency of repayment of the added percent - semi-annual shares, annually;

- return term - 3 years;

- mortgage providing - credit portfolio on the credits issued within the Program.

4. For refinancing of the credits:

- interest rate - annual interest rate 6,5, with the subsequent issuance of credits to subjects of business activity under 11,0 of annual interest rates;

- penalties - 11,0 of the annual interest rates charged on the amount of overdue payment, 12,0 of annual interest rates - on the amount of inappropriate use;

- grace period of repayment of principal amount - 12 months, frequency of repayment after the end of grace period - semi-annual equal shares;

- frequency of repayment of the added percent - semi-annual shares, annually;

- return term - 3 years;

- mortgage providing - credit portfolio on the credits issued within the Program.

5. For microcredit of small entrepreneurs:

- interest rate - 5,0 of annual interest rates with return term to 16 months, with the subsequent issuance of credits of IFI under 7 annual interest rates, with return term to 15 months. In turn IFIs shall make microcredit of small entrepreneurs under 14 annual interest rates with return term to 12 months;

- penalties - 10,0 of the annual interest rates charged on the amount of overdue payment, 15,0 of annual interest rates - on the amount of inappropriate use;

- grace period of repayment of principal amount - up to 3 months, frequency of repayment after the end of grace period - monthly payments.

- frequency of repayment of the added percent - monthly payments;

- return term - 12 months;

- mortgage providing - the operating credit portfolio of commercial bank of at least 50%, the remained amount - credit portfolio of IFI;

- responsibility for timely and complete return of borrowing facilities bears commercial bank before the Ministry of Finance of the Kyrgyz Republic, IFI - before commercial bank;

- responsibility for end target use is born by IFIs.

6. The means provided from external sources, accumulated on accounts of the Central Treasury of the Ministry of Finance of the Kyrgyz Republic in National Bank of the Kyrgyz Republic are issued on the conditions approved with the international partners.

Commercial banks concerning which the special regime is introduced (direct banking supervision, Temporary administration) from National Bank of the Kyrgyz Republic cannot participate in program implementation.

In program implementation commercial banks with equity at least 600 million som and availability of branches/divisions can participate in 5 (five) areas and the microfinancial organizations with equity at least 100 million som and availability of branches/divisions at least in 3 (three) areas at least.

Within implementation  of the Presidential decree of the Kyrgyz Republic "About the announcement of 2020 Year of development of regions, digitalizations of the country and support of children" of January 8, 2020 No. 1 is performed crediting of regions by crediting of the operating and newly created companies, crediting amount at least 60 percent in regions and no more than 40 percent in the cities of Bishkek and Osh. At the same time the amount of crediting makes at least 5 percent in areas where there are filial organizations of the participating banks.

Within implementation of this Program to one subject of entrepreneurship borrowing facilities in the amount of no more than 30 million som, on condition of positive credit history till March, 2020 are allocated, at the same time it is allowed to consider requests of the borrowers who earlier allowed overdue debt on one payment up to 20 days and in total on all payments up to 60 days.

Unsecured microcredit is performed on regions without restrictions.

All risks on return of the issued credits are born by commercial banks and IFI, selection of borrowers is made according to their internal procedures.

Within the Program female entrepreneurs, or the companies most of which of workers make women shall constitute at least 30 percent of loanees.

The program provides recapitalization of Ayyl Bank and RSK Bank open joint stock companies at the expense of means of the republican budget. At the same time the specified commercial banks allocate the funds received on recapitalization for preferential crediting of subjects of entrepreneurship on the terms of this Program. Recapitalization of the above-stated open joint stock companies will be performed by the separate decision of the Government of the Kyrgyz Republic.

Commercial banks perform crediting with the following provisions:

Target direction	Rendering the state financial support to small entrepreneurs, including business and individual entrepreneurs, to subjects of small and medium business, large objects of business, victims of COVID-19, coronavirus pandemic effects by providing with preferential borrowing facilities in the following directions: - tourism; - light industry; - pharmaceutical industry and sphere of medicine;; - freight transportation; - stimulation of activities of production and processing enterprises; - processing industry, including procurement and preprocessing of agricultural products. - education; - services; - trade; - agricultural industry. For the purpose of implementation of digitalization of tax administration provision of soft credits to subjects small and medium business, applying components of digitalization of tax procedures (electronic invoices, program KKM, marking of goods), without restrictions on industries. For support of small business microcredit is carried out on unsecured basis without restrictions on industries, except for consumer loans
The size and term of crediting, in som	Credit amount: 1) acquisition, updating, expansion and upgrade of fixed assets on the amount to 30 million som, for up to 60 months, at the same time is allowed refinancing of the available debt of borrowers on the credits no more than 50% of credit amount. At the same time crediting in the field of tourism does not extend to restaurant business, except for points of public catering in case of tourist objects (boarding houses, rest houses, etc.); 2) purchase of raw materials, component parts, spare parts on the amount to 20 million som, for up to 36 months, at the same time is allowed refinancing of the available debt of borrowers (credit debt, to suppliers, assignments in соцфонд, taxes) no more than 50% of credit amount, and also financing of salary payments is allowed. At the same time crediting in the field of tourism does not extend to restaurant business, except for points of public catering in case of tourist objects (boarding houses, rest houses, etc.); 3) acquisition, updating, expansion and upgrade of fixed assets, purchase of goods, raw materials, component parts, spare parts by the subjects of business activity applying components of digitalization of tax procedures (electronic invoices, program KKM, marking of goods) on the amount to 10, 0 million som, for up to 36 months, at the same time are allowed refinancing of the available debt of borrowers (credit debt, to suppliers, assignments in соцфонд, taxes) no more than 50% of credit amount, and also financing of salary payments is allowed; 4) for refinancing of the credits for the amount to 20 million som, for up to 36 months; 5) microcredit on unsecured basis to 150 thousand som, for up to 12 months
Main conditions of receipt of the credit and characteristic of categories	1. Resident of the Kyrgyz Republic. 2. The individual entrepreneur, the small, average, large entrepreneur / the legal entity who is properly registered in all state bodies of the Kyrgyz Republic including the State Tax Administration under the Government of the Kyrgyz Republic and Social fund of the Kyrgyz Republic
Final interest rate	1) acquisition, updating, expansion and upgrade of fixed assets - 6%; 2) purchase of raw materials, component parts, spare parts - 10%; 3) acquisition, updating, expansion and upgrade of fixed assets, purchase of goods, raw materials, component parts, spare parts by the subjects of small and medium entrepreneurship applying components of digitalization of tax procedures - 4%. At the same time, in case of obtaining by commercial banks, IFI (based on the signed agreement on exchange of information with the State Tax Administration under the Government of the Kyrgyz Republic) data on refusal or violation by the subject of small or medium business of conditions of application of components of digitalization of tax procedures (electronic invoices, program KKM, marking of goods) who received preferential crediting during the credit period from the first following after month of receipt of such information is carried out recalculation of credit obligations of such subject with charge of interest rate of commercial bank, IFI operating on date of issue of financing, for the entire period of crediting; 4) for refinancing of the credits - 11%; 5) microcredit on unsecured basis - 14%. The additional charges and the commissions (for issuance of credit, schedule revision, reservation, restructuring, cashing in, etc.) are not collected
Grace period	Full relief from payment of fees on principal amount: 1) acquisition, updating, expansion and upgrade of fixed assets - up to 18 months, except for industries of service industry and tourism; 2) purchase of raw materials, component parts, spare parts - up to 12 months; 3) acquisition, updating, expansion and upgrade of fixed assets, purchase of goods, raw materials, component parts, spare parts by the subjects of business activity applying components of digitalization of tax procedures - up to 12 months. The program also provides full relief from repayment of the added percent for a period of up to 12 months; 4) for refinancing of the credits - up to 12 months; 5) microcredit on unsecured basis - up to 3 months
Penalties	In case of inappropriate use of borrowing facilities financial sanctions by charge of penalty are applied to the main credit amount (from the date of issue) on interest rate in the amount of 30 annual interest rates. The penalty size (penalties, penalty fee) shall not exceed the size of nominal rate of the issued credit according to requirements of the Law of the Kyrgyz Republic "About restriction of usurious activities in the Kyrgyz Republic"

It is allowed to commercial banks and IFI at the expense of own means to establish longer grace period, than the period specified in the Program.

In case of insufficient tax providing at potential borrowers, the last have the right to address to Guarantee fund open joint stock company (further - JSC Garantiyny fond) with the statement for receipt of guarantee.

Guarantees are provided to the commercial banks and IFIs which signed agreements on cooperation with JSC Garantiyny fond.

4. Program implementation

Commercial banks, after entry into force of this resolution, submit to the Ministry of Finance of the Kyrgyz Republic the application for participation in program implementation, with indication of crediting amount, with breakdown on areas of the Kyrgyz Republic.

The Ministry of Finance of the Kyrgyz Republic signs the contract with commercial bank on allocation of budget credit, and within 5 days allocates the credit. The budget credit is allocated by the Ministry of Finance of the Kyrgyz Republic separate tranches, in process of its development.

Commercial banks shall master the tranche received from the Ministry of Finance of the Kyrgyz Republic within 60 calendar days, submit the report on target use of this tranche in the Ministry of Finance of the Kyrgyz Republic and return to the Ministry of Finance of the Kyrgyz Republic unused balance of tranche.

The next tranche of budget credit is allocated with the Ministry of Finance of the Kyrgyz Republic to commercial bank only after receipt of the Kyrgyz Republic by the Ministry of Finance from commercial bank of the satisfactory report on target use of the previous tranche.

For the purpose of proper informing the population on program implementation the commercial banks and IFIs participating in its realization publish in mass media, at information stands and the official sites terms for crediting, and also period of time with which order taking for receipt of the credit begins. Requests shall be registered in the special "online magazine of accounting of requests" of commercial banks and IFI.

Commercial banks and IFI provide the report on the number of female entrepreneurs among loanees, the companies headed by women and the companies most of which of employees make women.

The commercial banks and IFIs participating in program implementation monthly represent information on the issued credits to the Ministry of Finance of the Kyrgyz Republic and the Ministry of Economics of the Kyrgyz Republic.

Credit activities of commercial banks and microfinancial organizations shall be performed according to requirements of the bank law of the Kyrgyz Republic.

5. Risks and threats, monitoring

For the purpose of risk minimization of inappropriate use of means by commercial banks:

- The National Bank of the Kyrgyz Republic performs check of target use of the credits within the current activities of National Bank of the Kyrgyz Republic in the form of inspection checks;

- commercial banks and IFI, monthly (and also on unplanned request) submit in the Ministry of Finance of the Kyrgyz Republic reports on amounts of the placed credits according to the Program.

In case of detection of the fact of inappropriate use of borrowing facilities commercial banks and IFI draw up the relevant statement, demand from the borrower of early repayment of remaining balance of unused borrowing facilities and establish (from the date of receipt of the credit) interest rates in the amount of 30 annual interest rates.

Threat of natural cataclysms and availability of force majeur circumstances:

- in case of risk of the non-return of the credits by borrowers connected with force majeure, natural cataclysms, commercial banks and IFI independently take measures for risk minimization.

Monitoring of target use of borrowing facilities is performed by commercial banks and IFI.

Disclaimer! This text was translated by AI translator and is not a valid juridical document. No warranty. No claim. More info