UDK 631.18.02

Abraliev Onalbek, Erkimbekyli Rauan

Kazakh National agrarian university

THE CURRENT STATE OF THE DEPOSIT MARKET IN KAZAKHSTAN: ISSUES AND DEVELOPMENT PERSPECTIVES

Annotation

This article analyses the current state of the deposit market in the Republic of Kazakhstan. Moreover, issues and development perspectives of Kazakhstani deposit market are defined in the work.

Key words: deposit market, financial market of Kazakhstan, development perspectives, financial stability

According to the President of the Republic of Kazakhstan, Nursultan Nazarbayev, the economic stability has the significance for the future development of the state [1]. In addition, maintaining and regulating the financial sector plays the important role for further economic growth [2]. For instance, loans and investments are among instruments that economy may rely on in order to achieve growth [3].

According to Arping (2015) there is the direct link between deposits and pricing power of organisations in the banking sector which may have long-term impact upon the real outcomes in the economy of the state [4]. As a result, the current state of the deposit market in Kazakhstan is among factors that determine the loan market by impacting its pricing, rates and competition level [4,5]. The figure below shows the volume of deposits in depositary organisations for 1 year from August 2016 till August 2017.

Figure 1 - The total volume of deposits in depositary organisations of the Republic of Kazakhstan by the end of the period from August 2016 to August 2017, million tenge

Source: The National Bank of Kazakhstan (2017) Depository Organizations Deposits. Available: http://www.nationalbank.kz/?finalDate=5.08.2016&finalDate2=25.08.2017&dates=+To+display+the+information&tab_id=1&lang=eng&docid=191&switch=english [Accessed: 12 October 2017].

Figure 1 shows that in one year the highest monthly drop in the total volume of deposits took place in January 2017 – decline by 707594 million tenge or 3.896% less compared to the same indicator in December 2016. The highest rise in the deposit’s volume in one year shown by the figure above was in March 2017 – 598913 million tenge more compared to the previous month or rise by 3.51%.

The lowest indicator took place in February 2017 – 17045369 million tenge, and the highest volume occurred in November 2016 - 18163828 million tenge.

The average value of the total volume of deposits is around 17677291.69 million tenge. The median value for deposits in one year is 17651329 million tenge. The first interquartile is 17628083 million Kazakhstani tenge. The third interquartile is 177 trillion 541 billion and 22 million tenge. Therefore, the interquartile range for one year from August 2016 to August 2017 equals to 126 billion and 39 million tenge.

The figure above illustrates that there may be the seasonal trends, therefore, the figure below defines the total volume of deposits in depositary organisations only for December for the last ten years.

Figure 2 – The total volume of deposits in depositary organisations for December month from 2007 to 2016, million tenge

Source: The National Bank of Kazakhstan (2017) Depository Organizations Deposits. Available: http://www.nationalbank.kz/?finalDate=5.08.2016&finalDate2=25.08.2017&dates=+To+display+the+information&tab_id=1&lang=eng&docid=191&switch=english [Accessed: 12 October 2017].

The figure above shows that since 2007 there is the trend of growth in the deposit’s volume every December month compared to the same month of the previous year. The average value of total deposit value in the last ten years for the last month of the year is 9650372.7 million tenge.

The lowest level of yearly change for the monthly indicator was between 2012 and 2011 – growth by 608 billion 198 million tenge or rise by nearly 7.25%. The highest level of yearly change took place between 2008 and 2007 – rise by 4 trillion 276 billion 596 million tenge or increase by 39.05%.

Figure 1 shows that there may be the trend of the total volume of deposits declining in the beginning of the year which is analysed by the figure below. The starting point is taken by December 2010 and not any year earlier because the financial crisis of 2008-2009 had significant negative impact on the global financial sector and might broke the trends in the banking sector in the earlier years [6].

Figure 3 - The total volume of deposits in depositary organisations of the Republic of Kazakhstan from December 2010 to February 2017 for January, February and December months, million tenge.

Source: The National Bank of Kazakhstan (2017) Depository Organizations Deposits. Available: http://www.nationalbank.kz/?docid=191&switch=english [Accessed: 12 October 2017].

The figure above shows that every December of the following year had higher volume of deposits compared to the previous year indicator. For instance, there is growth by 10829488 million tenge or by 147.65% from December 2010 to December 2010.

The table below analyses if there is any trend between the end and the start of the year in the total amount of deposits in depositary organisations.

Table 1 – The trend analyses between December of the previous year and January-February of the next year in the total volume of deposits

	What happened to the total volume of deposits?
1	from	to	result
2	December 2010	January 2011	growth
3	December 2011	January 2012	decline
4	December 2012	January 2013	growth
5	December 2013	January 2014	decline
6	December 2014	January 2015	decline
7	December 2015	January 2016	growth
8	December 2016	January 2017	decline

Table 1 shows that there are no trends between the last month of the last year and the first month of the next year. Therefore, there is need to understand what may impact deposit rates if banks gain more power. The banking sector of Kazakhstan has become more stable due to the support of the financial sector by the government [7]. As a result, in the long-run banks may gain more power if the financial sector continues its growth. The figure below shows the possible scenarios for deposit rates and other significant financial indicators if the banking sector gains more power in the economy.

Figure 4 – Scenarios for some significant financial indicators in the deposit market if Kazakhstani banks in the long run gain more market power

Source: Arping, S. (2017) Deposit competition and loan markets. Journal of Banking and Finance (80), pp. 108-118

The figure above shows that deposit rates might decline if banks gain more market control in Kazakhstani financial sector despite the competition level in the market. Therefore, the figure below shows possible actions to the government of the Republic of Kazakhstan that may help to regulate the situation in the deposit market in the long-run.

Figure 5 – Possible actions that may be taken by the government to improve the deposit market in the Republic of Kazakhstan

The figure above shows that the potential growth in the deposit market can by achieved through technologic improvements, regulating competition and cooperation with the National Bank of Kazakhstan.

In conclusion, analysis in the work showed 108 trillion 294 billion and 88 million tenge if the volume of deposits in December 2010 and in the same month in 2017 are compared. Moreover, despite monthly fluctuations the deposit market may grow unless new entrants come to the market or the financial environment changes.

Bibliography

1. Nazarbayev, N. (2017) The President of Kazakhstan Nursultan Nazarbayev’s Address to the Nation of Kazakhstan. January 31, 2017. Available: http://www.akorda.kz/en/addresses/addresses_of_president/the-president-of-kazakhstan-nursultan-nazarbayevs-address-to-the-nation-of-kazakhstan-january-31-2017 [Accessed: 10 September 2017].

2. Kawai, M., & Prasad, E. (2011) Asian Perspectives on Financial Sector Reforms and Regulation. Washington, D.C.: Brookings Institutions Press.

3. Faruqi, S. (1994) Financial Sector Reforms, Economic Growth, and Stability: Experiences in Selected Asian and Latin American Countries. Washington, D.C.: The World Bank.

4. Arping, S. (2017) Deposit competition and loan markets. Journal of Banking and Finance (80), pp. 108-118.

5. Ferran, E., & Goodhart, C. (2001) Regulating Financial Services and Markets in the 21st Century. Oxford and Portland, Oregon, USA: Hart Publishing.

6. Elson, A. (2017) The Global Financial Crisis in Retrospect: Evolution, Resolution, and Lessons for Prevention. New York: Springer Nature.

7. Nazarbayev, N. (2015) The 100 concrete steps set out by President Nursultan Nazarbayev to implement the five institutional reforms. May 20, 2015. Available: https://strategy2050.kz/en/page/message_text2014/ [Accessed: 10 September 2017].