Borrowing from Kyrgyz banks: 10 Frequently Asked Questions

Each bank sets limitations on the amount of credits depending on the type of lending. As a rule, the biggest credits are issued for the purpose of developing existing businesses.
Kyrgyz law establishes a maximum exposure to one borrower to be 15%-30% of the net capital of the bank depending on affiliation and non-affiliation with a bank.

At present, each bank has its own lending programs: business credits, retail credits, mortgage credits, etc., and establishes minimum and maximum rates for respective credit products.
Approximate interest rates in local banks are as follows:
- Corporate credits – from 14% to 26% per annum;
- Small business credits – from 16 to 23% per annum;
- Mortgage credits - from 16% to 20% per annum;
- Retail credits – from 17% to 28% per annum.

Interest rates vary depending on bank’s policy, financial records of the borrower, currency in which credit is issued, borrower’s credit score and security.

No, it is not. Kyrgyz law does not prohibit foreign nationals or stateless persons from receiving credits from Kyrgyz banks.

The repayment of credit and interest, as well as other charges concerned is made according to the credit agreement and credit repayment schedule. In case of a credit facility, the repayment of the credit or part thereof can be made during the term of the credit, in which case the borrower shall have the right to re-borrow the repaid amount of the credit. If the procedure and time for repayment of interest are not set by the agreement, the interest shall be paid in equal monthly installments until the date of credit repayment.

The right to prepay and prepayment terms and conditions are provided in the credit agreement. The agreement can establish penalty or moratorium/ban on the early repayment of the credit. In any case, borrower cannot prepay without creditor’s consent unless otherwise stipulated in the agreement.

For the purposes of ensuring the repayment of credit, the following types of security are used:
a. penalty (contractual sanctions for late payment);
b. pledge (mortgage);
c. surety (guaranty);
d. bank guaranty.
In practice, pledge of immovable property (mortgage) is the most common type of security. Among other things which may be used as collateral are any movable property or property rights including equipment, transport, goods in turnover, securities, accounts receivable, etc.

Any solvent persons can act as a surety for a credit. A surety assumes joint liability for the performance by borrower of its obligations under the credit agreement, unless the surety agreement provides for a subsidiary liability of surety.

Joint liability means that creditor may present claims under the credit against borrower and surety jointly or against any of them separately, for the full amount or part of the debt.

Subsidiary liability means that creditor may present claims against surety only after borrower refused or is unable to satisfy bank’s claims or fails to fully repay the debt.

Depending on the extent of violations and terms and conditions of the agreement, borrower may be required to perform additional obligations such as payment of penalty or fines. In case of material breaches, creditor may demand early repayment of the credit and interest thereon.

When considering a bank credit, pay attention not only to interest rates and maturity, but also to credit-related expenses. If all expenses listed below are summed up, they can result in a quite substantial amount thus making the credit more expensive.
Significant expenses are as follows:
a. front-end fee (1-2% of the total amount of credit)
b. real estate appraisal fee
c. collateral protection insurance fee, pledge registration fee
d. fees for legal and notarial services
e. taxes