For its first 12 years, Kompanion Bank operated as a microfinance institution. Obtaining its banking license in 2016, enabled Kompanion Bank to broaden its offerings beyond credit to include international money transfers, SME loans, payment and cash services, electronic payment cards and correspondent relationships with foreign banks. 

Margarita Cherikbaeva was appointed as CEO of Kompanion Bank in March 2018. She has a longstanding career in the financial (inclusion) sector. We sat down with Margarita to find out more about Kompanion Bank and how it’s helping grow the country’s financial sector and social and economic development. 

What do you think the role of financial inclusion is for Kyrgyzstan’s social and economic development?

It’s huge! So much has already been achieved but there’s so much yet to do. The number of active accounts in our economically active population is still less than other CISⁱ countries. If we look at the statistics only 35-40% currently have bank accounts, five years ago it was just 18-20%, so it is growing. We have to find a way to deepen financial penetration and include them in the formal financial sector. We want to encourage savings because if we look from a macro-economic perspective, a bigger deposit base means that interest we pay on deposits will be cheaper than the interest we pay on funding we receive from abroad, so we can lower our interest rates on local loans. The whole financial ecosystem will be stimulated.

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ⁱ_{CIS stands for the Commonwealth of Independent States which was formed when the former Soviet Union dissolved in 1991. It consists of Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Armenia, Moldova, Russia, Tajikistan and Uzbekistan.}
 

What do you think is holding financial inclusion back?

We know from our own research and also independent organisations like USAID and National Bank of the Kyrgyz Republic, that there are three outstanding issues that we have to address. The first is our history of being a cash economy. Many people lost their life savings when there was a devolution crisis in the Soviet Union in 1989-1990. So the level of trust in banks was not very high, it is slowly increasing. The second issue is the lack of convenience, especially in rural areas. Establishing banking infrastructure in remote areas is not cost effective because of all infrastructure expense and regulatory requirements. The third reason is that the country’s level of financial literacy needs to improve. 
 

What are you doing to help tackle the issues?

We began to address the issues as soon as we received our banking license. We’ve developed very simple financial literacy training and run workshops using games to explain that savings can make a real difference on a personal level. It’s about being close and making things easy to understand. Staff at all of our 106 locations have been trained and they run the sessions every couple of weeks. We invite clients but anyone from the community is welcome. We have one of the biggest customer bases in the country, with 130,000 customers, and we use our capacity to reach out and support as many people as possible. 

I have many stories I could share, but this is one of my favourites: About half a year ago, a driver of mini-bus came to one of our sessions to hear about the benefits of saving. He wasn’t a client but he told us that he had been saving a few coins each day for two years. We calculated with him what he would have earned had he been depositing with us. It was 200 US dollars. The next day he opened and account and brought 40kg of coins to the branch!
 

How important is the role of female participation to you?

We have an active strategy and every branch runs financial literacy and information sessions especially for women. When we invite women and talk to them about saving, they become serious and motivated when they understand the potential future impact on their children. For example, when they learn that it can help them achieve their dream to pay university fees for their children. They see that saving can really change life. On average if we run a session for 30 women, at least five will open a savings account. 
 

Your training sounds like it’s restoring trust in the financial sector and improving financial literacy, but what about the problem of rural access?

That’s where fintech comes in! Although we have a broad network that aligns with the top three banks in the country, we’re just unable to service a lot of people, especially those in remote areas. There are villages with populations below 500 and they are usually low-income earners. They can’t afford to travel the distance to visit a branch, they may do so to get a loan, but not to save. So their distance from branches creates barrier to financial inclusion. We see fintech as an opportunity to reach them. 

In December 2018 we approved our Digitisation Strategy and one of the projects we are implementing as part of this strategy is working through an agents’ network. Anyone who becomes an approved agent, for example, a village shop, can serve as a point of cash in and cash out. The agent will also have an electronic wallet, our customers will have an electronic wallet and we will have one. All of the transactions will go between the three of us without the need of opening a subbranch. Customers can make transactions between their electronic wallet and their account and top up their savings account. The bank will accrue interest and customers will learn to save step by step. It’s simple, it’s convenient and my expectation is that it will boost the number of savers in the country and grow our economy. 
 

What are achievements you are most proud of? 

We just found out that we belong to the top four profitable banks in our country, but we’re doing so much more in social responsibility than other banks. We’re not only about profit, and we’re not grant dependent. We pay for our own social impact activities like the financial literacy training. We do it for free, from our pocket. I don’t mind if they open accounts elsewhere, it’s good for our country. We also employ 32 agronomists and veterinarians as staff members who deliver special training to the country’s poorest. They may be clients or non-clients but we teach them about sustainable agricultural practices, for example how to raise harvest yields, take better care of cattle, and how to prune fruit trees etc. In time, these farmers may become a client of our bank, or of another bank, but the main thing is that we want to help them generate more income and lift them out of poverty. 

I am also very proud of the atmosphere that we have created, one of real trust and openness between management and staff. It’s progressive. There’s excitement in the air and people are learning to embrace new opportunities. 

What are developments in Kyrgyzstan you are excited/worried about?

Kyrgyzstan is a young country and we have been through very difficult times, economic decline, two revolutions, but I believe that we can handle whatever comes our way. We have markets that provide opportunity to grow, and we have very good and enthusiastic and supportive staff. With all the fintech on the way, I think we will be able to grow in real terms. The environment for it is supportive. Interestingly there may be competition on the horizon from the mobile operators who are trying to enter the financial market. We have three major telecom companies and penetration is growing. Having their resources and level of access is a major advantage, but the banking sector is demanding that they have to comply with the same regulation as we do. There is more opportunity to collaborate too. A few years ago things were more competitive, but now the sector is exploring ways we can open up and support each other, for example discussing about how we could cooperate with the operators in the field of e-wallets. Let’s see if there will be synergy. The spirit of cooperation is in the air. 
 

Where does he envisage Kompanion Bank be in 3 to 5 years’ time? What is needed to realise this ambition?

In the next three years I want us to be one of the top three banks in the country in terms of return on investment, cost of income, and other indicators of efficiency. At the moment we’re half way. In some areas we are there already and in some other areas we have launched several strategic projects to achieve our goal, for example digitization – electronic wallets and agencies, digitizing the entire lending process, and we’re also looking at QR codes. There are new opportunities that don’t require as intensive infrastructure and we have an opportunity to leapfrog the others.

Triodos Microfinance Fund and Triodos Fair Share Fund hold an equity stake in Kompanion Bank. Regional Manager Rosanna Sarkayeva represents the two funds on the Board of Directors and, in this role, actively contributes to the strategic development of Kompanion Bank and its further professionalisation.