Kazakhstan’s rapid adoption of buy-now-pay-later (BNPL) schemes raises concerns for inflation and consumer debt levels. Popular fintech firms dominate the BNPL market, with Kazakh banks reporting significant portfolio growth, yet regulatory scrutiny intensifies. Economists urge stricter regulations to avoid overindebtedness and ensure transparency to protect consumers from hidden costs. Concurrently, both the financial market regulator and competition authority are seeking to address the potential inflationary effects of BNPL practices.
Kazakhstan is experiencing a significant surge in the usage of buy-now-pay-later (BNPL) schemes, raising concerns for regulators regarding inflation control and consumer debt levels. As Kazakhstan becomes a burgeoning e-commerce center, the appeal of BNPL options has skyrocketed, yet remains a double-edged sword for economic stability.
Popular fintech companies, such as Kaspi.kz, dominate the BNPL market, with the latter claiming it is pivotal to its lending strategy. A recent Bloomberg report highlighted the rapid growth of BNPL services, resulting in heightened regulatory scrutiny amidst concerns over consumer debt risks and inflationary pressures. Kazakhstan’s online sales soared by 60% last year, significantly boosted by BNPL offerings.
The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM) reported an increase in Kazakh banks’ BNPL portfolios, reaching KZT2.3 trillion ($4.5 billion) as of September 2024, indicating a 17% increase from the previous year. Conversely, concerns arise as the World Bank warns that the ease of access to BNPL can lead to unsustainable household debt levels.
By 2023, reports suggest that BNPL products may comprise 50% of consumer loans in Kazakhstan, despite discrepancies in official data. Economists have cautioned that aggressive lending practices may result in mounting loan defaults. Alexander Yurin pointed out that banks could shift credit risk onto well-meaning borrowers, necessitating stricter regulations in the consumer lending sector, particularly concerning BNPL and interest-free loans.
The ARDFM has expressed worries regarding the inflationary effects of BNPL schemes, criticizing agreements that enable inflated prices in installment plans. Furthermore, Madina Abylkasymova of the ARDFM has confirmed that hidden fees inflate cash prices, ultimately affecting consumers opting for cash transactions. Local experts argue for greater transparency in BNPL agreements, emphasizing the need for consumers to understand the true costs associated with such payment methods.
Kasakhstan’s banking sector expert Galim Khusainov has criticized the absence of effective oversight on BNPL agreements, conveying that without regulation, BNPL could perpetuate inflation and over-indebtedness within the economy. Nonetheless, BNPL remains popular among consumers, as some vendors experience substantial sales losses without offering such financing options.
A Bank of International Settlements (BIS) study highlighted that BNPL attracts younger users with higher delinquency rates, indicating potential future complications in financial stability. Kazakhstan has been grappling with significant inflation, further complicating the existing BNPL dilemma, as increased demand for these services could lead to a self-reinforcing cycle of inflation and dependence on BNPL options.
Despite these challenges, Richard Wray from Carta Worldwide noted that while high interest rates may drive customers towards BNPL due to attractive terms, funding difficulties for providers may arise, compelling a reevaluation of the market. In light of ongoing trends, regulatory measures for BNPL systems may serve the interests of both consumers and providers alike.
While Kazakhstan’s financial regulators aim to impose stricter price controls and enhance compliance within the BNPL sector, there remains a need for robust competition authority intervention to propel necessary changes forward.
Kazakhstan faces a dilemma with the burgeoning buy-now-pay-later (BNPL) market, which significantly contributes to economic concerns such as inflation and rising consumer debt. Despite its popularity among consumers and merchants, experts call for stricter regulations to mitigate hidden costs and ensure transparency in BNPL agreements. As the financial regulator works alongside the competition authority, there lies a necessity for immediate action to address the overall risks associated with the BNPL framework within the country.
Original Source: www.intellinews.com
