On Microfinance Organizations

Updated Unofficial translation

The Law of the Republic of Kazakhstan dated 26 November, 2012 No. 56-V.

      Unofficial translation
      The order of enforcement of this Law See Article 32

      This Law regulates social relations, linked with carrying out activity on extension of microcredits, establishes special aspects of legal status, establishment, activity of microfinance organizations, as well as determines special aspects of the state regulation of microfinance organizations, control and supervision of their activity.

Chapter 1. GENERAL PROVISIONS

Article 1. Basic definitions, used in this Law

      The following basic definitions shall be used in this Law:

      1) record registration – inclusion of microcredit organization into register of microfinance organizations in accordance with Article 14 of this Law;

      2) credit folder – documents and data, formed by microcredit organization for every credited party;

      3) credited party – an individual or legal entity, concluded agreement on extension of microcredit with microfinance organization;

      4) directed microcredit – microcredit, provided on conditions of its use by credited party for the certain purposes in accordance with concluded agreement on extension of microcredit;

      5) microcredit – money, provided by microcredit organization to credited party in the national currency of the Republic of Kazakhstan in amount and manner, determined by this Law, on conditions of serviceability, urgency and refundability;

      6) register of microfinance organizations – joint list of microfinance organizations;

      7) a microfinance organization – a legal entity, that is commercial organization, official status of which shall be determined by the state registration in bodies of justice and by record registering, carrying out activity on extension of microcredits, as well as additional types of activity, allowed by this Law;

      8) an applicant – an individual or legal entity, filed an application to microfinance organization for extension of microcredit;

      9) an authorized body – the National Bank of the Republic of Kazakhstan.

Article 2. The legislation of the Republic of Kazakhstan on microfinance organizations

      1. The legislation of the Republic of Kazakhstan on microfinance organizations shall be based on the Constitution of the Republic of Kazakhstan and consist of the Civil code of the Republic of Kazakhstan, this Law and other regulatory legal acts of the Republic of Kazakhstan.

      2. The Laws of the Republic of Kazakhstan “On economic partnerships” and “On limited and additional liability partnerships” shall be extend to microfinance organizations in the part, not regulated by this Law.

      3. If international treaties, ratified by the Republic of Kazakhstan established other rules, than those contained in this Law, the rules of international treaties shall be applied.

Chapter 2. Extension of microcredits

Article 3. Procedure and conditions of extension of microcredits

      1. Microfinance organization shall extend microcredits in amount, not exceeding eight thousand-fold amount of monthly calculation index, established on the relevant accounting period by the Law on republican budget, for one credited party.

      2. Microfinance organization shall have the right to extend microcredits only in existence of the rules of extension of microcredits, confirmed by its superior body.

      2-1. Is excluded by the Law of the Republic of Kazakhstan dated 29.03.2016 № 479-V (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).
      3. Is excluded by the Law of the Republic of Kazakhstan dated 24.11.2015 № 422-V (shall be enforced from 01.01.2016).

      4. Commission fee, remuneration and other payments related to provision of microcredit shall be collected by a microfinance organization after or at the time of providing a microcredit.

      Prior to conclusion of a microcredit contract with an individual not related to business, a microfinance organization shall be obliged to provide an individual with microcredit options to choose which do not require collection of commission fees and other payments that are taken into account when calculating the annual effective interest rate for microcredit in accordance with the procedure established by the normative legal act of the authorized body, as well as the conditions for microcrediting, which provide for the right of microfinance organization to charge, in addition to the interest rate, the commission fees and other payments related to the issuance and servicing of microcredit and stipulated in the microcredit contract.

      Microfinance organizations shall be obliged in the microcredit contracts to indicate the full list of commission fees and other payments, as well as their amounts subject to collection in connection with the issuance and servicing of microcredit, and may not unilaterally introduce new types of commission fees and other payments within the framework of the concluded contract.

      Footnote. Article 3 as amended by the Laws of the Republic of Kazakhstan dated 16.05.2014 № 203-V (shall be enforced upon expiry of six months after the day its first official publication); dated 24.11.2015 № 422-V (the order of enforcement see Art.2); dated 29.03.2016 № 479-V (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 4. Agreement on extension of microcredit

      1. Agreement on extension of microcredit shall be concluded in written form.

      2. Information on agreement on extension of microcredit, concluded by microfinance organization shall be subject to mandatorily provision to credit bureau with the state participation on conditions, determined the legislation of the Republic of Kazakhstan on credit bureau and formation of credit histories.

      3. Agreement on extension of microcredit shall contain:

      1) name of a microfinance organization and last name, first name and patronymic (in its existence) of credited party-individual or name of credited party-legal entity;

      2) the amount of microcredit provided;

      2-1) a full list of commission fees and other payments, as well as their amounts subject to collection in connection with the issuance and servicing of microcredit;

      3) repayment date of microcredit;

      4) method of repayment of microcredit (in cash and (or) non-cash form, in a lump sum or by parts);

      5) method of repayment of microcredit: annuity or differentiated, or another method in accordance with the rules for provision of microcredits;

      5-1) priority of repayment of microcredit debt;

      5-2) the procedure for calculating and the amount of penalties (fines, fees) for late repayment of the principal debt and payment of remuneration;) calculated in accordance with the procedure established by Article 5 of this Law;

      6) microcredit repayment schedule, signed by both parties of agreement on extension of microcredit, specifying the repayment dates and amounts of next settlements, containing the sums of microcredit repayment and remuneration, residues of the sums of microcredit on a date of next repayment, as well as specifying total sum of microcredit and remuneration on a date of signing of agreement on extension of microcredit;

      7) securing fulfillment of obligations of credited party under agreement on extension of microcredit (in its existence);

      8) amount of rates of remuneration on microcredit, as well as amount of annual rate of remuneration and annual effective rate of remuneration (actual value of microcredit), calculated in the manner, established by Article 5 of this Law;

      8-1) rights and obligations of the parties to the microcredit contract;

      9) liability of parties;

      10) other conditions in accordance with the legislation of the Republic of Kazakhstan.

      4. Compulsory condition of agreement on extension of directed microcredit shall be statement of goal of microcredit, as well as procedure for carrying out the control of its intended use.

      In case of improper use of microcredit, a credited party shall be obliged to reimburse microcredit to microfinance organization in advance and remunerate in part of used microcredit, assessed under agreement on extension of microcredit on a date of reimbursement of microcredit.

      4-1. If a microfinance organization cedes the right (claim) under the microcredit contract to a third party, the requirements and restrictions imposed by the legislation of the Republic of Kazakhstan on the relationship between the creditor and the borrower under the microcredit contract extend to the borrower's legal relationship with the third party to whom the right (claim) is ceded.

      Violation by a third party to which the right (claim) is ceded, the requirements and restrictions imposed by the legislation of the Republic of Kazakhstan on the relationship between the creditor and the borrower within the framework of the microcredit contract, shall entail liability established by the laws of the Republic of Kazakhstan.

      5. In the microcredit contracts, the conditions specified in subparagraphs 1), 2), 3), 4), 5), 5-1), 5-2), 8) of paragraph 3 and paragraph 4 of this article are reflected starting from the first page of the contract in the specified sequence.

      In the event that the microcredit contract stipulates that its individual terms are determined by exemplary conditions referred to in accordance with article 388 of the Civil Code of the Republic of Kazakhstan, the part of the microcredit contract containing the signatures of the parties must contain the mandatory conditions specified in part one of this paragraph.

      6. If the conditions for performance of the microcredit contract secured by a real estate mortgage that is a dwelling and (or) a land plot with a dwelling placed on it issued to an individual or the issuance of a new microcredit for the purpose of repaying a microcredit secured by a real estate mortgage being a dwelling and (or) a land plot with a dwelling placed on it, issued to an individual, the capitalization (summation) of an overdue remuneration, a penalty (fine, fee) to the amount of the principal debt shall not be allowed.

      Footnote. Article 4 as amended by the Laws of the Republic of Kazakhstan dated 24.11.2015 № 422-V (shall be enforced from 01.01.2016); dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 5. Annual effective rate of remuneration on microcredit

      1. Annual effective rate of remuneration shall be the rate of remuneration in trustworthy, annual, effective, comparable computation on microcredit, calculated in recognition of expenses of credited party, containing remuneration, in existence – commission and other payments, subject to pay to microfinance organization for extension, securing and repayment (reimbursement) of microcredit.

      Amount of annual effective rate of remuneration on microcredit shall not exceed the limit amount, determined by the regulatory legal act of the authorized body.

      2. Rules of calculation of annual effective rate of remuneration on extended microcredits shall be developed and confirmed by the authorized body.

      3. During alteration of conditions of agreement on extension of microcredit, entailing change of sum (amount) of pecuniary liability of credited party and (or) payment date, a calculation of adjusted value of annual effective rate of remuneration shall be carried out proceeding from residue of debt balance, remaining maturity of microcredit on a date, after which the terms shall be altered, without regard to payments on microcredit, made by credited party from the beginning of validity of agreement on extension of microcredit.

Article 6. Securing fulfillment of obligations by credited party under agreement on extension of microcredit

      1. Fulfillment of obligations by credited party under agreement on extension of microcredit shall be secured by methods, provided by the legislation of the Republic of Kazakhstan or agreement on extension of microcredit.

      1-1. The amount of payment made by the borrower under a microcredit contract concluded with an individual in the event that it is insufficient to fulfill the borrower's obligation under the microcredit contract, repays the debt of the borrower in the following order:

      1) arrears for principal debt;

      2) arrears for remuneration;

      3) penalty (fine, fee) in the amount specified in the microcredit contract;

      4) the amount of the principal debt for the current period of payments;

      5) remuneration accrued for the current period of payments;

      6) costs of a microfinance organization for the receipt of performance.

      At the end of one hundred and eighty consecutive calendar days of delay, the amount of payment made by the borrower under the microcredit contract concluded with an individual in the event that it is insufficient to fulfill the borrower's obligation under the microcredit contract, repays the debt of the borrower in the following order:

      1) arrears for principal debt;

      2) arrears for remuneration;

      3) the amount of the principal debt for the current period of payments;

      4) remuneration accrued for the current period of payments;

      3) penalty (fine, fee) in the amount specified in the microcredit contract;

      6) costs of a microfinance organization for the receipt of performance.

      Changes in the conditions for performance of the microcredit contract shall be made in the manner provided for in the microcredit contract.

      2. In securing fulfillment of obligations under agreement on extension of microcredit by credited party, microfinance organizations shall be prohibited to receive shares of stock or participation shares in charter capital of legal entities, with the exception of shares of stock or participation shares in charter capital of legal entities, provided in subparagraph 4) of paragraph 1 of Article 19 of this Law.

      Footnote. Article 6 as amended by the Law of the Republic of Kazakhstan dated 24.11.2015 № 422-V (shall be enforced from 01.07.2016).

Article 7. Rights and obligations of microfinance organization

      1. Microfinance organization shall have the right to:

      1) extend microcredits with securing or without securing fulfillment of obligations in accordance with the civil legislation of the Republic of Kazakhstan;

      1-1) to cede the right (claim) under the microcredit contract to the person specified in paragraph 4 and 5 of Article 9-1 of this Law, if the borrower has a delay in fulfilling the obligation under the microcredit contract over ninety consecutive calendar days;

      2) require the documents and data of credited party (applicant), required for conclusion of agreement on extension of microcredit and fulfillment of obligations under it, determined by the rules of extension of microcredits;

      3) carry out other rights, established by this Law, other Laws of the Republic of Kazakhstan and agreement on extension of microcredit.

      2. Microfinance organization shall be obliged to:

      1) notify in written the authorized body, as well as credited parties (applicants) in case of change of location area or change of the name, by publication of the relevant information in two printed matters in Kazakh and Russian languages on location area of the microfinance organization, as well as on legal address of credited party (applicant)-individual and on location area of credited party (applicant)-legal entity by written notification of each of credited party (applicant) within the term, not later than thirty calendar days from the date of these changes;

      2) place a copy of the rules of extension of microcredits in a place, available for view and familiarization by credited party (applicant) of microfinance organization as well as on a website of microfinance organization if its existence;

      3) provide full and trustworthy information to credited party about payments, linked with receiving, securing and repayment (reimbursement) of microcredit;

      4) to provide the applicant with draft repayment schedules calculated by various methods before the conclusion of a microcredit loan contract for acquaintance and selection of the method of repayment of microcredit. On a mandatory basis, the borrower should be provided with the draft microcredit repayment schedules calculated in accordance with the methods for calculating regular payments on microcredits issued by microfinance organizations to individuals and temporary bases for calculating the remuneration for such microcredits established by the normative legal act of the authorized body with the frequency established in the microcredit contract, with the following methods of repayment:

      by the method of differentiated payments, where the repayment of microcredit debt is made by decreasing payments, including equal amounts of payments on the principal debt and remuneration, accrued for the period for the remainder of the principal debt;

      by the method of annuity payments, where the repayment of microcredit debt is made by equal payments throughout the entire period of the microcredit, including the increasing payments on the principal debt and decreasing payments for the remuneration, accrued for the period for the remainder of the principal debt. The amounts of the first and last payments may differ from the others.

      A microfinance organization may propose additional drafts of microcredit repayment schedules calculated in accordance with the rules for provision of microcredits;

      4-1) in order to prevent an increase in the debt of the borrower being an individual, the microfinance organization is not entitled to demand payment of a remuneration, as well as penalties (fines, fees) accrued after one hundred and eighty consecutive calendar days of the delay in fulfilling the obligation to repay any payment on amounts of the principal debt and (or) remuneration, on microcredit secured by a real estate mortgage, which is a dwelling and (or) a land plot with a dwelling located on it;

      5) inform credited party (applicant) about his (her) rights and obligations, linked with receiving microcredit;

      5-1) to inform the authorized body for financial monitoring in accordance with the Law of the Republic of Kazakhstan "On combating legalization (laundering) of proceeds from crime and financing of terrorism";

      6) keep a secret of extension of microcredit;

      7) carry out classification of assets and contingent liabilities on extended microcredits and establish provisions (reserves) against them, in accordance with the rules, confirmed by the authorized body on agreement with government body, carrying out administration in the scope of securing return of duties and other compulsory payments to budget;

      8) comply with prudential regulations and other compulsory norms and limits, methods of their calculation, established by the authorized body;

      9) present a report to the authorized body in due time and in manner, determined by the authorized body;

      10) correct breaches of the legislation of the Republic of Kazakhstan, detected by the authorized body;

      11) notify the authorized body in writing within fifteen working days of the changes made to the documents provided for in subparagraph 6) of paragraph 1 of Article 14 of this Law;

      12) comply with other requirements, established by this Law and other legislation of the Republic of Kazakhstan.

      3. Microfinance organization shall not have the right:

      1) to change the rates of remuneration in accordance with unilateral provisions (with the exception of cases of their reduction) and (or) means and method of microcredit repayment, as well as amounts of tariffs and charges (with the exception of cases of their reduction), linked with issue and securing microcredits, being in force on a date of signing of agreement on extension of microcredit;

      2) apply punitive sanctions against credited party that is an individual, wholly or partially reimbursed a sum of microcredit in advance to microfinance organization for early reimbursement of microcredit.

      Footnote. Article 7 as amended by the Laws of the Republic of Kazakhstan dated 10.06.2014 № 206-V (shall be enforced upon expiry of six months after the day its first official publication); dated 24.11.2015 № 422-V (the order of enforcement see Art. 2); dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 8. Rights and obligations

      1. Applicant shall have the right to:

      1) look through the rules of extension of microcredits, tariffs of microfinance organization on extension of microcredits;

      2) receive full and trustworthy information on payments, linked with receiving, securing and repayment (reimbursement) of microcredit;

      3) refuse from conclusion of agreement on extension of microcredit.

      2. Applicant shall present the documents and data, determined by paragraphs 3 and 4 of Article 20 of this Law to microfinance organization, required for conclusion of agreement on extension of microcredit and agreements, securing fulfillment of obligations of credited party.

      3. Applicant shall have the other rights and obligations, established by this Law and other Laws of the Republic of Kazakhstan.

Article 9. Rights and obligations of credited party

      1. Credited party shall have the right to:

      1) look through the rules of extension of microcredits, tariffs of microfinance organization on extension of microcredits;

      2) dispose received microcredit in the manner and on conditions, established by agreement on extension of microcredit;

      3) protect own rights in the manner, established by the Laws of the Republic of Kazakhstan;

      4) wholly or partially reimburse a sum of microcredit in advance to microfinance organization, extended under agreement on extension of microcredit;

      4-1) apply to the bank ombudsman in case of assignment of the right (claim) under the microcredit contract concluded with it for settlement of disputes with the person specified in paragraphs 4 and 5 of Article 9-1 of this Law. This right extends to a borrower who is an individual;

      5) carry out other rights, established by this Law, other Laws of the Republic of Kazakhstan and agreement on extension of microcredit.

      2. Credited party shall be obliged to:

      1) reimburse received microcredit and pay compensation on it due time and manner, established by agreement on extension of microcredit;

      2) present the documents and data, requested by microfinance organization in accordance with this Law;

      3) perform other requirements, established by this Law, other legislation of the Republic of Kazakhstan and agreements, concluded with microfinance organization.

      Footnote. Article 9 as amended by the Law of the Republic of Kazakhstan dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 9-1. Procedure for transferring debt for pre-judicial recovery and settlement or assignment of rights (claims)

      1. A microfinance organization shall be prohibited to conclude a contract with third parties whose subject is the provision of services for pre-trial recovery and settlement of debts, as well as collection of information related to the debt of the borrower (hereinafter referred to as the debt collection contract), except for the cases of conclusion of such a contract with the collection agency.

      2. A microfinance organization may not conclude a contracr to recover a debt with a collection agency in respect of an individual whose debt is secured by a mortgage in the form of a dwelling.

      3. During the period when the debt is at the pre-trial collection and settlement at the collection agency, the microfinance organization has no right:

      to file a claim to the court to recover debts;

      to demand payment of remuneration, accrued during the period when the debt is in the work of the collection agency, and also to impose a penalty (fine, fee) for the late repayment of the principal debt and remuneration.

      4. A microfinance organization shall be prohibited from making an assignment of the right (claim) under a microcredit contract concluded with an individual and secured by a mortgage in the form of a dwelling, with the exception of the assignment of the right (claim) to organizations, more than fifty percent of shares in the authorized capitals of which or the placed shares of which belong to the state, while respecting one of the following conditions:

      the acquisition of rights (claims) is one of the activities of such an organization, provided for by the laws of the Republic of Kazakhstan;

      the acquisition of rights (claims) is carried out within the framework of state and government programs or legal acts of state bodies to support individuals.

      5. A microfinance organization shall be prohibited from making an assignment of the right (claim) under the microcredit contract to a third party, except for the assignment of the right (claim) to the following entities:

      a collection agency;

      a microfinance organization;

      a special financial company established in accordance with the legislation of the Republic of Kazakhstan on project financing and securitization, under a securitization transaction.

      The requirements of this paragraph shall not apply to cases provided for in paragraph 4 of this article.

      6. A microfinance organization may not assign a right (claim) under a microcredit contract without the consent of the borrower, unless otherwise provided by the laws of the Republic of Kazakhstan or the microcredit contract.

      7. It is not allowed to assign the right (claim) under the microcredit contract in relation to one borrower to several persons.

      8. When concluding a contract containing the conditions for the transfer of the right (claim) of a microfinance organization under a microcredit contract to a third party (hereinafter - the contract of assignment of the right of claim), the microfinance organization shall be obliged:

      1) before concluding the contract of assignment of the right of claim to notify the borrower (or its authorized representative) of the possibility of the transfer of rights (claims) to a third party, as well as of the processing of personal data of the borrower in connection with such assignment in the manner provided for in the microcredit contract or not contradicting the legislation of the Republic of Kazakhstan;

      2) to notify the borrower (or its authorized representative) of the transfer of the right (claim) to a third party in the manner provided for in the microcredit contract or not contradicting the legislation of the Republic of Kazakhstan within thirty calendar days from the date of concluding the contract of assignment of the right of claim with an indication of the further payments to repay microcredit to a third party (name and location of the person to whom the right (claim) under the microcredit contract was transferred), the full volume of the transferred rights (claims), as well as overdue balances and current amounts of principal debt, remuneration, fees, penalties (fines, fees) and other amounts due;

      3) to transfer to the person to whom the right (claim) under the microcredit contract was transferred, the originals and (or) copies of the following documents:

      the title documents on the subject of pledge (in case if the microcredit is secured by a pledge);

      surety or guarantee contracts (in the event that the performance of the microcredit obligation is secured by a surety or guarantee);

      calculations of the borrower's debt as of the date of the assignment of the right (claim);

      complaint correspondence with the borrower;

      constituent documents of the borrower - a legal entity, a document certifying the identity of the borrower - an individual;

      documents confirming the borrower's repayment of debts;

      documents on the sale of mortgaged property;

      other documents in accordance with the contract of assignment of the right of claim.

      In the event of the assignment of all rights (claims) to the borrower, a microfinance organization transfers all original documents available to it to the person to whom the right (claim) under the microcredit contract is ceded.

      In the event of the assignment of a part of the rights (claims) to the borrower, a microfinance organization has the right to retain the originals of documents certifying such rights (claims) and to transfer the notarially certified copies of the specified documents to the person to whom the right (claim) under the microcredit contract is partially ceded.

      For the loss of originals of title documents for property that is a security under a microcredit contract, a microfinance organization, a person to whom the right (claim) under the microcredit contract is ceded, shall be liable under the laws of the Republic of Kazakhstan;

      4) after concluding the contract of assignment of the right of claim to transfer the money received from borrowers in repayment of debt to the bank account of the person to whom the right (claim) under the microcredit contract was ceded, with the provision of payment decoding in the context of each borrower.

      9. A person to whom the right (claim) of a microfinance organization has passed under a microcredit contract concluded with an individual shall be prohibited from assigning such a right (claim) to other persons, except for the return sale (return) of the repurchased right (claim) to the original creditor, the assignment (re-assignment) of rights (claims) to collection agencies, a special financial company established in accordance with the legislation of the Republic of Kazakhstan on project financing and securitization, in a securitization transaction and other microfinance organizations.

      Footnote. Chapter 2 is supplemented by Article 9-1 in accordance with the Law of the Republic of Kazakhstan dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 10. Termination of obligations under agreement on extension of microcredit

      1. Obligations under agreement on extension of microcredit shall be terminated by the grounds, provided by the civil legislation of the Republic of Kazakhstan.

      2. Limitation and claim periods shall not extend to requirements of microfinance organizations to credited parties on improper execution of agreements on extension of microcredits.

Chapter 3. ESTABLISHMENT AND ACTIVITY OF MICROFINANCE ORGANIZATIONS

Article 11. Legal status of microfinance organization

      1. Microfinance organization shall be established in the legal organizational form of economic partnership.

      2. Microfinance organization shall be prohibited to issue securities.

Article 12. Formation of charter capital of microfinance organization

      1. Incorporators of microfinance organization shall be obliged to fully pay the minimum amount of charter capital of established microfinance organization by the time of its state registration (reregistration).

      2. Minimum amount of charter capital of microfinance organization shall be established by the regulatory legal act of the authorized body.

      3. Charter capital of microfinance organization shall be formed exclusively by money in the national currency of the Republic of Kazakhstan.

Article 13. Name of microfinance organization

      1. Name of microfinance organization shall contain the words “microfinance organization” in a mandatory manner.

      Cut of the name of microfinance organization shall be allowed with the use of abbreviation “MFO” in the name.

      2. Legal entity, not registered in the capacity of microfinance organization shall not have the right to use the words in its name “microfinance organization”, derivative words, supposing that it carries out activity on extension of microcredits, or abbreviation “MFO”.

Article 14. Record registration of microfinance organizations

      1. For record registration, microfinance organization shall present to the authorized body as follows:

      1) an application;

      2) is excluded by the Law of the Republic of Kazakhstan dated 16.05.2014 № 203-V (shall be enforced upon expiry of six months after the day its first official publication);

      3) copies of the documents, confirming payment of charter capital, as well as information on compliance with minimum amount of owned capital;

      4) provision on Internal Control Service (in existence);

      5) business plan, unfolding a strategy of activity of microfinance organization, determination of market segment on which microfinance organization is focused, types of services, marketing plan (formation of clientage), sources of financing of organization’s activity;

      6) information on the founders (participants), on the first head (members) of the executive body, the chief accountant (if any) as of the date preceding the date of submission of the application;

      7) copy of the rules of extension of microcredits;

      8) copy of agreement on delivery of information, concluded in accordance with the Law of the Republic of Kazakhstan “On credit bureau and formation of credit histories in the Republic of Kazakhstan", and copy of the document on conformance to requirements, specified to participants of the system of formation of credit historiesand their use.

      2. Rules of record registration and maintenance of register of microfinance organizations shall be developed and approved by the authorized body.

      3. The authorized body shall consider application for record registration within fifteen business days from the date of presentation of complete package of documents.

      4. The authorized body shall be obliged to enter a microfinance organization into register of microfinance organizations and notify it on this decision or give a motivated response in written on the reasons of refusal of record registration within the term, established by paragraph 3 of this Article.

      5. Register of microfinance organizations, passed record registration shall be put on the website of the authorized body.

      Footnote. Article 14 as amended by the Laws of the Republic of Kazakhstan dated 16.05.2014 № 203-V (shall be enforced upon expiry of six months after the day its first official publication); dated 24.11.2015 № 422-V (shall be enforced from 01.01.2016).

Article 15. Grounds of refusal of record registration of microfinance organizations

      1. Refusal of record registration of microfinance organizations shall be carried out in cases of:

      1) non-conformity of presented documents to requirements, established by paragraph 1 of Article 14 of this Law;

      2) provision of inaccurate data and information, subject to reflection in the documents, mentioned in paragraph 1 of Article 14 of this Law;

      3) if a microfinance organization didn’t file application on passing record registration within one year from the date of its state registration (reregistration) in justice agencies;

      4) if a head or one of incorporators of microfinance organization has outstanding or unexpunged conviction, as well as when a person formerly was the incorporator of microfinance organization within the period, not exceeding one year before adoption of decision by the authorized body on exclusion from register of this microfinance organization;

      5) failure to present the documents, provided by paragraph 3 of Article 31 of this Law.

      2. In case of refusal of record registration, a legal entity registered in the capacity of microfinance organization shall have the right to repeatedly present the application in accordance with the rules of passing record registration and maintenance of register of microfinance organizations within thirty business days or shall be obliged to adopt decision on change of the name or reorganization, or liquidation.

      Repeatedly presented application shall be considered by the authorized body within thirty business days.

Article 16. Grounds for exclusion of microfinance organizations from register

      1. Microfinance organization shall be excluded from register of microfinance organizations in cases of:

      1) carrying out activity with systematic (more than three times within twelve consecutive calendar months) disturbances of norms of this Law, other Laws of the Republic of Kazakhstan, as well as regulatory legal acts of the authorized body;

      2) systematic (more than three times within twelve consecutive calendar months) violation of prudential regulations and (or) other compulsory norms and limits;

      3) systematic (more than three times within twelve consecutive calendar months) non-presentation of reports to the authorized body;

      4) bringing to administrative responsibility more than two times for presentation of untrustworthy information;

      5) systematic (more than three times within twelve consecutive calendar months) non-fulfillment of written breves of the authorized body;

      6) bringing to administrative responsibility more than two times for carrying out the types of activity, not provided by this Law;

      7) non-carrying out of activity of microfinance organization within twelve consecutive calendar months from the date of inclusion of microfinance organizations into register;

      8) enforcement of the court decision on termination of activity of microfinance organization;

      9) adoption of decision on voluntary termination of its activity by reorganization or liquidation by microfinance organization.

      By this, a microfinance organization shall fulfill all its obligations before filing application on exclusion from register of microfinance organizations. The application shall becoincidently accompanied by letter on confirmation of fulfillment of all obligations;

      10) impeding of conducting verification more than two times by microfinance organization, entailed failure to its conduct within established periods.

      2. In case of exclusion from register of microfinance organizations, the authorized body shall notify a microfinance organization in written about this within seven calendar days from the date of exclusion.

      Notification shall be directed at address, mentioned in application for passing record registration.

      3. Decision of the authorized body on exclusion from register of microfinance organizations may be appealed in the manner, established by the Laws of the Republic of Kazakhstan.

      Appeal of decisions of the authorized body on exclusion of microfinance organizations from register shall not suspend execution of these decisions.

      4. Microfinance organizations shall be prohibited to extend new microcredits after receiving written notification of the authorized body on its exclusion from register of microfinance organizations.

      5. Microfinance organization shall be obliged to adopt decision on change of the name or reorganization or liquidation of microfinance organization within thirty calendar days from the moment of notification on exclusion from register of microfinance organizations by the authorized body.

Article 17. Rules of extension of microcredits

      Rules of extension of microcredits shall contain the following data:

      1) procedure for filing application on extension of microcredit and procedure for its consideration;

      2) procedure for conclusion of agreement on extension of microcredit;

      3) maximum amounts and terms of extension of microcredit;

      4) maximum value of rates of remuneration on extended microcredits;

      5) procedure for remuneration payment on extended microcredits;

      6) requirement to received securing by microfinance organization;

      7) rules of calculation of annual effective rate of remuneration on extended microcredits;

      8) methods of repayment of microcredit.

      Rules of extension of microcredits may also contain other conditions of extension of microcredit and data, not inconsistent with the Laws of the Republic of Kazakhstan.

Article 18. Internal Control Service

      1. Microfinance organization may establish Internal Control Service for monitoring of control of its finance and economic activity.

      2. Procedure of work of Internal Control Service shall be determined by the legislation of the Republic of Kazakhstan, as well as by the rules, provision and other documents, regulating internal activity of microfinance organization.

Article 19. Additional types of activity of microfinance organizations

      1. In addition to activity on extension of microcredits, microfinance organizations shall have the right to carry out the following types of activity:

      1) procurement of loans (with the exception of attraction of money in the form of loan from citizens in the capacity of entrepreneurial activity) and grants from residents and non-residents of the Republic of Kazakhstan;

      2) allocation of temporarily redundant assets on the deposits of second level banks;

      3) use and disposition of pledged property, received in the capacity of securing a microcredit in the manner, prescribed by the Laws of the Republic of Kazakhstan;

      4) acquisition of block of stocks or participation shares in charter capital of credit bureau, microfinance organizations, organizations, rendering services on collection of banknotes, coins and values, and organizations, having a licence on security guard activities;

      5) sale of own property;

      6) rendering advisory services on the issues, linked with activity on extension of microcredits;

      7) property leasing (lease) of own property;

      8) carrying out of leasing activity;

      9) sale of specialist literature on the issues of activity of microfinance organizations on any types of data carrier;

      10) conclusion of insurance agreements in the name and on commission of insurance organizations-residents of the Republic of Kazakhstan in the capacity of insurance agent;

      11) carrying out of functions of agent of an issuer of electronic money in accordance with the legislation of the Republic of Kazakhstan;

      12) conclusion of transactions with derivative finance instruments on organized securities market, consummated for the purpose of hedging.

      2. Microfinance organizations shall be prohibited to carry out other entrepreneurial activity, not provided by this Law.

Article 20. The order of documentation maintenance on extended microcredit

      1. Each extended microcredit shall be registered by microfinance organization in register book of credited parties, maintenance of which shall be carried out in electronic form or in hard copy.

      2. For receiving microcredit, an applicant (credited party) shall present the documents, provided by paragraph 3 of this Article.

      3. Credit folder shall be formed from the date of signing of the first agreement on extension of microcredit in this microfinance organization.

      Credit folder shall contain as follows:

      1) an application with data on destination of microcredit (in case of extension of directed microcredit), on a property, provided in securing fulfillment of obligations on microcredit repayment and remuneration payment by credited party, specifying its value, or on the absence of securing;

      2) decision of body of credited party-legal entity on obtaining of microcredit;

      3) decision of body of pledger-legal entity on granting a subject of pledge in securing the fulfillment of obligations of credited party;

      4) copies of constituent documents of the borrower (for legal entities);

      5) copy of the document, identifying credited party (for individuals);

      6) documents, confirming powers of a representative of credited party for signing of agreement on extension of microcredit;

      7) agreement on extension of microcredit;

      8) in case, if extended microcredit is secured by pledge of property – a pledge agreement, copies of the documents, confirming the freehold interest in the property, and in cases of compulsory registration of pledge of property – the documents, confirming the fact of registration of the pledge of property.

      4. Credit folder on microcredit, the fulfillment of obligations whereby is secured by a guarantee or surety shall be accompanied by the following additional documents:

      1) indemnity contract or surety agreement;

      2) documents, confirming powers of representation on signing of indemnity contract in the name of guarantor or surety agreement in the name of surety;

      3) decision of body of guarantor or surety-legal entity on issue of a guarantee or surety in securing the fulfillment of obligations of credited party.

      5. Documents (or their copies), confirming full or partial debt repayment on microcredit shall be attached to credit folder and reflect the source of microcredit repayment (money, placed by credited party or collected from a sale of pledged property).

      Footnote. Article 20 as amended by the Law of the Republic of Kazakhstan dated 29.12.2014 № 269-V (shall be enforced from 01.01.2015).

Article 21. Secret of extension of microcredit

      1. Secret of extension of microcredit shall contain a data on credit parties, amounts of microcredits, on other conditions of agreement on extension of microcredit, related to credited party, and on operations of microfinance organization (with the exception of the rules of extension of microcredits).

      Data on concluded agreements on extension of microcredits by microfinance organization, being in the process of liquidation shall not relate to the secret of extension of microcredit.

      2. Microfinance organizations shall guarantee the secrecy of extension of microcredit.

      3. The secret of providing a microcredit may be disclosed to the borrower only, to any third party on the basis of the written consent of the borrower given at the time of his personal presence in the microfinance organization, the credit bureau for the provided microcredits in accordance with the laws of the Republic of Kazakhstan, as well as to the persons specified in paragraphs 4, 5, 5-1 and 6 of this article.

      4. Data on credited parties, amounts of microcredits, on other terms of agreement on extension of microcredit, related to credited party, on operations, conducted by microfinance organization shall be issued to:

      1) state bodies and officials performing the functions of criminal prosecution:

      1-1) to the national security agencies and the State Security Service of the Republic of Kazakhstan with the sanction of the prosecutor at their request to provide information necessary for prevention, detection and suppression of intelligence and (or) subversive actions;

      2) courts: on cases, being in their proceeding on the basis of determination, regulation, decision and court verdict;

      3) to the judicial bodies and private bailiffs: on the cases of enforcement proceedings on the basis of a court-sanctioned resolution of a bailiff, certified by the seal of the judicial bodies or by the seal of a private bailiff;

      4) prosecutor: on the basis of regulation on proceeding of verification within its competence on material, being in his (her) proceeding;

      5) state revenue bodies solely for the purposes of tax administration: on matters related to taxation of the audited entity, on the basis of the instruction;

      6) to the representatives of the borrower: on the basis of a power of attorney, on a borrower who is an individual, on the basis of a notarized power of attorney;

      7) to the authorized body in the field of rehabilitation and bankruptcy: in respect of a person for which there is a legally effective court decision on bankruptcy, for a period of five years prior to initiation of a bankruptcy case and (or) rehabilitation with the sanction of the prosecutor.

      5. Data on credited party, amount of microcredit, on other conditions of agreement on extension of microcredit, related to credited party, in case of death of credited party, besides the persons, provided in paragraph 4 of this Article, shall be also issued on the basis of written request to:

      1) persons, mentioned by credited party in testament;

      2) notary officers: on probate case, being in their proceeding on the basis of written request of notary officer, affixed by his (her) seal.

      Written request of notary public shall be accompanied by copy of certificate of death;

      3) foreign consular institutions: on probate cases, being in their proceeding.

      5-1. The secret of providing a microcredit may be disclosed to the banking ombudsman on the petitions of borrowers-individuals that are under consideration for settling disputes arising from the microcredit contract, the right (claim) for which was ceded to the person specified in paragraphs 4 and 5 of Article 9-1 of this Law.

      6. Extension of microcredit shall not be disclosure of secret as follows:

      1) delivery of adverse information by microfinance organizations to credit bureau and delivery of adverse information by credit bureau on a subject of credit history in the part of past-due debt more than one hundred eighty calendar days;

      2) provision by microfinance organizations of information related to microcredit, for which there is an overdue debt on the principal debt and (or) the accrued remuneration to the persons specified in paragraphs 4 and 5 of Article 9-1 of this Law;

      3) provision of information by microfinance organizations to a collection agency on microcredit within the framework of the concluded contract on collection of debts with this collection agency.

      Footnote: Article 21 as amended by the Laws of the Republic of Kazakhstan dated 07.03.2014 No 177-V (shall be enforced upon expiry of ten calendar days after its first official publication); dated 29.09.2014 № 239-V (shall be enforced upon expiry of ten calendar days after the day its first official publication); dated 28.11.2014 № 257 (the order of enforcement see sub-point 12) of Art. 10); dated 29.12.2014 № 269-V (shall be enforced from 01.01.2015); dated 24.11.2015 № 422-V (shall be enforced from 01.01.2016); dated 28.12.2016 № 36-VІ (shall be enforced upon expiry of two months after the day its first official publication); dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).
     

Article 22. Maintenance of business accounting and composition of financial accountability

      Maintenance of business accounting and composition of financial accountability by microfinance organization, automatization of maintenance of business accounting shall be carried out in accordance with the regulatory legal acts of the authorized body.

Article 23. Documents custody

      Documents custody, linked with activity of microfinance organization shall be carried out in accordance with the legislation of the Republic of Kazakhstan.

Article 24. Prohibition on activity on extension of microcredits and incorrect advertisement

      1. Legal entities, not registered in the capacity of microfinance organizations, shall not have the right to carry out entrepreneurial activity on extension of microcredits.

      2. Incorrect advertising by microfinance organizations on their activity shall be prohibited on the day of its publication.

Article 25. Reorganization and liquidation of microfinance organizations

      Reorganization and liquidation of microfinance organizations shall be carried out in the manner, prescribed by the Laws of the Republic of Kazakhstan.

Chapter 4. STATE REGULATION OF MICROFINANCE ORGANIZATIONS, CONTROL AND SUPERVISION OF THEIR ACTIVITY

Article 26. Prudential regulations and other compulsory norms and limits, established for microfinance organization

      Prudential regulations and other compulsory norms and limits shall contain as follows:

      1) minimum charter capital;

      2) minimum amount of owned capital;

      3) sufficiency of owned capital;

      4) maximum risk dimension for one credited party;

      5) leverage ratios.

Article 27. Competence of the authorized body

      The authorized body shall:

      1) conduct record registration;

      2) maintain register of microfinance organizations;

      3) develop and confirm prudential regulations and other compulsory norms and limits by microfinance organization, methods of their calculation, as well as the forms and terms of reporting on their performance;

      4) determine the list, forms, terms and procedure for reporting by microfinance organization;

      5) develop and approve the rules of carrying out of classification of assets and contingent liabilities on extended microcredits and establishment of provision (reserves) against them, in concurrence with government body, carrying out administration in the scope of securing the return of duties and other compulsory payments in budget;

      6) carry out verification of activity of microfinance organization;

      6-1) monitors compliance of microfinance organizations with the requirements provided for by the legislation of the Republic of Kazakhstan on combating legalization (laundering) of proceeds from crime and financing of terrorism;

      7) file an action in court on reorganization or liquidation of microfinance organizations in case of non-fulfillment of requirements, provided by part one of paragraph 2 of Article 15 and paragraph 5 of Article 16 of this Law;

      8) carry out other powers, provided by this Law, other Laws of the Republic of Kazakhstan and acts of the President of the Republic of Kazakhstan.

      Footnote. Article 27 as amended by the Law of the Republic of Kazakhstan dated 10.06.2014 № 206-V (shall be enforced upon expiry of six months after the day its first official publication).

Article 28. Enforcement action, applied to microfinance organization, and grounds of their application

      1. The authorized body takes the measures of impact established by this article when the microfinance organization violates prudential norms and other mandatory norms and limits, reveals wrongful acts or inaction of officials and employees of the microfinance organization, fails to comply with the requirements of laws of the Republic of Kazakhstan and normative legal acts of the authorized body.

      The impact measures are the limited measures of influence and sanctions.

      2. As a limited measure, the authorized body has the right to apply the following limited measures to the microfinance organization:

      1) give a binding instruction in writing;

      2) issue a written warning;

      3) draw up a written agreement;

      A written instruction is the instruction to the microfinance organization to take mandatory remedial measures to eliminate the violations and (or) causes, as well as the conditions that contributed to their commissioning, within the specified period and (or) to provide, within the specified period, an action plan to eliminate the revealed violations and (or) causes, as well as the conditions that contributed to their commissioning (hereinafter - the action plan).

      The action plan submitted in time, established by a written instruction, indicates the description of violations, the reasons that led to their occurrence, the list of planned actions, the timing of their implementation, as well as responsible officials.

      Appeal against the written instruction of the authorized body in court does not suspend its execution.

      A written warning is the notification of the authorized body of the possibility of applying sanctions to the microfinance organization, provided for in paragraph 4 of this article, if the authorized body, within one year after issuing this warning, reveales the repeated violations of the norms of the legislation of the Republic of Kazakhstan similar to the violation for which the written warning has been issued.

      A written agreement is concluded between the authorized body and the microfinance organization on the need to immediately eliminate the revealed violations and approve the list of measures to eliminate these violations, indicating the time frame for their elimination and (or) the list of restrictions that the microfinance organization assumes before the violations are eliminated.

      Conclusion of a written agreement is necessary in cases when a financial deterioration in the activities of a microfinance organization is noticed, requiring effective coordinated measures to improve it. The written agreement specifies the actions and deadlines for their implementation, which the management body and / or the executive body of the microfinance organization must take to eliminate the deficiencies, improve the financial condition. By signing a written agreement, the microfinance organization assumes obligations to fulfill its conditions.

      A written agreement is subject to mandatory signing by a microfinance organization.

      3. A microfinance organization shall be obliged to notify the authorized body of the execution of the measures specified in the written instruction and the written agreement, within the terms provided by these documents.

      In case, if the term, established for elimination of violation exceed one month, the microfinance organization shall notify the authorized body on execution of actions on elimination of having disadvantages on a monthly basis before the twentieth day of the month.

      Application of one restrictive enforcement action shall not exclude application of other restrictive enforcement actions in cases, prescribed by the Laws of the Republic of Kazakhstan, shall not suspend and terminate the actions of early taken measures.

      4. In the capacity of sanctions, the authorized body shall exclude microfinance organization from the register of microfinance organizations on the grounds, provided in paragraph 1 of Article 16 of this Law.

      5. Decision of the authorized body on application of enforcement actions, provided by this Article to the microfinance organization may be appealed in a court.

      6. In the absence of the possibility of eliminating the violation within the timeframe set out in the action plan, in a written agreement or in written instruction, for the reasons beyond the control of the microfinance organization, the deadline for implementation of the action plan, written agreement or written instruction may be extended by the authorized body in accordance with the procedure established by the normative legal act of the authorized body.

      Footnote. Article 28 as amended by the Laws of the Republic of Kazakhstan dated 24.11.2015 № 422-V (shall be enforced from 01.01.2016); dated 29.03.2016 № 479-V (shall be enforced upon expiry of twenty one calendar days after the day its first official publication); dated 06.05.2017 № 63-VI (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 29. Verification of activity of microfinance organization

      1. Verification of activity of microfinance organization shall be carried out by the authorized body on an independent basis or with assistance of government bodies and (or) organizations.

      2. Microfinance organization shall be obliged to provide assistance to inspection body on the issues, mentioned in a planning task of the authorized body on verification, as well as secure a possibility of interrogation of any officials and employees and access to any sources of required information for performance of verification.

      3. Employees of the authorized body shall be prohibited to disclose or transfer a data, received in the course of verification of activity of microfinance organization to third parties.

      4. Persons, carrying out verification shall bear liability for disclosure of data, received in the course of verification of activity of microfinance organization that is the secret, protected by the Laws of the Republic of Kazakhstan.

Chapter 5. FINAL AND TRANSITIONAL PROVISIONS

Article 30. Liability for breach of the legislation of the Republic of Kazakhstan on microfinance organizations

      Breach of the legislation of the Republic of Kazakhstan on microfinance organizations shall entail liability, established by the Laws of the Republic of Kazakhstan.

Article 31. Transitional provisions

      1. Microcredit organizations, with the exception of non-commercial organizations shall be subject to state reregistration in accordance with the Laws of the Republic of Kazakhstan within the term, by 1 January, 2016.

      In case of non-compliance with requirement, established by this paragraph, microcredit organizations shall be subject to reorganization or liquidation in accordance with the Laws of the Republic of Kazakhstan.

      2. Non-commercial microcredit organizations shall be subject to reorganization or liquidation in accordance with the Laws of the Republic of Kazakhstan within the term, by 1 January, 2016.

      3. Microcredit organization, reregistered or modified in microfinance organization shall additionally present a copy of tax declaration for the last three years, reflecting incomes on issued microcredits and estimated sum of corporate income tax for passing record registration in accordance with Article 14 of this Law.

      4. Microcredit organizations shall be ruled in their activity by the regulations, provided in subparagraphs 2) – 5) and 8) of Article 1, paragraphs 2 and 3 of Article 2, Article 3, paragraphs 1, 3 and 4 of Article 4, paragraphs 1 and 3 of Article 5, Article 6, paragraph 1, subparagraphs 1) – 6) of paragraph 2, paragraph 3 of Article 7, Articles 8-10, paragraph 2 of Article 11, paragraph 3 of Article 12, Articles 17 and 18, subparagraphs 1) – 9) and 12) of paragraph 1 of Article 19, Articles 20, 21 and 23, paragraph 2 of Article 24, Articles 25, 30 and 31 of this Law by 1 January, 2016.

      Effect of paragraph 3 of Article 12 of this Law shall not extend to non-commercial microcredit organizations.

      5. Microcredit organizations shall have the right to carry out classification of assets and contingent liabilities on extended microcredits and establish provisions (reserves) against them in accordance with the rules, confirmed by the authorized body in concurrence with government body, carrying out administration in the scope of securing return of duties and other compulsory payments to budget by 1 January, 2016.

      6. The authorized body shall consider an application for passing record registration within thirty days from the date of presentation of complete package of documents, provided by Article 14 of this Law and paragraph 3 of this Article, by 1 January, 2016.

      Authorized body shall be obliged to enter microfinance organization into register of microfinance organizations and notify it on this decision or give a motivated response in written on the reasons of refusal in record registration within the term, established by part one of this paragraph.

Article 31-1. Notification of the approval of services for provision of microcredit

      A microfinance organization shall be obliged to notify the authorized body of the approval of the microcredit services by the microfinance organization’s body authorized to approve the services for provision of microcredits, within ten working days from the date of their approval, in accordance with the Law of the Republic of Kazakhstan “On permissions and notifications.

      Microfinance organizations shall attach the following documents to the notification:

      a standard form of a microcredit contract approved by a microfinance organization;

      an extract from the decision of the microfinance organization on approval of the standard form of the microcredit contract.

      Footnote. Chapter 5 is supplemented by Article 31-1 in accordance with the Law of the Republic of Kazakhstan dated 16.05.2014 № 203-V (shall be enforced upon expiry of six months after the day its first official publication); in the new wording of the Law of the Republic of Kazakhstan dated 29.03.2016 № 479-V (shall be enforced upon expiry of twenty one calendar days after the day its first official publication).

Article 32. The order of enforcement if this Law

      1. This Law enters into force upon expiry of ten calendar days after its first official publication, with the exception of paragraphs 3 and 4 of Article 14 of this Law that shall be enforced from 1 January, 2016.

      2. The Law of the Republic of Kazakhstan dated March 6, 2003 “On microcredit organizations” (The Bulletin of the Parliament of the Republic of Kazakhstan, 2003, No. 4, Article 23; 2006, No. 11, Article 55; No. 23, Article 140; 2010 No. 7, Article 28; 2011, No. 3, Article 32) shall be deemed to have lost force.

      The President
      of the Republic of Kazakhstan N. NAZARBAYEV

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