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 public relations associated with the activities for provision of microcredits, establishes the specifics of creation of organizations carrying out microfinance activities, the legal status, the activities of organizations carrying out microfinance activities, and also determines the specifics of state regulation of organizations carrying out microfinance activities, control and supervision over their activities.

      Footnote. Preamble as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Chapter 1. GENERAL PROVISIONS

Article 1. Basic concepts used in this Law

      For the purposes of this Law, the following basic concepts are used:

      1) accounting registration - inclusion of an organization carrying out microfinance activities in the register of organizations carrying out microfinance activities, in accordance with Article 14 of this Law;

      2) credit dossier - documents and information generated by an organization that carries out microfinance activities for each borrower;

      3) a borrower - an individual or legal entity who has entered into a microcredit agreement with an organization engaged in microfinance activities;

      4) a microcredit - money provided by an organization carrying out microfinance activities to the borrower in the national currency of the Republic of Kazakhstan in the amount and in the manner determined by this Law, on the terms of payment, urgency and repayment;

      5) an organization engaged in microfinance activities - a microfinance organization, credit partnership, pawnshop, carrying out activities for provision of microcredits;

      6) a register of microfinance organizations (hereinafter referred to as the register of microfinance organizations) - a single list of microfinance organizations;

      7) an applicant - an individual or legal entity that has submitted an application to a microfinance organization for a microcredit;

      8) an authorized body - a state body exercising state regulation, control and supervision of the financial market and financial organizations.

      Footnote. Article 1 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 2. Legislation of the Republic of Kazakhstan on microfinance activities

      Footnote. The title of Article 2 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

      1. The legislation of the Republic of Kazakhstan on microfinance activities is based on the Constitution of the Republic of Kazakhstan and consists 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 Joint- Stock Companies", "On Business Partnerships", "On Limited and Additional Liability Partnerships" and "On Credit Partnerships" apply to organizations engaged in microfinance activities, 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.

      4. For microfinance organizations and other legal entities carrying out activities within the framework of a special regulatory regime introduced in accordance with the Law of the Republic of Kazakhstan "On state regulation, control and supervision of the financial market and financial organizations", the norms of this Law and regulatory legal acts of the authorized body, the National Bank of the Republic of Kazakhstan, adopted in accordance with this Law, are applied within the limits provided for by the conditions of the special regulatory regime.

      Footnote. Article 2 with the change introduced by the Law of the Republic of Kazakhstan dated 02.07.2018 № 168-VI (shall be enforced upon the expiration of ten calendar days from the date of its first official publication); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Chapter 2. MICROFINANCE ACTIVITIES

      Footnote. The title of Chapter 2 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 3. Microfinance activities, procedure and conditions for provision of microcredits

      Footnote. The title of Article 3, as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).
      1. is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

      1-1. Microfinance activities include:

      1) the activities of credit partnerships to provide microcredits to their participants;

      2) the activity of pawnshops on the provision of microcredits to individuals on the security of movable property intended for personal use, for a period of up to one year in an amount not exceeding eight thousand-fold monthly calculation index established for the corresponding financial year by the law on the republican budget;

      3) the activities of microfinance organizations to provide microcredits to individuals and (or) legal entities with or without collateral in an amount not exceeding twenty thousand fold monthly calculation index established for the corresponding financial year by the law on the republican budget.

      1-2. Organizations engaged in microfinance activities (hereinafter referred to as microfinance organizations), in addition to the activities specified in paragraph 1-1 of this article, are entitled to carry out the following operations:

      1) attracting loans (except for attracting money in the form of a loan from citizens as entrepreneurial activity) from residents and non-residents of the Republic of Kazakhstan;

      2) investing own assets in securities and other financial instruments;

      3) provision of consulting services on the issues related to the provision of microcredits;

      4) to lease (rent) own property;

      5) implementation of leasing activities;

      6) sale of special literature on the activities of microfinance organizations on any types of information carriers;

      7) performance of the functions of a paying agent and a paying subagent;

      8) conclusion of insurance contracts on behalf of and at the instruction of insurance organizations - residents of the Republic of Kazakhstan as an insurance agent;

      9) performance of the functions of an agent of the electronic money system in accordance with the legislation of the Republic of Kazakhstan;

      10) factoring operations: the acquisition of rights to claim payment from the buyer of goods (works, services) with the acceptance of the risk of non-payment;

      11) forfeiting operations (forfeiting): payment of the promissory note of the buyer of goods (works, services) by purchasing a promissory note without recourse;

      12) the issuance of guarantees, sureties and other obligations providing for the execution in cash.

      1-3. A microfinance organization that provides microcredits to individuals secured by movable property intended for personal use has the right to additionally register, store and sell jewelry containing precious metals and precious stones.

      1-4. Microfinance organizations are prohibited from carrying out other entrepreneurial activities not provided for by this Law.

      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).

      3-1. A microfinance organization has the right to provide microcredits electronically in the manner determined by the authorized body.

      4. is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

      5. It is not allowed to index the obligation and payments under the agreement on granting a microcredit issued in tenge with reference to any currency equivalent.

      6. A microfinance organization does not have the right to change the terms of a microcredit agreement unilaterally, except in cases of their improvement for the borrower.

      Improvement of the terms of the microcredit agreement for the borrower for the purposes of this paragraph means:

      change in the direction of reduction or complete cancellation of forfeit (fine, penalty);

      a change in the direction of decreasing the interest rate under the microcredit agreement.

      In the event that a microfinance organization applies improving conditions, the borrower is notified of the change in the terms of the microcredit agreement in the manner prescribed in the microcredit agreement.

      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); dated 24.05.2018 № 156-VI (shall be enforced upon expiration of ten calendar days after the date of its first official publication); 02.07.2018 № 168-VI (shall be enforced dated 01.08.2018); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 4. Agreement on extension of microcredit

      1. An agreement on provision of microcredit is concluded taking into account the requirements of the civil legislation of the Republic of Kazakhstan to the written form of the transaction.

      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. The regulatory legal act of the authorized body approves the procedure for concluding an agreement on provision of microcredit, including the requirements for the content, design, mandatory terms of the agreement on provision of microcredit, the form of the microcredit repayment schedule, taking into account the requirements established by the civil legislation of the Republic of Kazakhstan.

      3-1. Under a microcredit agreement concluded with an individual for up to forty-five calendar days, in an amount not exceeding fifty fold monthly calculation index established for the corresponding financial year by the law on the republican budget, the requirement established by paragraph 1 of Article 5 of this Law is not applied if the agreement meets the following conditions:

      1) the remuneration under the microcredit agreement does not exceed the limit value established by the regulatory legal act of the authorized body;

      2) the amount of the forfeit (fine, penalty) for violation of the obligation to return the amount of the microcredit and (or) pay remuneration under the microcredit agreement cannot exceed 0.5 percent of the amount of the unfulfilled obligation for each day of delay;

      3) all payments of the borrower under the microcredit agreement, including the amount of remuneration and forfeit (fine, penalties) provided for by the microcredit agreement, with the exception of the microcredit subject, in aggregate, cannot exceed the amount of the microcredit issued for the entire period of the microcredit agreement;

      4) the agreement contains a prohibition on increasing the amount of the microcredit;

      5) by agreement of the parties, it is possible to extend the term of the microcredit agreement on current or improving conditions.

      4. excluded by the Law of the Republic of Kazakhstan dated 02.07.2018 № 168-VI (shall be enforced dated 01.01.2019).

      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. Excluded by the Law of the Republic of Kazakhstan dated 02.07.2018 № 168-VI (shall be enforced dated 01.01.2019).

      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); the Law of the Republic of Kazakhstan № 168-VI dd. 02.07.2018 (shall be enforced dated 01.01.2019); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 5. Annual effective rate of remuneration on microcredit

      1. The size of the annual effective interest rate on microcredit must not exceed the limit 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. is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).
      Footnote. Article 5 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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;

      5-1) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

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

      The requirements established by this paragraph do not apply to the microcredit agreement specified in paragraph 3-1 of Article 4 of this Law, as well as the microcredit agreement concluded by the pawnshop.

      2. is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).
      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); dated 02.07.2018 № 168-VI (shall be enforced dated 01.01.2019); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 7. Rights and obligations of microfinance organization

      1. Microfinance organization shall have the right to:

      1) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

      1-1) to assign the right (claim) under the microcredit agreement to the person specified in paragraphs 4 and 5 of Article 9-1 of this Law;

      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;

      2-1) at the request of the borrower, to transfer microcredit to a third party through second-tier banks in order to pay for goods, works or services;

      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;

      The requirements established by this subparagraph do not apply to the microcredit agreement specified in paragraph 3-1 of Article 4 of this Law;

      4-1) is excluded by the Law of the Republic of Kazakhstan dated 27.12.2019 No. 291-VІ (shall be enforced upon expiry of ten calendar days after the day of its first official publication);

      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;

      The requirement established by this subparagraph does not apply to credit partnerships and pawnshops;

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

      8-1) to observe the procedure for calculating and the limit value of the debt burden ratio of the borrower of a microfinance organization, established by the regulatory legal act of the authorized body.

      The requirement established by this subparagraph does not apply to credit partnerships and pawnshops;

      9) to submit to the National Bank of the Republic of Kazakhstan the financial and other reports, the list, forms, terms and procedure for submission of which are established by regulatory legal acts of the National Bank of the Republic of Kazakhstan in agreement with the authorized body;

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

      11) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

      11-1) to refuse to provide microcredit in cases provided for by the Law of the Republic of Kazakhstan "On counteracting legalization (laundering) of criminal proceeds and financing of terrorism";

      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 unilaterally change the interest rates (except for cases of their reduction) and (or) the method and way of repayment of the microcredit;

      1-1) to provide a microcredit specified in paragraph 3-1 of Article 4 of this Law to individuals who have overdue debts on unsecured bank loans and microcredits for more than sixty calendar days, in an amount equal to or exceeding fivefold monthly calculation index established for the corresponding financial year by the law on the republican budget.

      The requirement established by this subparagraph does not apply to pawnshops;

      1-2) to establish and collect from the borrower (applicant) any payments, except for remuneration and forfeit (fines, penalties) for microcredit;

      2) to demand from a borrower who is an individual who has fully or partially repaid to the microfinance organization the amount of the microcredit, forfeit (fine, penalty) and other payments for early repayment of the microcredit;

      3) to use and dispose the pledged things;

      4) to accrue and demand a forfeit (fines, penalties) after ninety consecutive calendar days of delay in fulfilling the obligation to repay any of the payments for the principal debt and (or) remuneration on a microcredit of a borrower - an individual, not related to entrepreneurial activity.

      The requirement of this subparagraph does not apply to a microcredit agreement if, on the date of its conclusion, the amount of the principal debt was fully secured by a pledge of property subject to registration and (or) a pledge of money;

      5) to demand the payment of remuneration, as well as forfeits (fines, penalties) accrued after one hundred and eighty consecutive calendar days of delay in fulfilling the obligation to repay any of the payments on the principal debt and (or) remuneration for a micro-loan secured by a mortgage of real estate that is housing and (or) a land plot with housing located on it.

      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); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020); dated 27.12.2019 No. 291-VІ (shall be enforced upon expiry of ten calendar days after the day of 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 for the period when the debt is in work in a debt collection agency, as well as to charge a forfeit (fine, penalty) during the specified period for 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:

      the second-tier bank;

      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.

      to a legal entity - a pledgee of the rights of claim under a microcredit agreement when a microfinance organization issues secured bonds or receives loans.

      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, who has transferred the right (claim) of a microfinance organization under a microcredit agreement concluded with an individual, is prohibited from assigning such a right (claim) to other persons, with the exception of the repurchase (return) of the redeemed right (claim) to the original creditor, assignment (re-assignment) of rights (claims) to the second-tier banks, debt 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, as well as to 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); as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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. The statute of limitations on the request of microfinance organizations to borrowers on improper performance of microcredit agreements is five years.

      Footnote. Article 10 with the change introduced by the Law of the Republic of Kazakhstan dated 02.07.2018 № 168-VI (shall be enforced upon the expiration of ten calendar days from the date of its first official publication).

Chapter 3. ESTABLISHMENT AND ACTIVITY OF MICROFINANCE ORGANIZATIONS

Article 11. Legal status of a microfinance organization

      1. A microfinance organization (with the exception of a credit partnership) is created in the legal form of a joint-stock company or a business partnership.

      2. A microfinance organization is prohibited from issuing bonds, with the exception of issuing bonds for the purpose of their placement on the organized securities market of the Republic of Kazakhstan and (or) admission to trading on the stock exchange operating on the territory of the International Financial Center Astana.

      Footnote. Article 11 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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. The name of a microfinance organization (with the exception of a credit partnership and a pawnshop) must necessarily contain the words “microfinance organization” or the abbreviation “MFO”.

      1-1. The name of a credit partnership or pawnshop must necessarily contain the words "credit partnership" or "pawnshop", respectively.

      2. A legal entity that is not registered as a microfinance organization, credit partnership, pawnshop does not have the right to use in its name the words "microfinance organization", "credit partnership", "pawnshop", words or abbreviations derived from them, suggesting that it carries out activities for provision of microcredits.

      Footnote. Article 13 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

Article 14. Accounting registration of microfinance organizations and requirements for executives and founders (members) of a microfinance organization

      Footnote. The title of Article 14 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

      1. A legal entity intending to carry out activities for the provision of microcredits is subject to the accounting registration within six months from the date of its state registration (re-registration) in the State Corporation "Government for Citizens" as a microfinance organization, credit partnership, pawnshop.

      1-1. For the accounting registration, a microfinance organization submits an application and other documents to the authorized body, the list of which is established by the regulatory legal act of the authorized body.

      2. Rules for the registration of microfinance organizations, as well as for maintaining and excluding from the register of microfinance organizations shall be developed and approved by the authorized body.

      3. The authorized body considers an application for the accounting registration within ten working days from the date of submission of a 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.

      6. Executives of a microfinance organization are the first head and members of the executive body (collegial or sole), members of the supervisory board (if any), members of the board of directors (if any), the chief accountant.

      An executive of a microfinance organization cannot be a person who:

      1) has not higher education;

      2) has an unexpunged or unspent criminal record;

      3) in respect of whom a court decision has entered into legal force on the application of criminal punishment in the form of deprivation of the right to hold a position of a senior employee of a financial organization, banking and (or) insurance holding, and to be a major participant (major shareholder) of a financial organization for life.

      7. No person alone or jointly with another (other) person (s) can directly or indirectly own and (or) use, and (or) dispose the shares in the authorized capital or the placed shares of microfinance organizations in the Republic Kazakhstan, if it:

      1) is an individual with an unexpunged or unspent criminal record;

      2) has registration, place of residence or location in offshore zones, the list of which is established by the authorized body;

      3) is a legal entity, the founder (shareholder, participant) or executive of which was previously the first head or founder (participant) of a microfinance organization in the period for not more than one year before the authorized body makes a decision to exclude this microfinance organization from the register of microfinance organizations for the grounds provided for in subparagraphs 1), 2), 3), 4), 5), 6), 7), 8) and 10) of paragraph 1 of Article 16 of this Law;

      4) previously was or is a major participant - an individual or the first head of a major participant - a legal entity and (or) an executive of a financial organization for a period of not more than one year before the authorized body makes a decision to classify the bank as insolvent one, to shut down insurance (reinsurance) company, compulsory redemption of its shares, revocation of a license of a financial organization, as well as on compulsory liquidation of a financial organization or declaring it bankrupt in accordance with the procedure established by the legislation of the Republic of Kazakhstan.

      The requirements established by part one of this paragraph do not apply to credit partnerships.

      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); dated 25.12.2017 № 122-VI (shall be enorced dated 01.01.2018); dated 02.07.2018 № 168-VI (shall be enforced upon the expiration of ten calendar days from the date of its first official publication); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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-compliance of the submitted documents with the requirements established by the regulatory legal act of the authorized body, as well as the provision of inaccurate information and information to be reflected in these documents;

      2) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

      3) if a microfinance organization within six months from the date of its state registration (re-registration) in the State Corporation "Government for Citizens" has not applied with an application for the accounting registration;

      4) non-compliance with one of the requirements established by paragraphs 6 and 7 of Article 14 of this Law;

      5) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

      6) failure to comply with the term of state re-registration established by paragraph 1 of Article 31 of this Law.

      2. In case of refusal in the accounting registration on the grounds provided for in subparagraphs 1) and 4) of paragraph 1 of this article, a legal entity registered as a microfinance organization, credit partnership, pawnshop, within thirty working days after the day of receipt of refusal in the accounting registration re-submits an application in accordance with the rules for the accounting registration of microfinance organizations, as well as maintaining and excluding from the register of microfinance organizations, or must carry out the re-registration procedure by excluding from its name the words "microfinance organization", "credit partnership", "pawnshop", derivative words or abbreviations suggesting that it carries out activities to provide microcredit, or make a decision on reorganization or liquidation.

      A re-submitted application shall be considered by the authorized body within thirty working days.

      In case of refusal in accounting registration on the grounds provided by subparagraphs 3) and 6) of paragraph 1 of this article, a legal entity registered as a microfinance organization, within thirty working days after the date of receipt of refusal in accounting registration shall be obliged to carry out the re-registration procedure by excluding from its name the words "microfinance organization", derivative words or abbreviations from them, assuming that it carries out activities to provide microcredits, or to make a decision on the reorganization.

      In cases of non-implementation by a legal entity of the actions specified in parts one and three of this paragraph, it is subject to forced reorganization or liquidation in the manner prescribed by the laws of the Republic of Kazakhstan.

      Footnote. Article 15 as amended by the Law of the Republic of Kazakhstan of 02.07.2018 № 168-VI (shall be enforced upon the expiration of ten calendar days from the date of its first official publication); dated 02.04.2019 № 241-VI (shall be enforced dated 01.07.2019); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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) failure to submit reports to the National Bank of the Republic of Kazakhstan;

      4) bringing to administrative responsibility more than two times (within twelve consecutive calendar months) for submission of inaccurate financial or other reports;

      5) systematic (more than three times within twelve consecutive calendar months) failure to comply with written instructions 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. A microfinance organization must, within thirty calendar days after receiving a notification from the authorized body on exclusion from the register of microfinance organizations, carry out the re-registration procedure by excluding from its name the words "microfinance organization", "credit partnership", "pawnshop", words or abbreviations derived from them assuming that the specified legal entity carries out activities to provide microcredits, or make a decision on reorganization or liquidation.

      Footnote. Article 16 as amended by the Law of the Republic of Kazakhstan № 168-VI dated 02.07.2018 (shall be enforced upon expiration of ten calendar days from the date of its first official publication); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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

      Footnote. Article 19 is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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) public and private bailiffs: in cases of enforcement proceedings in their proceedings on the basis of the bailiff's decision authorized by the prosecutor, certified by the seal of the judicial authorities or by the seal of the 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;

      4) exchange of information, including information constituting the secret of providing a microcredit, between the National Bank of the Republic of Kazakhstan and the authorized body;

      5) submission by an official of a state body or a person performing managerial functions in a microfinance organization, of documents and information containing the secret of providing a microcredit, as supporting documents and materials when sending a report on a criminal offense to the criminal prosecution body.

      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); № 217-VI of 21.01.2019 (shall be enforced upon the expiration of three months after its first official publication); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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

      Accounting and financial reporting by a microfinance organization, automation of accounting are carried out in accordance with the regulatory legal acts of the National Bank of the Republic of Kazakhstan.

      Footnote. Article 22 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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 that are not registered as microfinance organizations, credit partnerships, pawnshops are not entitled to carry out entrepreneurial activities to provide microcredits.

      2. Microfinance organizations are prohibited from:

      1) advertising of their activities, which does not correspond to reality on the day of its publication;

      2) advertising related to the offer of microcredit on terms that do not comply with the legislation of the Republic of Kazakhstan on microfinance activities.

      3. The authorized body has the right to demand that a microfinance organization makes changes to advertising that does not correspond to reality, its termination and (or) publication of its denial.

      If this requirement is not met within the time period established by the authorized body, the authorized body has the right to publish information on the discrepancy between the validity of the information contained in the advertisement, or to clarify them at the expense of the microfinance organization that published such an advertisement.

      4. Legal entities that are not included in the register of microfinance organizations are prohibited from advertising services provided that fall under the category of microfinance activities.

      Footnote. Article 24 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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 and the National Bank of the Republic of Kazakhstan

      Footnote. The title of Article 27 as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

      The authorized body shall:

      1) conduct record registration;

      2) maintain register of microfinance organizations;

      3) develops and approves prudential standards and other mandatory standards and limits for a microfinance organization, a methodology for their calculation in relation to the corresponding type of microfinance activity;

      4) is excluded by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020);

      4-1) approves the procedure for calculating and the maximum value of the debt burden ratio of the borrower of a microfinance organization (except for a credit partnership and a pawnshop);

      4-2) approves the list of documents required for obtaining a microcredit, as well as the procedure for maintaining a credit dossier under a microcredit agreement specified in paragraph 3-1 of Article 4 of this Law;

      4-3) in agreement with the Ministry of Internal Affairs of the Republic of Kazakhstan, approves the procedure for organizing the activities of pawnshops, including the issues of storing things in a pawnshop, establishing requirements for ensuring the safety and technical strength of pawnshop premises, measures to counter the circulation of illegally obtained things in pawnshops;

      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) files a lawsuit for compulsory reorganization or liquidation:

      of microfinance organizations in case of failure to comply with the requirement provided for in paragraph 5 of Article 16 of this Law;

      of legal entities registered as microfinance organizations, credit partnerships, pawnshops that have not passed the accounting registration in accordance with paragraph 1 of Article 14 of this Law, and have not fulfilled the requirements provided for in parts one and three of paragraph 2 of Article 15 of this Law;

      of legal entities engaged in the provision of loans (with the exception of persons registered as credit partnerships, pawnshops, as well as microfinance organizations that have undergone the accounting registration and entered the register of microfinance organizations) that have not passed the state registration (re-registration) as a microfinance organization in accordance with this Law;

      of microcredit organizations that have not undergone the state re-registration in accordance with paragraph 1 of Article 31 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.

      The National Bank of the Republic of Kazakhstan, in agreement with the authorized body, approves:

      1) a list, forms of reporting on implementation of prudential standards and other mandatory standards and limits by a microfinance organization, the terms and procedure for its submission to the National Bank of the Republic of Kazakhstan;

      2) a list, forms of financial and other reports, terms and procedure for their submission by a microfinance organization to the National Bank 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); dated 02.07.2018 № 168-VI (shall be enforced upon expiration of ten calendar days from the date of its first official publication); dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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 the requirement established by this paragraph, microcredit organizations shall be subject to forced 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.

      Footnote. Article 31 with the change introduced by the Law of the Republic of Kazakhstan dated 02.07.2018 № 168-VI (shall be enforced upon the expiration of ten calendar days from the date of its first official publication).

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

      A microfinance organization notifies the authorized body of the approval of services for provision of microcredits by the body of the microfinance organization authorized to approve the services for provision of microcredits within ten working days from the date of their approval.
      The procedure for notifying the authorized body about the approval of services for provision of microcredits by an organization carrying out microfinance activities, as well as the list of documents attached to the notification, are determined by the regulatory legal act of the authorized body.
      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); as amended by the Law of the Republic of Kazakhstan dated 03.07.2019 No. 262-VI (shall be enforced from 01.01.2020).

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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