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РОЛЬ БАНКОВСКОГО КОММЕРЧЕСКОГО КРЕДИТОВАНИЯ В ЭКОНОМИЧЕСКОЙ ДЕЯТЕЛЬНОСТИ КЫРГЫЗСКОЙ РЕСПУБЛИКИ
Халит Каракаш1 Нурбек Мадмаров Мехмет Али Атеш Нурлан Атабаев4
Научно-исследовательский институт инновационной экономики при Кыргызском
экономическом университете
2Кыргызско-Турецкий Университет Манас
3Бишкекский гуманитарный университет им. К. Карасаева
4Американский университет в Центральной Азии
(Кыргызстан, г. Бишкек)
Аннотация. В статье представлен анализ современного состояния банковского кредитования в Кыргызской Республики. Предметом исследования являются влияние денежно-кредитной политики государства на уровень жизни населения. Далее, в работе представлен анализ кредитов, выданных в иностранной и национальной валюте и их влияние на уровень бедности.
Ключевые слова: кредит коммерческих банков, уровень бедности, кредитная политика, Кыргызская Республика.
Introduction and Background of Banking Sector in Kyrgyzstan
Significant achievements of economically developed countries in the innovation of modernization is largely depend on the provision of optimal, mutually beneficial financial interaction between banks and enterprises of the real sector of the economy. Efficient management of debt capital in the capital structure of an enterprise can provide additional income in its business turnover, increase the profitability of the production process, increase the market value of the enterprise. So we can say, that granted loans by banks really influence on the economy. But in our case, in case of Kyrgyzstan , we observe that financial interaction between banks and enterprises and individuals are negatively affect to the economy because most of the loans are given in foreign currency. I mean, we haven't been seen the progressiveness and positive relationship between granted loans in foreign currency by banks and economy of Kyrgyz Republic. Political situations affect financial system (Honohan, 2004). In witness of this prospering poverty rate and other indicators.
It is important to remember that our country is post Soviet Union country that is why we only reached to market economy and we decelerate from other countries. And it is vital
that we have problems with poverty. A significant level of poverty in Kyrgyzstan is far superior to that of most of the world is, on the one hand, the result of which began with the beginning of the 1990s. Radical economic reforms and, on the other hand, indicates the absence of adequate measures of social and economic policies or lack of effectiveness of government. One of the characteristics of poverty in the region appears that in Kyrgyz-stan (Torm, 2003) 57% of workers live below the poverty line. Currently, Kyrgyzstan is one of the first places on the number of people receiving wages below the standard of living. Kyrgyzstan on the sovereignty of the initial period (1990-1995 gg.) is strongly rolled back in his development. The decline in production had a negative impact on employment and the level of people's income. In the context of the general deterioration of socio-economic situation in Kyrgyzstan has increased property differentiation among populations. The difficult socio-economic situation, the extremely low standard of living of the working population of Kyrgyzstan was forced to leave the country in search of work. And now 2016, we have stabilized situation than past years, but nevertheless we are not developing like our neighbor- countries. And now we can include to this level bankruptcy enterprises and individ-
uals, who took loans from commercial banks, which interest's is so high so that some credit takers cannot afford credit payments. And we must understand that credit that gives us commercial banks are refunded by international organizations like World bank, Europe Bank and other are in American dollars, which take our country hostage of transaction currency.
Nowadays, we have a lot of sources, forms and conditions of attracting debt capital. One of the sources of debt capital formation is a bank loan (Bates, 1990). Currently the role of loans has increased dramatically (NBKR, 2011). Due to the fact that the rise in national production is largely associated with the implementation of the capacity credit relations. We must carefully and entirely investigate credit policy in order to efficiently meet capitals.
The modern banking system - is the most important sphere of national economy of any developed nation. In today's economy, banks play the role of many hearts. Being in the center of economic life, serving the interests of manufacturers, banks mediate the relationship between industry and trade, agriculture and population.
Banks provide the accumulation of temporarily free funds of enterprises, organizations, people, government, and others. And transfer (on terms of repayment) money capital accumulation of the areas in use. Due to banks
operating mechanism of distribution and flow of capital in the spheres and branches of production, through banks can be mobilized large amounts of capital required for the investment, the introduction of innovations, expansion and restructuring of production, housing and others. Banks contribute to saving public distribution costs, helping to accelerate the circulation of money , accelerated calculations, money transfer, issuance of credit instruments of treatment instead of cash (bills, checks, debit and credit cards, certificates, etc.). They contribute to the stabilization of money growth - is the key to reducing inflation, ensuring consistency, when the price level which market relations affect the economy of the national economy the most efficient way. Essentially, the banking system - is the heart of the economic organism of any country. I also want to add that in our country, banking system is one of the more developed sphere and so interaction of the bank in all part of our life is a huge.
Reforms that is done in the Kygyz Republic in the banking sector led to a two level of banking system, which consists of the National Bank and a network of commercial banks (Sagbansua, 2006). As of March 31, 2016 on the territory of the Kyrgyz Republic were 25 commercial banks (including the Bishkek branch of the National Bank of Pakistan) and 323 branches of commercial banks (NBKR, 2016).
Table 1. The head offices and regional distribution of commercial banks in Kyrgyz Republic (March, 2016)_
Total
Bishkek Chuy Issyk-Kol Naryn Talas Jalal-Abat Osh Batken
325 64 46 40 22 18 49 60 26 Branches of resident banks
32 3 5 3 2 6 7 4 1 OJSC Aiyl Bank
16 2 3 3 1 1 1 5 - 2 OJSC AMANBANK
8 2 2 2 - 1 1 - 3 CJSC Bank Asia
7 1 - 1 1 1 1 1 1 4 CJSC Bank Bai- Tushum
8 - 2 1 1 1 1 1 1 5 OJSC Bakai Bank
14 2 2 3 - 2 4 1 6 CJSC BTA Bank
13 6 - 1 1 1 1 2 1 7 CJSC Demir Bank
10 2 2 2 1 1 1 1 - 8 OJSC Dos-Credobank
2 - - - - 1 1 9 OJSC Capital bank
16 2 1 2 2 1 4 2 2 10 CJSC Bank Kompanyon
16 5 2 1 1 1 2 3 1 11 CJSC Kyrgyz Investment- Credit
Bank
3 2 - 1 - - - 1 - 12 OJSC Kyrgyz Commercial Bank
13 OJSC Kyrgyz Credit Bank
3 1 - - - - 1 1 - 14 CJSC Kyrgyz-Swiss Bank
- - - - - - - - - 15 OJSC Commercial Bank
34 7 5 3 3 1 7 6 2 KYRGYZSTAN
16 OJSC Optima Bank
18 7 3 3 - 1 1 2 1 17 OJSC Rosinbank
23 7 4 3 1 1 2 3 2 18 OJSC RSK Bank
51 3 8 7 5 4 10 9 5 19 CJSC AKB Tolubai
2 2 - - - - - - - 20 OJSC FinanceCreditBank KAB
6 - 1 1 1 - 1 2 - 21 CJSC Finca Bank
22 OJSC Halyk Bank Kyrgyzstan
24 3 3 3 2 2 5 4 3 23 OJSC Chank An Bank
9 4 1 1 - - 1 2 - 24 OJSC Ecolslamic Bank
Branches of non-resident banks
- - - - - - - - - 25 Bishkek branch of the National
10 3 2 1 - - 1 2 1 Bank of Pakistan
The operations of commercial banks of Kyrgyzstan
For passive operations are related to the formation of bank resources. Bank resources are divided into internal and attracted. The availability of this capital is the basis for attracting foreign funds. Sources of equity capital are share capital (authorized capital), capital reserves (reserve fund and other funds derived from the profit) and retained earnings.
But nowadays we observe that deposits are also growth and expand. And help to generate credit resources. For active operations are related mobilized money that banks use to lend to customers for the implementation of its business activities. Operations related to the deployment of bank resources, refer to the Bank's active operations. Up to 80% of bank assets accounted for credit operations and operations with securities. Great importance is
attached to assessing the quality of assets of commercial banks. Total volume of the credit portfolio of commercial banks for 2016 is 91063,9 million som . Normal- 20 427,4 ( 22.43%), Satisfied - 42009,0( 46,13%), Under surveillance - 20874,4 (22.92%), Substandard - 3 287,4 (3,60%), Doubtful -2006,1 (2.20%), Loss- 2 459,6 (2.7). This shows that most of the assets occupy unclassified assets (91.4%). Thus, we can say that today the credit portfolio of the banking system is reliable.
Evaluation of given credits by commercial banks in Kyrgyz Republic
In 2015, the commercial banks continued to increase in the loan portfolio due to lower interest rates on foreign currency borrowings.
The loan portfolio of commercial banks for april 2016 amounted to million 91 758,1 million soms, having decreased since the beginning of the year by 4.74% percent. Here national part of the loan portfolio increased by 8.3 percent, to lay down in the amount of 49 829,6 million soms. The volume of loans in foreign currency amounted to 41 928,5 million in som equivalent, decreasing the corresponding figure at the beginning of the year by 16.62 percent.
The weighted average interest rate on the loan portfolio amounted to 19.67 percent , in national currency - 23.41 percent and foreign - 15.23 percent .
However, in 2015, there was a slight deterioration in the quality characteristics of the loan portfolio of the banking system. Thus,
the share of overdue loans amounted to 2.5 percent of the total loan portfolio, in quantitative terms, the volume of such loans has increased since the beginning of the year to 6.7 percent. The share of extended loans in the total loan portfolio increased by 1.8 percentage points to 5.4 percent.
From the beginning of the year 2015 , in the time structure of the loan portfolio of banks observed increase in both long and short-term loans. However, the share of short-term loans (up to one year) rose from 15.5 to
20.5 percent, and long-term - fell from 82.3 to
77.6 percent. This structural distribution of the loan portfolio, in turn, led to a decrease in the duration index from 30.6 to 28.3 months.
The total volume of newly granted loans in 2016 amounted to 96 327,7 million soms, which is 22.77 percent higher than the amount issued in the same period in 2015. Loans in national currency increased by 39.76 percent and also increased by 10.48 percent in foreign currency, but nevertheless, in april 2016 foreign currency decreased for 16.62%, in whole it decreased for 7.8 % from january 2015 to april 2016.
The weighted average interest rate on issued credits in the national currency has increased as compared to the same period of 2015 by 10.62 percentage points in april 2016, accounting for 19.67 percent, in foreign currency decreased by 5.23 percentage, points to 15.23 percent , in national currency increased by 16.17 percentage, points to 23.41.
■a
01
100000-,, 90000-> 80000 70000 60000 50000 40000 30000 20000 10000 0
edits of comme
cial banks.
Total Amount
O* <f <5* <f
Size in national currency
% rate, in national currency
Size in foreign currency
Dates from 1996- 2016
Figure 1. Credit Amounts Provided by Commercial Banks in Kyrgyz Republic
We want to note that after because of non stability in national exchange rate, our financial system of Kyrgyz Republic decided to issue credits in national currency in order to help borrowers of loans and to support national economy, so interest rate of credits in national currency increased, because there was demand and supply for it. But credits in foreign currency were ceased to issue.
Condition of foreign exchange rate.
It is vital to note that the situation in the domestic foreign exchange market was characterized is not good, the increased pressure on the exchange rate. There was a weakening of the national currency in nominal terms, it happen because of against the deterioration in the geopolitical situation in the region, name-
Credit portfolio.
The increase in the loan portfolio of banks in the first half of 2015 was due mainly to the increase in lending to trade sectors. In the first half of 2015 the level of dollarization of the loan portfolio of the banking sector increased by 0.5 percentage points compared to the same period of 2014 and amounted to 52.7 percent.
ly the continuation of the embargo between Russia and Western countries. Also strengthened US dollar positions in the world due to the recovery of the US economy and Fed policy of the USA. To counter these effects, the National Bank of Kyrgyz Republic conducted foreign exchange intervention as a sales and purchase of foreign currency.
80 EE 8 75 > « 70 01 ij 65 u "rö 60 o ~ 55 as 55 Z For 1$ USD=
■ rill III August Septembe October Novembe Decembe January February March 2015 r 2015 2015 r 2015 r 2015 2016 2016 2016 65,0953 68,8359 69,698 75,9 75,8993 75,8826 74,2525 70,0158
Figure 3. Dynamics of evolution of foreign exchange rate to national currency
100
90
SÇ 80
70
—.
E 60
o VI 50
c
o 40
10 30
c
20
10
0
2010
2011
2012
2013
2014
2014 1half/ye ar
2015 1half/ye ar
I Credits
26,4
31,2
40,1
54
78,8
66,8
3,7
I The rate of growth of loan portfolio
23
29
35
46
41
31
I The level of dollarization of the loan portfolio
58
57
55,5
54
59
51,2
52,7
Figure 2. Dynamics of the credit portfolio of banking sector
5
Now we can illustrate all parts of our economy and understand all problems that our economy met. One problem in one part of economy can influence to another part. All the more if this problem is macroeconomic character. Performance of financial and credit institutions directed to ensure the stability of the national currency, alleviate business condition and support economy that can not exist without commercial loans ; therefore credit policy and an analysis of their effectiveness is key role to correctly manage them.
Empirical Analysis
While we researched this topic , we found interesting thing and now let me show you this phenomenon. We make econometric analysis and discovered that when given credits in foreign currency increases by 1%, poverty rate increases by 1.884%. Again when given credits in national currency increases by 1%, poverty rate decreases by 3.95%. Like other different developed country our country is not so much industrialized, do not armed by advanced technologies and do not oriented on export, we are more likely oriented on import, all this make our position defeated. Just because we are developing country, we depend on environment, I mean our economy depend on economic situation of the world and on neighbor's. It is common knowledge that all currency of the world attached on US dollar. All money market rotate through a dollar. We took credit from international institution and they also give us in foreign currency- in dollar, it turns out that we are fully depend on dollar.
This is okay, when dollar is important currency, but unfortunately the problem is when countries, exactly politics use dollar to manipulate other countries. As an example of Russia. And now all macroeconomic pressure
of Russia affect to economy of our republic and leave us in vulnerable situation. So, to sum it up, it seems to me, that we must give credits in national currency- in som and above, we said that business can not activate without loans of commercial banks, only credits that issued in som, make our country better off , decrease poverty and external migration.
Now, Let see the mathematical evidence of interesting phenomenon. We use Ordinary Least Squares Model. Sample and Data Set
lpov: residuals obtained from ordinary least square model of natural logarithm of poverty rate on dummy variable @during("2000 2008"). We should use these residuals instead of log(poverty rate) because observations between 2000-2008 represent structural change that should be removed. As a result we obtain well-behaved series.
lcredfrgn: natural logarithm of bank credits given in foreign currency in million KRSoms lcrednat: natural logarithm of bank credits given in national currency in million KRSoms lemigr: natural logarithm of number of external migration
lgdp: natural logarithm of GDP at constant previous year prices in million KRSoms
lrem: natural logarithm of received personal remittances in million KRSoms
lruble: natural logarithm of annual average KRSom/RRuble exchange rate
Take Necessary Transformations After the data for 1995-2012 for each variable is entered in Eviews we should take natural logarithm of all variables as above (the motivation is to decrease the standard deviations of the variables. And use these new transformed variables in your analyses.
Table 2. Descriptive Statistics
D(LPOV ) D(LCREDFRGN ) D(LCREDNAT ) D(LEMIGR ) D(LGDP ) D(LREM ) D(LRUBLE )
Mean 0.039658 0.332556 0.227107 -0.047718 0.169904 0.457494 -0.031776
Median 0.058673 0.274610 0.230075 0.022571 0.162607 0.330588 -0.016336
Maximum 3.818997 1.219018 0.886565 0.490812 0.397181 2.381129 0.185640
Minimum 3.818997 -0.131618 -0.466923 -1.256563 0.034833 -0.535494 -0.472573
Std. Dev. 1.312015 0.370766 0.304573 0.410272 0.104939 0.599994 0.136320
Skewness 0.093013 0.982883 -0.209591 -1.229706 0.764440 1.765584 -1.761456
Kurtosis 8.948059 3.425847 3.761848 5.277040 2.790944 7.236533 7.375518
Jarque-Bera 26.56051 3.034188 0.567094 8.425212 1.785883 22.81302 23.66705
Probability 0.000002 0.219348 0.753108 0.014808 0.409450 0.000011 0.000007
Sum 0.713846 5.986007 4.087917 -0.858930 3.058280 8.234883 -0.571959
Sum Sq. Dev. 29.26352 2.336950 1.577005 2.861493 0.187208 6.119877 0.315913
Observation s 18 18 18 18 18 18 18
Unit Root Test Results
A unit root is a feature of processes that evolve through time (deterministic trend and seasonality) that may lead to serious problems in statistical inferences in time series. A series that includes a unit root is said to be non-stationary. Most of the macroeconomic variables or series depend on time (include deterministic time trend). As a result these series tend to have a relationship that does not really exist (spurious regression). A spurious (fake) relationship among non-stationary series can be diagnosed by high goodness of fit, high t-values, and low Durbin Watson (DW) test statistics. We can overcome this problem by taking 1st or 2nd differences of series. So first we should decide whether a series include a unit root then take necessary differences. To decide whether series have a unit root (non-stationary) we should apply Augmented Dickey Fuller (ADF) unit root test (Maddala, & Wu,1999) (for AR(p) process):
where x't are optional exogenous variables that include a constant or constant and
time trend, vt is a White Noise process , A is a 1st difference operator. In this test, zero hypothesis is H0: a=1 (Unit Root exists), and the alternative hypothesis is H1: a<1 (Unit Root does not exist). The 2nd unit root test is of the Phillips Peron (PP). PP Test uses non-augmented Dickey Fuller equation, and modifies the t-value of a so that serial correlation does not influence the asymptotic distribution of the test statistic; where is the estimate, and is the t-value of a, is coefficient standard error, and s is the std.error of the test regression. Also, is a consistent estimate of the error variance computed as . Lastly, is an estimator of the residual spectrum at frequency zero. Here zero hypothesis is the same as the zero hypothesis in ADF unit root test. The ADF and PP Test results show that all variables' 1st difference doesn't include a unit root so we they are all I(1), integrated of degree one. So, we should use 1st differenced series in our models.
The results will be given in the following tables:
Table 3. ADF and PP Unit Root Test Results
ADF Test Results (Schwarz Info Criteria, Lag=5)
Level (ADF Test Statistics and p-values in 1st Difference (ADF Test Statistics and p-
parentheses) va ues in parentheses)
No exogenous variables Constant Constant and Trend No exogenous variables Constant Constant and Trend
lpov -1.1937 -1.548 -1.538 -3.928 -3.807 -4.0943
(0.2037) (0.4872) (0.7767) (0.0006)*** (0.0117)** (0.0255)**
lcredfrgn 3.201 -1.745 -2.102 -2.734 -3.204 -3.785
(0.9987) (0.3894) (0.5036) (0.0094)*** (0.0416)** (0.0505)*
lcrednat 3.25 (0.999) 0.59 (0.985) -2.95 (0.1714) -2.88 (0.0068)*** -5.308 (0.0006)*** -5.126 (0.004)***
lemigr -0.556 -1.467 -1.33 -3.632 -3.526 -4.40
(0.4621) (0.5265) (0.8464) (0.0012)*** (0.0203)** (0.016)**
lgdp 6.315 -2.175 -3.1845 -2.191 -3.685 -3.62
(1.0000) (0.221) (0.1184) (0.0312)** (0.0149)** (0.0584)*
lrem 1.297 -2.524 -2.921 -4.115 -6.467 -4.219
(0.9438) (0.1275) (0.1806) (0.0004)*** (0.0001)*** (0.0204)**
lruble -1.734 -2.004 -1.884 -4.063 -4.376 -5.052
(0.0786)* (0.2825) (0.621) (0.0004)*** (0.0038)*** (0.0046)***
PP Test Results (Newey-West Automatic using Bartlett Kernel)
Level (PP Test Statistics and p-values in parentheses) 1st Difference (PP Test Statistics and p-values in parentheses)
lpov -1.1939 -1.601 -1.4917 -3.928 -3.807 -4.214
(0.2037) (0.4618) (0.7939) (0.0006)*** (0.0117)** (0.0206)**
lcredfrgn -2.55 -2.14 -3.083 -2.656 -2.997 -2.4035
(0.9953) (0.2326) (0.1394) (0.0113)** (0.0554)* (0.3647)
lcrednat 3.249 (0.999) 0.59 (0.985) -2.95 (0.1714) -2.901 (0.0064)*** -5.308 (0.0006)*** -5.126 (0.004)***
lemigr -0.6019 -1.705 -1.447 -3.659 -3.513 -5.741
(0.4351) (0.4123) (0.8096) (0.011)*** (0.0208)** (0.0014)***
lgdp 6.315 -2.213 -3.385 -2.191 -3.978 -3.822
(1.0000) (0.2086) (0.0848)* (0.0312)** (0.0084)*** (0.0412)**
lrem 2.041 -5.38 -1.684 -2.5025 -3.504 -5.938
(0.9863) (0.0005)*** (0.716) (0.0158)** (0.0212)** (0.001)***
lruble -2.395 -2.825 -1.483 -4.0632 -4.376 -5.323
(0.0199)** (0.0745)* (0.7969) (0.0004)*** (0.0038)*** (0.0028)***
*=10% significant, **=5% significant, ***=1% significant Ordinary Least Squares (OLS) Models Full OLS Model
Table 4. Correlation Matrix
D(LPOV ) D(LCREDFRGN ) D(LCREDNAT ) D(LEMIGR ) D(LGDP ) D(LREM ) D(LRUBLE )
D(LPOV) 1.000000 0.082567 0.001936 -0.288319 0.223744 0.147881 -0.183093
D(LCREDFRGN ) 0.082567 1.000000 0.098503 -0.203526 0.149485 0.560997 0.074322
D(LCREDNAT) 0.001936 0.098503 1.000000 0.153883 0.424908 0.380291 0.035490
D(LEMIGR) 0.288319 -0.203526 0.153883 1.000000 0.183412 0.142293 0.033209
D(LGDP) 0.223744 0.149485 -0.424908 -0.183412 1.000000 0.249380 0.296622
D(LREM) 0.147881 0.560997 0.380291 -0.142293 0.249380 1.000000 -0.245469
D(LRUBLE) 0.183093 0.074322 0.035490 0.033209 0.296622 0.245469 1.000000
Poverty rate has weak linear relationship with other variables (the highest with external migration, -0.28832). Each of Real GDP, and KRSom/RRuble exchange rate has negative poor correlation with poverty. Given credits in foreign and national currencies have high positive correlation (0.561 and 0.38) with
All variables are individually insignificant (p-values are very high), and jointly insignificant (Prob(F-Stat.= 0.863)) to explain poverty rate. Also, adjusted R2 is negative. The reason for all could be omitting relevant regressors, building incorrect functional form, and correlation between regressors and error term (due to measurement error in regressors, lagged dependent variables, or serially correlated er-
We reject H0 (Functional form is true) at 1% significance level. So we should add
worker's remittances. Also, given credits in national currency has negative correlation with Real GDP. We will use this correlation coefficients to build models
If the regression of d(lpov) over other variables is estimated by using OLS method, the following model is obtained:
ror terms) as a result OLS estimates are biased and inconsistent, and conventional inference procedures are invalid. let's run Ramsey RESET test. Here H0 hypothesis is the coefficients on squares of fitted values are all zero (Former functional form is true), and alternative hypothesis H1 is not all of the coefficients on squares of fitted values are zero (Former functional form is false):
squares, and cross variables. After some effort, the following OLS model is obtained.
Table 5. Full OLS Model (Bartlett Kernel, Newey-West fixed bandwidth=3.00)
d(lpov) c d(lcredfrgn) d(lcrednat) d(lemigr) d(lgdp) d(lrem) d(lrem)
Coefficients (p-value) 0.522 (0.3128) 0.303 (0.646) -0.345 (0.543) -1.002 (0.302) -3.81 (0.3553) -0.0264 (0.9561) -0.855 (0.6327)
Other Statistics R2= 0.18, Adjusted R2= -0.267, Pro AIC=3.903, SC= 4.25, HQ b(F-Stat.)= 0.863, C= 3.951
Table 6. Ramsey RESET Test Results
Ramset RESET Test (Omitted variables: squares of fitted values)
Value Degrees of freedom Probability
F-Statistics 13.777 (1, 10) 0.004
LR 15.59 1 0.0001
Table 7. Modified OLS Model Estimates (HAC std.errors and covariance, Bartlett Kernel, Newey-West fixed bandwidth=3.00 )_
d(lpov) d(lcredfrgn) d(lcrednat) d(lemigr) d(lgdp) d(lrem) d(lruble) d(lcredfrgn)2
Coefficients (p-value) 2.876 (0.2222) -15.8125 (0.0014)*** 1.397 (0.0273) ** 42.96 (0.0004 )*** -2.554 (0.0386 )** 5.56 (0.2490) 8.47 (0.0136)**
d(lcrednat)2 d(lgdp)2 d(lruble)2 d(lcredfrgn) * d(lrem) d(lcrednat) * d(lrem) d(lgdp) * d(lruble)
Coefficients (p-value) 3.36 (0.0537)* -132.18 (0.0008) *** -35.404 (0.0031)** * -14.484 (0.0658)* 22.606 (0.0763)* -93.816 (0.0155)**
Additional Statistics r2= 0.9644, Adjusted R2= 0.88, AIC= 1.432, SC= 2.075, HQC= 1.52
*=10% significant, **=5% significant, ***=1% significant All regressors except
KRSom/RRuble exchange rate are significant. Goodness of fit is now very high, and adjusted R2 is positive and high. Also, all information criterias are less than they are in the model (Table 3). We can rely on HAC standard errors estimated by using Newey-West fixed bandwidth (Bartlett Kernel) due to being heteroskedasticity and autocorrelation (in residuals) robust.
When given credits in foreign currency increases by 1%, c.p, poverty rate increases by [2.876+16.94*d(lcredfrgn)-14.484*d(lrem)]%. If we write mean values of d(lcrednat) and d(lrem) (0.3326 and 0.4575) during 1996-2014 (Table 6) then poverty increases by (2.876+16.94*0.3326-14.484*0.4575)%= 1.884%. Again when given credits in national currency increases by 1%, c.p, poverty rate
decreases by [-
15.8125+6.72*d(lcrednat)+22.606*d(lrem)]% = 6.72*0.227+22.606*0.4575-15.8125= -3.945%.
When Real GDP rises by 1%, c.p., poverty increases by [42.96-264.36*d(lgdp)-93.816*lruble]%. [42.96-264.36*0.17-
93.816*(-0.032)= 1.021%. I think this is logically, because when Real GDP raises, it positively affect to economic poverty.
When received remittances rises by 1%, c.p., poverty decreases by [-2.554-14.484*d(lcredfrgn)+22.606*d(lcrednat)]% [-2.554-14.484*0.3326+22.606*0.227= -2.24%]. Because this remittance active our economy and standard of living rises.
When Som depreciates against Ruble by
1%, c.p., poverty decreases by [5.56-70.808*d(lruble)-93.816*d(lgdp)]% [5.56-70.808*(-0.032)-93.816*0.17= -8.123%]. How we said before, we are not industrialized country, so when som depreciates against ruble, most our employees go to work to Russia, and makes remittance. Now we are convinced of this, that if we want development in general, we should have unified approach to work. This model improve this.
Problems and solutions to improve the banking system
We can see that banks play a very important role in the economy. However, the state of the banking system of the Kyrgyz Republic, its legislative framework does not provide economic stability to the right degree. National Bank, commercial banks still do not play a proper role in stimulating economic development in the long-term investments in the real sector, in economic restructuring process. Therefore, it is vital to change not only commercial bank's policy , but also whole financial system from profit oriented to economic development.
First of all, it is necessary to unite the country's existing domestic savings in the form of a system of long-term deposits under the patronage of the state in the state-owned banks long-term lending. To strengthen the role of commercial banks as financial intermediaries is necessary to promote the growth of confidence in the banking sector, which includes the establishment of a deposit insurance mechanism, strengthening banking supervision and audit. And just creating condi-
tions for deposits in such way we have been generated credit resourses, improve credit portfolio and reduce interest defect. Banks have to offer a wide range of banking products. They should focus their attention on the maximum satisfaction of customer needs as the primary market activity.
Increasing public confidence in the banking system, enhancing its reliability also requires the strengthening of banking supervision system. At this stage, it is extremely important to create an effective mechanism for management effectiveness evaluation in commercial banks to ensure liquidity and security of the entire banking system, systemic risk prevention. All this necessitates attend to proper risk assessment, which are commercial banks were required that risks have been controlled. It is necessary to further improve the methodology and practice of banking supervision with an emphasis on risk assessment, especially credit and currency. Therefore, just by establish a well-functioning banking system, we can withdraw from the crisis situation prevailing in our country. At the present time, due to a shortage of qualified personnel and the rapid increase in the number of commercial banks in this area are not enough trained workers who do not have special education. This leads to poor performance of banks and their desire to simply make money fast. Therefore it is necessary to streamline the work of banks, increased control over their activities.
The second of all, credits that is issued by commercial banks must be given in national currency. Because it is really decrease pov-
erty rate and make our economy better off. Credit policy help to activate and organize our economy, increase standard of living and decrease poverty rate, it must be passed through effective banking system of country.
And the last , it should be noted that the economy of Kyrgyzstan has an open character, and this, in conjunction with the floating exchange regime, significantly increases the bank's vulnerability to external shocks and request from the economy in general and the banking system, a large margin of safety and stability. Recent negative developments in the banking sector, have clearly demonstrated that the commercial banks have not enough resources and the necessary measures to protect against risks, so in order to not to be dependent on economics of other country or politics intrigue in the world, our country should create favorable conditions for the business environment, investing in the real sector of economy, for this it is necessary to create a good environment for investors, that is, to deal with the laws relating to investors, to tack responsible attitude to the state officials and of course the stability of the governance. When we invest in real sector of economy, we gain more, for example, we are not any more dependent on different country, start to export, money market will not deeply affect us, decrease unemployment, decrease interest and of course poverty rate.
So , now, while there is no stability in the world and there is no help from other countries, we must rely on ourselves, and start to efficiently solve our problems and just take responsibility and do not wait solutions.
References
1. Bates, T. (1990). Entrepreneur human capital inputs and small business longevity. The review of Economics and Statistics, 551-559.
2. Honohan, P. (2004). Financial Development, Growth and Poverty: How Close are. Financial development and economic growth: Explaining the links, 1
3. Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics, 61(S1), 631-652.
4. Torm, N. (2003). The nexus of economic growth, employment and poverty during economic transition: An analysis of Armenia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan. Recovery and Reconstruction Department, International Labour Office.
5. Sagbansua, L. (2006). Banking System in Kyrgyz Republic. Scientific Journal of International Black Sea University, 1(1), 39.
6. NBKR (2011). Banking System Development Trends. Retrieved from http://www.nbkr.kg/index 1.jsp?item=140&lang=ENG
7. NBKR.(2016). Financial Sector Stability Report of the Kyrgyz Republic. Retrieved from http://www.nbkr.kg/D0C/15092016/000000000044075.pdf
THE ROLE OF COMMERCIAL BANK CREDIT IN THE ECONOMIC ACTIVITY
OF KYRGYZ REPUBLIC
Halit Karakaç1
Scientific research institute of innovative economics, Kyrgyz economic university Nurbek Madmarov2 Kyrgyz-Turkish Manas University Mehmet Ali Ateç3
Bishkek humanities university after K.Karaseav Nurlan Atabaev4
4American university in Central Asia (Kyrgyzstan, Bishkek)
Abstract. The article presents an illustration of the condition of credit policy of Kyrgyz Republic and how given credits affect to whole economy, because all movements in the economy attached by credits given by commercial banks of Kyrgyz Republic. There is more about analysis of the loans given in the foreign and national currency and their effect to poverty rate. All the more, while there is stagnation in the economy of the world, political confrontation and lack of knowledge of future.
Keywords: Commercial bank credit, poverty, credit policy, Kyrgyz Republic.
