The Asian Development Bank (ADB) is providing a US$100mn credit guarantee to securitise the diversified payment rights of JSC Kazkommertsbank, one of Kazakhstan’s largest commercial banks.
The diversified payment rights arise as a result of Kazkommertsbank’s role as financial intermediary between foreign payors that send funds to Kazkommertsbank’s clients in Kazakhstan and involve transactions such as export-related payments, foreign direct investments, personal or workers “remittances.
The US$100mn ADB credit guarantee is part of a US$500mn total diversified payments rights securitisation package being offered in partnership with two other guarantors, MBIA Insurance Corporation and Financial Guarantee and Insurance Corporation. The deal will be one of the largest of its kind done worldwide.
Although the concept of diversified payment rights securitisation is not entirely new to Kazakhstan, there have been few issues so far. The credit guarantee from the ADB is expected to facilitate the development of a full-scale securitisation market in Kazakhstan, and to have spill-over effects elsewhere in the region.
“Securitisation is an important means to raise financing for many low and middle income countries, especially during times of low liquidity and heightened perception of sovereign risk,” says William Willms, principal investment specialist. “Such securities reduce the sovereign-related risks and thereby lower the cost of funding.”
In addition to developing the securitization market, ADB aims to help Kazkommertsbank diversify its funding sources and boost its lending to struggling small and medium-sized enterprises in Kazakhstan’s oil export-dependent economy.