Kazakhstan banks on small business digitalisation as engine of accelerated growth

By on 16/08/2021 | Updated on 17/08/2021

The Republic of Kazakhstan is about the size of western Europe and stretches from the Caspian Sea in the south west to Russia in the north and China to the east, making it well positioned geographically to capitalise on the opportunities the digital economy presents. However, approximately half of Kazakhstan’s population of 19 million live in rural and economically isolated regions, a landscape that has inhibited business growth.

To bridge this divide, the Government is stepping up its investment in digital technology, launching a series of payments-focused initiatives to help small- and medium-sized enterprises (SMEs) and local entrepreneurs access new opportunities for trade and innovation.

The objective of these measures is to accelerate growth in the country, driving prosperity for its people. The Government’s actions look to capitalise on the country’s recent exceptional growth in e-commerce, which has been boosted further by social distancing efforts to combat the Covid-19 pandemic. Across the country, this has also resulted in an uptake in digital payments, with non-cash transactions increasing by 2.5 times, amounting to 7.5 trillion tenge (equivalent to 15 billion euros).

As part of a broader ambition of improving the delivery of public services using the latest technology, Kazakhstan’s Ministry of Trade & Integration is also looking to work more closely with private and non-profit sectors to deliver more unified support to SMEs, including fintechs and start-ups.

For example, the Ministry has signed an agreement with Mastercard to encourage and enable more SMEs to participate in e-commerce, promote digital and financial literacy among aspiring and established entrepreneurs, build digital payment infrastructure and establish a supportive eco-system for start-up and fintech acceleration – seen as crucial to helping diversify the economy and drive recovery.

Maintaining momentum for e-commerce

Initiatives involving Mastercard in the country include a series of e-commerce webinars for SMEs, the establishment of an e-commerce school, ‘accelerator’ programmes and competitions to bring together ambitious entrepreneurs from across the Central Asia region.

“We hope that our joint initiatives, implemented within the framework of this partnership, will allow our entrepreneurs to gain the necessary knowledge and experience from leading international experts and specialists in the field of business digitalisation,” said Vice-Minister of Trade & Integration, Assel Zhanassova. “This will help them change their strategy of work, find new formats, non-standard solutions and services in the field of trade. E-commerce can become one of the drivers of economic growth in the country, as well as a source of new jobs”.

The Government is increasingly seeking to harness the potential of digital technology more broadly. ‘Smart City’ initiatives (the country agreed an approach to developing smart cities in 2019) are among the other areas seen as holding potential for digitalisation.

From the Government’s perspective, greater take-up of digital commerce should boost competitiveness, ease the way that financial support can be provided to SMEs, address the share of the shadow economy and reduce the costs of cash and cheque-handling.

In many cases driven by necessity, many SMEs went online for the first time during 2020 while more experienced online sellers expanded their digital presence. Consequently, e-commerce has boomed worldwide during the pandemic and Central Asian countries are no exception. In Kazakhstan, online sales soared by 93 per cent during the first nine months of 2020 compared to the same period in 2019 — from 198 billion tenge (equivalent to 390 million euros) to 382 billion tenge (equivalent to 760 million euros), according to a study by PwC Kazakhstan.

While this demonstrates significant progress, to further drive growth and create employment in the country, the Kazakhstan’s National Trade Development Project has committed to an ambitious goal of achieving a share of e-commerce of up to 15 per cent by 2025, compared to 9.4 per cent in the first half of 2020.

From the Government’s perspective, digital literacy for SMEs is an important first step towards this goal. The Ministry is working with the United States Agency for International Development (USAID), the AIFC (Astana International Financial Centre) Fintech Hub and Kazakhstan’s DAMU Entrepreneurship Development Fund, as well as Mastercard, on staging a series of webinars that aim at helping SMEs to understand different aspects of business digitisation required to successfully participate in e-commerce. The DAMU fund was set up in 1997 to provide financial support to SMEs.

Vice-Minister Zhanassova herself opened the webinar series in April this year. This will initially run for eight monthly sessions, covering topics such as ‘Advertising and Digital Promotion’, ‘From Business to E-Business’ and ‘E-Payments’. Speakers have included representatives from companies offering digital solutions in these areas, including internet company Yandex Direct Kazakhstan; e-commerce company ECWID; and online payments firm Robokassa.

To combine digital literacy with practical application, the Ministry and Mastercard are also working together to establish an e-commerce school for SMEs, called ‘SmartDuken’ (which translates into English as ‘Smart Shop’). This is another example where partnerships with the private sector are playing a role in supporting the Kazakhstan Government’s ambition to unlock growth and prosperity through investment in small business.

Scheduled to launch in the coming months, this online platform will focus on helping entrepreneurs to develop and scale their online business through free support and assistance, including online educational courses, webinars, partner offers (IT tools, CRM, payment systems, website builders, etc.), as well as business acceleration for SMEs that want to reach new markets.

SmartDuken was announced by Vice-Minister Zhanassova at a conference entitled ‘Astana Finance Days 2021: Restoring Growth’ in early July. The session discussed the Government’s priorities in respect of e-commerce development, as well as sharing data on trends in online payments.

Leading through collaborations with the private sector

Solving the issues SMEs face in digitisation and collaborating with governments has been a core objective for Mastercard, which in April 2020, pledged to bring one billion people and 50 million micro- and small businesses, including 25 million women entrepreneurs, worldwide into the digital economy by 2025.

Aligned with the Kazakhstan Government’s own efforts to enable SME growth, Mastercard has launched its Simplify Commerce solution with one of the largest banks in the country, with plans underway to roll out the solution at a national level. The platform aims to overcome barriers to accessing the digital economy by offering a simple and secure way for SMEs to set up an online storefront and start accepting digital payments, speeding their route to market.

However, for the economic benefits of SME digitisation to be realised, citizens also need the ability and confidence to access the digital economy. Aimed at solving this issue, another solution – known as Masterpass  – deployed by Mastercard in the country focuses on engendering trust by providing a consistent, simple and secure digital check-out experience to consumers online (‘card-not-present’) and offline (‘face-to-face’). Masterpass is already familiar to those using some local popular digital wallets in Kazakhstan such as Rahmet, Senim and Simply (telecoms company Beeline’s mobile financial services application), which have made the service available.

In partnering Mastercard, the Government of Kazakhstan is joining a growing list of nations to have engaged in strategic partnerships with the private sector to help drive innovation and digitisation among SMEs, including in the Central Asia region. For example, in April the Central Bank of Azerbaijan announced the signing of a Digital Country Partnership with Mastercard. Key activities include initiatives that aim to expand financial inclusion through digital solutions to help more SMEs establish an online presence.

“The pandemic has proven that SMEs need to digitalise in order to weather the crisis and increase their resilience in the longer term. However, the majority of SMEs are under-prepared for the necessary accelerated digital transformation, and governments in the Central Asia region recognise this priority. We are delighted to be partnering with the Ministry of Trade & Integration in Kazakhstan to help SMEs bridge this digital gap and connect them with world-class solutions,” said Süleyman Sözeri, Vice-President for Government Engagements in High Growth European Markets at Mastercard.

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