Regulation on Minimum Requirements for Credit Risk Management in Microfinance Organizations Not Attracting Deposits

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Creation date: 2026-05-01

Approved

by the Resolution of the Board of the National Bank of the Kyrgyz Republic

of September 25, 2013

No. 35/14

REGULATION

on minimum requirements for credit risk management in microfinance organizations not attracting deposits (deposits)

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of November 27, 2013 No. 45/16, March 11, 2015 No. 16/2, April 15, 2015 No. 22/7, July 15, 2015 No. 38/3, February 10, 2016 No. 7/2, February 10, 2016 No. 7/3, August 24, 2016 No. 35/4, September 28, 2016 No. 40/6, May 31, 2017 No. 21/9, January 30, 2019 No. 2019-P-33/4-2, August 21, 2019 No. 2019-P-33/43-8, March 11, 2020 No. 2020-P-33/10-1, July 8, 2020 No. 2020-P-33/39-3, October 5, 2022 No. 2022-P-33/61-3, December 21, 2022 No. 2022-P-12/81-7, June 14, 2023 No. 2023-P-12/38-4, August 30, 2023 No. 2023-P-12/55-1, December 8, 2023 No. 2023-P-12/76-1, August 14, 2024 No. 2024-P-12/36-1, October 16, 2024 No. 2024-P-12/53-2-(NFU), October 31, 2024 No. 2024-P-12/58-2-(NPA), November 27, 2024 No. 2024-P-12/63-1-(NPA), January 22, 2025 No. 2025-P-12/2-3-(NFU), March 12, 2025 No. 2025-P-12/10-2-(NPA), June 18, 2025 No. 2025-P-12/28-1-(NPA), September 12, 2025 No. 2025-P-12/46-1-(NPA), October 23, 2025 No. 2025-P-12/55-3-(NPA), October 23, 2025 No. 2025-P-12/55-4-(NPA), December 19, 2025 No. 2025-P-12/68-2-(NPA), April 23, 2026

No. 2026-P-12/25-2-(NPA))

1. General Provisions

2. This Regulation applies to microfinance companies not attracting deposits (deposits), microcredit companies, and microcredit agencies, including those conducting operations based on Islamic principles of banking and financing and having an "Islamic window," taking into account special terminology (hereinafter - MFO).

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of May 31, 2017 No. 21/9)

2. The purpose of this Regulation is to define the minimum requirements for the organization of the credit risk management system arising from all transactions and operations, including the credit contract and contracts based on Islamic principles of banking and financing for Islamic MFOs, the procedure for their conclusion, and the formation of an adequate credit risk management system in the MFO.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 15, 2015 No. 38/3)

3. The MFO must conduct its activities in accordance with the laws of the Kyrgyz Republic "On Microfinance Organizations in the Kyrgyz Republic," "On Banks and Banking Activity," and other legislation of the Kyrgyz Republic, as well as the Charter of the MFO, based on a license/certificate of the National Bank of the Kyrgyz Republic (hereinafter - National Bank).

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 21, 2022 No. 2022-P-12/81-7)

4. Microcredit operations are carried out within the limits established by the legislation of the Kyrgyz Republic, on terms agreed upon with the borrower, using own and borrowed funds attracted from legal entities, founders (shareholders), financial and credit organizations, and/or international financial organizations.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of August 15, 2018 No. 2018-P-33/33-8)

5. For the purposes of this Regulation, the following main concepts are applied:

• Payment Schedule - a mandatory appendix to the credit contract defining the deadlines and amounts for the repayment of the microcredit and payment of interest;

• Group of Joint Liability (hereinafter - GJL) - a voluntary association of individual participants (at least 3 people) who jointly guarantee the fulfillment of obligations of each group member and bear responsibility for the full repayment of the received credit funds jointly, under any circumstances, in accordance with the legislation of the Kyrgyz Republic;

• Group loans - loans to GJL under joint liability of GJL members;

• Borrower - an individual or legal entity, GJL, that has received a loan from the MFO for specific purposes on the conditions of cost, term, and repayment;

• Client - an individual or legal entity, GJL, that has applied for services or is using the services of the MFO;

• Conflict of interest - a situation where the personal interest of an MFO employee may affect the decision-making process on granting a loan, thereby harming the interests of the MFO;

• Credit risk - the risk of borrowers failing to fulfill their obligations to return MFO assets in accordance with the deadlines and terms of the contract;

• Microcredit / microfinancing based on Islamic principles of banking and financing (hereinafter - loan) - funds provided to an individual, GJL, or legal entity in accordance with the MFO Charter and Article 2 of the Law of the Kyrgyz Republic "On Microfinance Organizations in the Kyrgyz Republic." The loan amount cannot exceed the maximum permissible size established by the National Bank. Also, for the purposes of this Regulation, loans are understood as assets and off-balance sheet obligations carrying credit risk;

• Supervisory body - the MFO management body exercising general management of the MFO (Board of Directors/Supervisory Board or other authorized person in accordance with the MFO's founding documents);

• Executive body - the MFO management body exercising collegial or sole current management of the MFO (Board/Chairman/Director/Manager or other authorized person in accordance with the MFO's founding documents);

• Total cost of consumer credit

– the total size of all borrower's expenses under the contract related to obtaining and servicing the consumer credit, including interest (markup), commissions, and other mandatory payments, as well as the increase in the cost of goods (works, services) due to the provision of the consumer credit;

• Consumer credit – a loan or financing based on Islamic principles provided by the MFO on the conditions of term, repayment, and cost, including for the purpose of paying for goods, works, or services with subsequent payment by the borrower in installments (deferred payment) within the framework of a consumer credit contract. Consumer credit is provided to individuals for personal, family, or household purposes not related to entrepreneurial activity and profit generation. For the purposes of this Regulation, consumer credits do not include loans and installments related to the acquisition, construction, or completion of residential real estate secured by real estate. Consumer credits may be provided without charging interest (markup) by agreement of the parties;

• Problematic loans - loans for which the borrower does not fulfill the terms of the contract with the MFO, or due to certain circumstances (for example, the occurrence of force majeure circumstances or financial difficulties), the fulfillment of obligations to the MFO and loan repayment are threatened;

• Force majeure circumstances - circumstances including, but not limited to, such events as natural disasters (floods, earthquakes, fires, and other natural or man-made catastrophes), epidemics, introduction of a state of emergency, mass riots, looting, military actions, etc.;

• Cooling-off period - this is a period of time after signing the credit contract, during which the MFO does not transfer funds to the borrower. During this period, the borrower has the right to refuse to receive the loan.

• Women's entrepreneurship - entrepreneurial activity in accordance with the legislation of the Kyrgyz Republic.

Self-prohibition on concluding a credit transaction (hereinafter - self-prohibition) - an independent declaration of will by an individual to establish a prohibition on concluding a credit contract or another contract providing for the provision of monetary funds and/or other property on loan (hereinafter - credit contract) by a financial and credit organization in accordance with the requirements of the Law of the Kyrgyz Republic "On the Exchange of Credit Information".

Establishing a self-prohibition, as well as lifting a self-prohibition, is carried out by an individual free of charge, independently, via the state portal of electronic services of the Kyrgyz Republic or by another method determined by the National Bank. The established self-prohibition does not have retroactive effect with respect to credit contracts concluded with credit organizations before the establishment of this self-prohibition. Information about the self-prohibition on concluding credit contracts is sent to credit bureaus at the choice of the individual establishing the self-prohibition. MFOs ensure inter-system integration with existing credit bureaus for the purpose of obtaining information about the self-prohibition (lifting of prohibition) on concluding credit contracts.

The procedure for determining the deadlines for the start, duration, and expiration of the self-prohibition, the form of establishment, and requirements for the self-prohibition (lifting of prohibition) are regulated by the Rules for regulating the activities of credit bureaus in the territory of the Kyrgyz Republic, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of September 28, 2016 No. 40/5.

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of July 15, 2015 No. 38/3, November 27, 2024 No. 2024-P-12/63-1-(NPA), June 18, 2025 No. 2025-P-12/28-1-(NPA), October 23, 2025 No. 2025-P-12/55-3-(NPA), April 23, 2026 No. 2026-P-12/25-2-(NPA))

5-1. (Lost force in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 21, 2022 No. 2022-P-12/81-7)

5-1. Terms and definitions used in the part on Islamic principles of banking and financing correspond to the terms and definitions provided in the legislation of the Kyrgyz Republic and normative legal acts of the National Bank regulating the activities of MFOs conducting their activities based on Islamic principles of banking and financing.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of May 31, 2017 No. 21/9)

5-2. For the purposes of this Regulation:

• the term "loan" also means financing provided based on Islamic principles of banking and financing;

• the term "credit contract" also means a financing contract provided based on Islamic principles of banking and financing;

• the term "interest rate" also means the markup on financing provided based on Islamic principles of banking and financing.

Markup – the yield rate on contracts in accordance with Islamic principles of banking and financing, brought to a nominal annual percentage value, as well as the increase in the borrower's obligation amount compared to the price (cost) of the goods, work, or service upon full one-time payment.

For the purposes of this Regulation, in a contract based on Islamic principles of banking and financing, the markup must be indicated in absolute value with additional disclosure of the nominal annual percentage value for operations for which a repayment schedule or income accrual schedule is compiled.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of April 23, 2026 No. 2026-P-12/25-2-(NPA))

2. Basic Requirements for the Organization of Credit Risk Management

3. The realization of the main goal of the MFO - providing accessible services to the population, assisting in overcoming poverty, increasing employment levels, promoting the development of entrepreneurship and social mobilization of the population of the Kyrgyz Republic - is possible through the issuance of microcredits:

• for creating initial businesses for low-income groups, women, residents of remote and hard-to-reach areas;
• for supporting and developing existing businesses;
• for consumer and other purposes not contrary to legislation.

7. The MFO is obliged to develop appropriate internal regulatory documents (policies and procedures), which are subject to approval by the corresponding MFO management bodies (Supervisory body or Executive body depending on the status of the document). These documents must provide for the following:

• disclosure of measures for implementing the activity goals defined by the MFO Charter and the Law of the Kyrgyz Republic "On Microfinance Organizations in the Kyrgyz Republic," for the execution of which the Supervisory and Executive bodies of the MFO are responsible;

• all conditions and main requirements for credit operations concerning the consideration of applications, issuance of loans, conclusion of credit contracts, and maintenance of relevant documentation on them, as well as the identification, measurement, monitoring, and control of credit risk. At the same time, a detailed description of each credit product must be reflected in the corresponding internal regulatory documents of the MFO.

8. Internal regulatory documents of the MFO must comply with the requirements set forth in this Regulation, other normative legal acts of the National Bank, and the laws of the Kyrgyz Republic.

9. MFOs conduct microcredit on the conditions of cost, term, and repayment.

10. MFOs conduct their activities on the principles of good faith, transparency, and accuracy towards clients, taking into account their economic interests and opportunities and in compliance with the requirements of the legislation of the Kyrgyz Republic on commercial and banking secrecy.

10-1. MFOs have the right to issue loans through remote/distant service channels provided that the requirements specified in the Regulation "On Minimum Requirements for Providing Remote/Distant Services in the Kyrgyz Republic," approved by the Resolution of the Board of the National Bank of April 15, 2015 No. 22/3, other normative legal acts of the National Bank, and in accordance with the internal policies and procedures of the MFO are observed.

The amounts of loans issued through remote/distant service channels must not exceed 15,000 somoni (equivalent in foreign currency - for microfinance companies) for contracts signed with a simple electronic signature, and 150,000 somoni (equivalent in foreign currency - for microfinance companies) - for contracts signed with an enhanced unqualified electronic signature.

For loans issued through remote/distant service channels by signing a credit contract with an electronic signature, the following minimum cooling-off period is established, during which the MFO cannot transfer monetary funds to the borrower:

• for loans from 50,001 somoni to 100,000 somoni - 4 hours;
• for loans from 100,001 somoni - 12 hours.

At the same time, the MFO must additionally conduct a control call procedure during the above-mentioned cooling-off period for loans from 100,001 somoni for the purpose of obtaining client confirmation on the processing of a loan issued through a remote/distant service channel.

The cooling-off period does not apply to loans issued through remote/distant service channels if the monetary funds for such loans are transferred directly to the seller/supplier, excluding the direct issuance of monetary funds to the borrower (installment plan for the purchase of goods or services, etc.). At the same time, the MFO must have established contractual partnership relations with the seller/supplier, being a legal entity or individual entrepreneur, in the manner established by legislation.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of March 12, 2025 No. 2025-P-12/10-2-(NPA))

3. Credit Policy

4. The credit activities of the MFO are carried out based on a credit policy approved by the corresponding MFO body.

11-1. The corresponding MFO body is obliged to review the credit policy for its adequacy, limit systems, tools, and procedures for credit risk management, and the internal audit system for credit risk management. The corresponding MFO body is also obliged to review the credit policy as necessary in the event of changes in the MFO's risk profile, normative legal acts of the National Bank, organizational structure, and staff composition of the MFO, as well as in other circumstances affecting the lending process, but no less than once a year.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of March 11, 2020 No. 2020-P-33/10-1)

12. The credit policy defines the strategy, criteria, and parameters that MFO employees must follow in activities related to the provision, documentation, monitoring, classification of loans, and credit risk management.

The MFO must ensure possible periodic training of MFO employees on lending and monitoring, issues of analysis and assessment of the borrower's solvency, taking into account the methodology for assessing borrower solvency implemented in the MFO, work with problematic loans, as well as on other lending issues, including communication with clients, and on other requirements of the legislation of the Kyrgyz Republic and principles of responsible lending.

An internal document must be approved in the MFO defining the methodology for conducting analysis and assessment of the borrower's and guarantor's solvency depending on the size and type of loan, client's activity, and income. The document must contain exhaustive norms allowing for the assessment of the financial condition of the borrower and/or guarantor, their ability to fulfill obligations taking into account all information available to the MFO. In this internal document, for loans exceeding 100,000 somoni, a list of documents confirming information about the borrower's and/or guarantor's income/solvency must be specified, while documents confirming information about the borrower's and/or guarantor's income/solvency must be reliable and sufficient for the MFO to make a decision on lending to the borrower. For loans up to 100,000 somoni, the MFO's internal documents must contain information on the basis of which the borrower's and/or guarantor's solvency is determined and a decision on issuing a loan is made.

Furthermore, this internal document must define requirements for the form and completion of the report on the verification of the targeted use of the loan. The report must be prepared within 1 (one) month from the date of loan issuance and contain confirming information on the use of funds. At the same time, the list of confirming documents is determined in this internal document, and the documents themselves confirming information on the targeted use of the borrower's loan must be reliable and sufficient.

Preparation of a report on the verification of the targeted use of the loan is not required for a loan of no more than 100,000 somoni, as well as for consumer credit and financing for consumer purposes based on Islamic principles of banking and financing, provided by transferring funds from the MFO's current account to the current account of the seller/store registered as a taxpayer.

MFOs, taking into account the risks on the loan, may not conduct an analysis of the guarantor's or surety's solvency if the surety is additional security for the loan.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 16, 2024 No. 2024-P-12/53-2-(NFU))

13. The credit policy of the MFO must reflect all main provisions concerning the issuance, monitoring, and repayment of loans, including:

1. general provisions, including:

• composition of potential borrowers;

• types of loans depending on the purpose of lending and other conditions, including loans aimed at the development of women's entrepreneurship. At the same time, standard credit products and contracts to them must be unified;

• procedure for determining the solvency of potential borrowers, including the procedure for calculating the debt burden indicator for consumer credits in accordance with the requirements of this Regulation;

• lending terms, including taking into account seasonality, business cyclicality;

• procedure for determining the solvency of potential borrowers;

• procedure for forming interest rates (nominal/effective);

• type of currency;

• structure of the credit portfolio (by industries, currencies, and other criteria);

• potential risks inherent to a particular type of loan and methods/ways to reduce them;

• prohibition on issuing indexed loans;

2. procedure for loan documentation, including:

• procedure for issuing and approving loans;

• procedure for evaluating collateral;

• procedure for controlling the correct documentation of loans, including the preparation of a repayment schedule;

• forms of documents;

• procedure for working with current and problematic loans;

3. requirements for loan management, including:

• requirements for forming and maintaining an adequate credit file of the borrower;

• requirements for conducting loan monitoring and fulfillment of credit contract terms in accordance with the MFO's internal procedures;

• conditions for prolongation, restructuring of loans, as well as renewal of loans, in case of repayment of overdue debt on them;

• definition of the loan classification system and establishment of values for contributions to the formation of the reserve for covering potential losses and damages (RPPU), without violating the values of contributions to the formation of RPPU established in the Regulation "On Classification of Assets and Formation of Reserves for Covering Potential Losses and Damages by Non-Bank Financial and Credit Organizations," approved by the Resolution of the Board of the National Bank of December 28, 2020 No. 2020-P-33/75-4-(NFU), as well as in the Procedure for applying special classification of loans meeting certain criteria, approved by the Resolution of the Board of the National Bank of March 2, 2006 No. 5/6;

• procedure for working on the recovery of overdue and unpaid debt on loans.

Borrowers must be informed, if necessary, about the MFO's procedure for working with "problematic" loans, including the possibility of loan restructuring.

When working with "problematic loans," conducting meetings and conversations, MFO employees must strictly adhere to the accepted business and professional etiquette of behavior.

4. distribution/separation of duties and powers of MFO employees in the lending process:

• on empowering the right to issue loans depending on the type of loan and its size;

• on administering (monitoring) current loans;

• on the recovery of debts from problematic borrowers;

5. MFOs, for the purpose of organizing work on risk assessment at the conclusion, modification, and monitoring of the execution of credit transactions, are obliged to conclude contracts for the exchange of credit information with existing credit bureaus, as well as in accordance with concluded contracts, provide them with the credit information available in the MFO.

The MFO provides credit information to credit bureaus with the consent of the client, except in cases where negative credit information is provided. At the same time, information about the non-fulfillment of contractual obligations (overdue debt) for more than ninety calendar days and/or other mandatory payments due to an emergency situation and/or a state of emergency is not included in negative credit information provided that the client submits an application indicating circumstances related to the introduction of an emergency situation and/or a state of emergency that affected the proper fulfillment of obligations.

In the event that overdue debt arose as a result of an emergency situation and/or a state of emergency, when transmitting information about overdue loans to credit bureaus, the MFO must indicate information that delays in loan payments are related to the introduction of an emergency situation and/or a state of emergency.

Credit information must be reliable and up-to-date, based on factual data and in accordance with the terms of the contract concluded between the MFO and the client.

The credit policy/internal documents of the MFO on managing credit activities must contain the procedure and requirements regarding the organization of work on the exchange of credit information:

• on ensuring the storage and protection of credit information from unauthorized access, destruction, alteration, use, or disclosure;

• on the prohibition of disclosure of information by the MFO and its employees who gained access to information in the process of exchanging credit inf