Private equity in Kazakhstan is still very much in its infancy. But, as many believe it has a key role to play in picking up and developing the country’s ailing economy, the industry is starting to take off with a number of new funds in the pipeline. Vicky Meek reports.

The financial and economic turbulence of the last two years has not been kind to Kazakhstan. Local banks’ heavy reliance on foreign wholesale markets meant they were some of the earliest casualties of the credit crisis. “The banks have had no access to funding since the autumn of 2007,” explains Milena Ivanova-Venturini, director of equity research, banking and finance in Central Asia, at Renaissance Capital. “It was one of the first markets to suffer from the credit crunch as banks found they were unable to refinance their loans and had to start paying back their shortterm liabilities.”

Banks’ inability to refinance in the capital markets was aggravated by the fact that the country’s banks were generally locally owned. While most other banks in regions such as Central Europe had foreign parents that, at the time, could provide funding, Kazakhstan’s, with few exceptions, couldn’t.

The effect on Kazakhstan’s economy was rapid. “As banks started steadily repaying their loans, they began shrinking their loan portfolios,” says Ralph De Haas, senior economist at the European Bank for Reconstruction and Development...

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