Microcredit company “Seif-Lombard” enters the securities market

Growth at any cost is not necessary – Gennady Kim.

Seif-Lombard will list bonds on the Kazakhstan Stock Exchange. Chairman of the Board Gennady Kim spoke about the company’s development history, industry specifics, goals, and plans.

• Why do people turn to pawnshops, and what is their social role?
• The company provides loans secured by jewelry and cars. Our clients are ordinary people: doctors, teachers, blue-collar workers, pensioners, students, and the self-employed. These are people who have a temporary need for cash, say, until payday or to purchase goods. They simply need a short-term loan, and such situations are common. Obtaining a bank loan is often time-consuming and requires tedious collection of documents and certificates; online loans are fast but very expensive. We are available in small towns and villages. Clients don’t have to go far or ask colleagues, neighbors, or relatives for money—our pawnshop is nearby, and we’re always ready to provide affordable microloans that are processed quickly and easily. Over 90% of our clients repay their loans.

There’s a common misconception that pawnshops are unfriendly to borrowers. This isn’t true! In terms of customer focus, pawnshops have long since caught up with, and in some ways, even surpassed, banks and other financial institutions. For example, if a client fails to repay a loan—no big deal, it happens! No debt collectors or lawsuits. We only honor claims based on collateral, which is more of a desire than a vital necessity, like housing. If a client fails to repay a microloan, we don’t create any stress for them; on the contrary, we’re ready and happy to help them again.

We value our clients’ loyalty and always strive to accommodate them. During the COVID-19 lockdown, we comprehensively relaxed payment discipline requirements: in accordance with regulator orders, we granted deferrals on microloans and waived fines and penalties. We even went further – we didn’t charge any interest during this period. We also don’t seek to profit from selling collateral – we don’t have jewelry stores in our branches. We value collateral at market rates, without predatory discounts. Our income comes from microloan interest, with the maximum rate capped by the regulator.

By helping ordinary people, we are available where they need us – and we see this as our social role.

• The international agency Fitch Ratings assigned the company a “B-” rating with a stable outlook, and the Russian agency Expert RA assigned it a “kzBB+” rating with a positive outlook. An excellent result! How did it all begin?
• In 2009, the financial crisis intensified. We operated as a bank, but anticipating difficult times for the industry, we began thinking about a business that would be resilient to financial turbulence. There are collaterals that don’t depreciate in a crisis. We decided to offer loans secured by gold as a non-bank financial institution.

With lending in the regions shrinking, we were precisely in the right place at the right time.

We then expanded our network—first geographically, then digitally: we connected to banking systems, developed a mobile app and a Telegram bot, and implemented the extension of pawn tickets on the website.

• Seif-Lombard has been officially listed on the Kazakhstan Stock Exchange. What makes you attractive as an issuer?
• High ratings for the industry, a stable financial position, significant capital adequacy, and a long-standing profitability record.

The company’s organizational structure was recently brought into line with international standards: a supervisory board, management board, internal audit, and risk management have been introduced; Independent directors have been appointed to the supervisory board.

• Why now?
• Previously, we were legally prohibited from listing on the stock exchange. The Law on Microfinance Activities opened this opportunity. Licensing activities, the introduction of regulations, and strict reporting have purged the market of unreliable players. Systematic government oversight of the microfinance industry has significantly increased market participants’ confidence in it.

The company is ready for the next step. Expanding sales channels and expanding product range require funding. The company’s low debt burden allows it to comfortably attract and service the necessary funds.

The bond placement is planned for early November through the underwriters ORDA Capital and BCC Invest. As debutants, we are currently offering a very attractive yield to maturity of approximately 16% per annum. Compare this to the average bank deposit rate, which is currently around 8.5% per annum. Going forward, the bond rate will decline to the coupon yield (14% per annum). An individual or legal entity can contact our underwriters and purchase Seif-Lombard securities.

• What are your future plans?
• We have 119 branches, 10 subsidiaries in 31 towns and villages. That’s not a lot. We will move forward gradually, based on our capabilities. Growth at any cost is not necessary. We are proponents of smart finance!

This year, we opened subsidiaries in Uzbekistan, Russia, and the AIFC. The Uzbek market is attractive for its microcredit opportunities, and we are launching online car-secured lending at the AIFC. Through our Russian subsidiary, we will enter the Russian debt market.

We are negotiating with European funds to open credit lines.

By the end of the year, we will merge our sister company, Altyn Bastau. As a result of the merger, the ownership structure will remain unchanged, with equity capital exceeding 12 billion tenge and assets exceeding 15 billion tenge.

We are building on our success story and increasing the company’s value for clients and investors.