[Financial Overseas Expansion] ① "Kyrgyzstan, a Financial Blue Ocean... High Growth Potential"

[Interview] Shin Dong-chul, Head of BNK Capital Kyrgyzstan Branch

"Kyrgyzstan can be considered a blue ocean in terms of finance. As a developing country with a GDP per capita of around $1,300, there is a very high demand for loans. It’s like Korea during its high-growth period. Loan demand is significantly increasing for everything from agricultural management costs and wedding and funeral expenses to purchasing sewing machines for home-based industries."

Shin Dong-cheol, head of BNK Capital's Kyrgyzstan branch, stated in a video interview with Asia Economy on the 1st regarding overseas expansion of financial companies, "The South Korean market is already saturated, so I believe the role of financial companies should be to pioneer blue oceans instead of red oceans," expressing this view.

Previously, BNK Capital selected Kyrgyzstan as its second Central Asian base following Kazakhstan and began local operations at the end of last year. It is the fifth overseas market overall (three countries in Southeast Asia, two in Central Asia). In May, the company held a corporate opening ceremony attended by Kim So-young, Vice Chairman of the Financial Services Commission, and began full-scale activities.

Kyrgyzstan, where BNK Capital took its first step, has a population of 7 million and a GDP of $9 billion. Compared to Southeast Asian countries where financial companies are rushing to enter or neighboring Central Asian countries such as Uzbekistan and Turkmenistan, the overall market is relatively small. The level of industrialization is also low, with primary industries mainly centered on agriculture and mining.

Shin cited "growth potential" as the reason for entering Kyrgyzstan despite these handicaps. The population is rapidly increasing, with a birth rate reaching 3.0 as of 2022, and although it is an Islamic cultural sphere, it is relatively secular, offering limitless economic growth possibilities.

He said, "Living in Bishkek (the capital), I saw that households typically have 4 to 5 children, indicating explosive population growth. It is only a matter of time before the total population exceeds 10 million," adding, "As these people grow up, they will eventually need to use financial services, so from a long-term perspective, I judged there is considerable growth potential."

Kyrgyzstan’s active attraction of foreign investment and relatively lower regulatory barriers compared to Southeast Asian countries were also factors. Shin said, "Because the Kyrgyz government is proactive in attracting foreign capital (in dollars), it is also active in attracting foreign financial companies," adding, "The regulatory level in Central Asia is lower than in Thailand, Vietnam, and Indonesia, which helps with market entry."

With economic growth underway, interest rates are also relatively high. He explained, "The average loan interest rate we (BNK Finance) handle is 28-29%, while the market average loan interest rate reaches 33-34%," and added, "The business environment being better than Korea was also one reason for entry."

Currently, BNK Capital operates in Kyrgyzstan with only a retail license. He said, "Since corporate development is still insufficient in Kyrgyzstan, there is no corporate credit rating (CB) system, but personal CB is relatively well established, so risk management is well maintained," and added, "Because light industry is underdeveloped, there is high demand for sewing machines for handicrafts and funds to purchase taxis to supplement inadequate public transportation."

BNK Capital aims to become a leading capital company in Bishkek, the capital. Although Kyrgyzstan’s population is about 7 million, Bishkek’s population is around 1 million, similar to major cities in countries where BNK Capital has already entered.

Shin said, "Among 85 local capital companies, the top 1 or 2 companies dominate 80% of the market, with the rest sharing 20%. We plan to become number one in Bishkek first and then consider expanding our business network."

As a personal opinion, Shin named Eastern Europe and Mediterranean coastal countries as the next expansion targets after Southeast Asia and Central Asia. He said, "Advanced markets like the U.S. and Europe offer no practical benefits for entry in terms of interest rates," and added, "Eastern European countries such as Poland and Ukraine, as well as Mediterranean countries like Morocco and Egypt, could also be blue oceans."