Loans and investments in Central Asia viola-funding October 25, 2023

Loans and investments in Central Asia

Loans and investments in Central Asia
Loans and investments in Central Asia: new lending opportunities

Loans and investments in Central Asia and her countries are becoming increasingly available. These long-term capital resources play a critical role in building competitive economies and serve as a powerful driver for local and foreign companies expanding their operations in the region.

Infrastructure projects, the oil and gas sector, mining, energy, agriculture, light industry and the recently emerging innovation sector largely depend on the ability of businesses to attract affordable investment loans and organize effective project finance schemes.

As global economic centers gradually shift towards Asian countries, Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan and Tajikistan are claiming increasingly important roles in the current system of global investment flows, resource hubs and supply chains.

Viola Funding Limited offers loans and investments in Central Asia including financial solutions, investments and organized project finance.

With the help of our high-net-worth angel investors, we are also ready to assist in the development of new projects on the EPC / EPCM basis, engineering services, financial modeling, project management and much more.

At the turn of the century, Central Asia began to emerge from the shadow of world politics and economics.

The essence of investment lending and its features

Investment loans can be provided by commercial banks, international financial institutions, government agencies, investment funds and other sources of capital to stimulate economic growth and development. Investment lending in Central Asia began to develop actively after the collapse of the Soviet Union and the countries of the region gained independence, opening up new opportunities for attracting foreign investment and business development.

An investment loan is a type of business financing provided to companies, organizations or individual entrepreneurs for the purpose of developing investment projects or operations.

The main feature of an investment loan and its difference from other types of financing, such as a working capital loan, is its purpose. Its main characteristics are listed below.

Purpose of investment loan: The main purpose of an investment loan is to finance long-term investment projects and operations that are expected to be profitable in the future.

These projects may include new plant construction, equipment upgrades, asset acquisitions, production expansions, or new product development. The main focus is on value creation and business growth.

Investment nature of financing: It is important to remember that funds obtained through an investment loan should generally be used for specific investment purposes and not for ongoing operations or personal expenses. This provides control and supervision on the part of the lender.

Long-term financing: Investment loans are usually provided for a long-term period, which can be several years or even decades. This allows the borrower to have enough time to implement the investment project and repay the loan from future income.

Security and collateral: Investment loans issued to companies in Central Asian countries, according to local legislation, can be secured by assets that are financed as collateral, which reduces the risk for the lender. In each case, participants need to familiarize themselves with the regulatory features and realities of the local financial sector.

These distinctive features make investment lending more suitable for financing large capital-intensive investment projects and strategic business development, while other types of financing, such as working capital or personal loans, are often used for ongoing operations, the purchase of goods or services, or meeting short-term needs.

Other sources of business financing are compared hereunder:

• Real estate mortgage. If the business owns real estate, a mortgage may be available at a lower interest rate, but the risk is loss of assets if the loan is defaulted.

• Short-term financing. This type of financing can be more flexible and suitable for short-term needs, but usually has higher interest rates.

• Equity. When using equity capital, the business is not required to pay interest and is not exposed to the risk of default, but it can lead to the erosion of ownership and control.

Each type of  business financing, including loans and investments in Central Asia has its own unique characteristics and is suitable for different situations depending on the specific needs of the business and its financial strategy.

To find out more about the financial options available to your company, contact Viola funding.

Loans and investments in central Asia today: new lending opportunities

From an economic point of view, this region is characterized by a wealth of natural resources, including oil, gas, uranium and precious metals. These resources play an important role in the economies of Central Asian countries and make them attractive to foreign investors.

Central Asia is a geographic region with a population of 76 million people and a total GDP of almost $400 billion, comprising five countries: Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan.

From a political point of view, the Central Asian region is a site of important geostrategic interests, as it is located between Russia, China, Iran and Afghanistan. This region is important because of its role in ensuring stability, combating transnational threats, and in the context of competition between leading states for influence and resources in the region.

Hydrocarbons and mineral resources have traditionally been of great investment attractiveness for foreign companies. Two of the five republics, Kazakhstan and Turkmenistan, are largely focused on the production and export of hydrocarbons. On the other hand, Tajikistan and Kyrgyzstan do not have large hydrocarbon reserves and therefore are forced to import fossil fuels. Only Kyrgyzstan has some reserves of thermal coal, but it is not yet able to fully provide its economy with them.

To a large extent, the investment attractiveness of Central Asia is determined by large reserves of non-ferrous and rare earth metals, such as copper, aluminum, silver, tungsten, etc.

Gold mining is actively carried out in Uzbekistan, Kyrgyzstan and Kazakhstan. Uranium reserves are also of great interest to foreign companies. Although there are no operating nuclear power plants in the region, Uzbekistan and Kazakhstan have traditionally been of significant economic and geopolitical importance as suppliers of uranium fuel.

Since independence, the economic structure of the region has undergone significant changes. In particular, many high-tech industries were reduced or completely lost (for example, the aircraft manufacturing industry in Uzbekistan). On the other hand, the countries of the region were able to develop a large number of new industrial projects with the participation of foreign companies, including Ispat (metallurgy), Samsung (various industries), Access Industries (natural resources) and many others.

Many loans and investments in the Central Asian republics are related to logistics projects and transport. In particular, the Chinese New Silk Road project is actively developing and is a direct competitor to the Russian Trans-Siberian Railway.

The development of alternative transport routes will continue in the coming years, which means the transit potential of the region will strengthen.

Brief information about investment lending in Central Asia

Investment funds such as those of the European Investment Bank (EIB) are also active in financing infrastructure and development projects in the region. Many projects in Central Asia are financed through multilateral agreements between countries and international institutions. An example would be the construction of railways or highways, which could be financed by several countries.

There are both local and international banks in the Central Asia region, providing loans and financial support to large business projects. Examples of local banks include Kazkommertsbank and Halyk Bank in Kazakhstan, National Bank of Uzbekistan in Uzbekistan and others.

A wide range of sources of long-term investment financing and lending for large projects are now available in the countries of the region. International organizations such as the Asian Development Bank (ADB), the World Bank and the European Bank for Reconstruction and Development (EBRD) provide financing and support for various projects in the region.

Investment funds such as those of the European Investment Bank (EIB) are also active in financing infrastructure and development projects in the region. Many projects in Central Asia are financed through multilateral agreements between countries and international institutions. An example would be the construction of railways or highways, which could be financed by several countries.

These may also be large specialized financial organizations, such as Samruk-Kazyna Joint Stock Company in Kazakhstan. The latter is an investment holding company whose mission is to improve the national welfare of Kazakhstan and ensure long-term sustainability for future generations.

Loans and investments in Central Asia requires an integrated approach and collaboration with various specialists and organizations to ensure the efficient and safe execution of investment plans.

If you are looking for a reliable partner who is ready to offer a full range of services for modeling, financing and managing an investment project in the region, you can always contact us.

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