Transformation of the Microfinance Sector: Why the Old IT Model Is No Longer Enough

Kazakhstan's microfinance market is undergoing a phase of consolidation and structural growth. Regulatory control is intensifying, maximum interest rates are being reduced, the debt burden ratio is being tightened, and supervision is extending even to instalment plans. At the same time, the microfinance sector has received a regulatory roadmap for transforming into a bank, as well as opportunities to become more significant players in the financial market, including through access to Islamic banking.

In a situation where the market is both limiting and expanding opportunities, a microfinance organization cannot simply wait for the situation to settle. It needs to adapt effectively and move to a new level of business development.

The regulator increasingly views the microfinance sector not only as a source of consumer loans, but also as a financing channel for small businesses, individual entrepreneurs and microenterprises. This is an important shift. The further an MFO moves into the SME segment, the closer it comes to a banking model of operations.

The market has already shown that this transition is possible. In 2025, the microfinance organizations KMF and BNK Finance completed their transformation into banks. Today, MFO transformation is no longer only a matter of ambition or business scale. It is a matter of technological readiness for the next stage of sector development.

Each organization will need to choose between two scenarios. The first is to remain within a narrow microcredit model, gradually adapting to interest-rate limits, debt burden requirements, supervision and transparency standards. The second is to grow into a financial organization of a new level, with business products, a sustainable risk model, full accounting, regulatory reporting and a bank-grade technology platform.

Colvir Microfinance Core: A Technology Foundation for the Next Stage of MFO Development

Organizations increasingly work not only with short-term consumer loans, but also with auto lending, partner schemes, financing for entrepreneurs and small businesses. Payment schedules are becoming more complex; collateral, restructurings, multi-level approvals, and requirements for risk management, reporting and operational transparency are becoming part of daily work. In this logic, the IT system is no longer a support function. It becomes one of the factors that determine whether an MFO can move to the next level.

The most forward-looking market players have started to consider bank-grade solutions, because the development trajectory of the sector is increasingly approaching the management logic of banks.

Colvir's solution for MFOs - the Microfinance Core platform - is built on this logic and adapted to the needs of the microfinance business. This approach allows an organization to start with a lighter-weight operational contour, while avoiding the limitations of a basic accounting system.

At the core of the solution is an architecture already used by banks and financial institutions across the region. This provides access to a more mature automation model, with full accounting, product configuration, business process management, access-rights management, integrations, reporting and further scalability.

In practical terms, this means support for the full loan lifecycle: from client onboarding and contract execution to disbursement, servicing, accruals, payments, overdue debt, default, reserves and contract closure. Product flexibility is another important layer. Modern financial companies need to change product conditions quickly, launch new financing schemes and adapt to market requirements. Colvir supports the configuration of schedules, interest rates, tariffs, operations, accounting models, reports and business processes.

The integration environment is equally important: connections with credit bureaus, payment systems, CRM platforms, scoring services, marketplaces, dealer networks, banks and government services. As a result, the ability of the platform to fit into a complex digital landscape becomes no less important than the functionality inside the system itself.

Stanislav Malinin

Head of Presales, Colvir Software Solutions

"At a high level, Colvir Microfinance Core should be viewed not as a standalone solution, but as an intermediate link between the microfinance model and a more mature financial organization. Its purpose is to enable growth without a sudden change of technology foundation: first, to cover current operational needs; then to expand the product line, strengthen control, automate reporting and, where required, move towards a banking level."

Two Cases, Two Paths

How Kazakhstani MFOs transformed with Colvir

Transformation is not a linear process. It depends on the scale of the business, its strategy and the maturity of the organization. As a result, different development scenarios are emerging in the market - from an accelerated transition into the banking sector to a gradual digital evolution within the current model.

The following two cases reflect these scenarios.

Case 1: KMF to KMF Bank

The first full-scale transformation of an MFO into a bank in Europe and Central Asia

About the company: KMF is Kazakhstan's largest MFO by assets and loan portfolio. It has been operating since 1997. Over 28 years, the company has built an impeccable reputation, serving 1.3 million clients, covering 4,000 communities, and operating 123 points of sale and 17 branches. Its main focus is supporting entrepreneurship, including women-led businesses. In July 2025, Fitch assigned KMF a B+ rating with a Stable Outlook.

Project implementation scale:

• Implementation preparation began in 2023; the active phase lasted throughout 2024

• The bank's first operating day was 4 August 2025

• Project team: 1 product owner, 1 project manager, 1 IT delivery manager, 18 IT experts (analysts, developers and testers), and 43 business experts

Role of the Colvir platform: The Colvir core banking system became the technology core of KMF Bank's new banking IT landscape and enabled the transition from an MFO model to a full-scale banking architecture.

Based on Colvir, a single integration environment was built, bringing together front-, middle- and back-office processes, digital channels, the credit conveyor, accounting, payment infrastructure, risk management systems, the data warehouse and regulatory reporting.

The system enabled:

• centralized automation of banking processes

• flexible configuration of business processes and approval routes

• strict segregation of access rights

• compliance with the requirements of Kazakhstan's regulator

• centralized accounting

• support for credit risk management and provisioning calculations

• a unified environment for data storage and processing

• a scalable architecture for the further development of a digital bank

The project included large-scale integration of internal and external services, ensuring continuous data exchange between the MFO's legacy infrastructure and the new banking environment.

Results:

• The full transformation was completed in less than one year

• System availability during the first three months of banking operations: 96.7%

• A stable client portfolio with zero customer outflow during the transition

• Record growth of the loan portfolio in September 2025, one month after obtaining the banking licence - the highest in the company's history since 1997

One of the most complex stages of the project was the full migration of data and the operational contour from the MFO infrastructure to the new banking platform.

As part of the cutover, client data, the loan portfolio, accounting balances, historical transactions, product settings and operational processes were migrated.

The migration was carried out within a minimal maintenance window, and the full transition was completed in 36 hours without data loss, loss of client history or interruption of critical business processes.

Shalkar Zhussupov

Chairman of the Management Board, KMF Bank

"When our work first began, we were already thinking that one day we would transform into a bank. And 90% of the success of the transformation depended on the IT division. During the active implementation phase, a 20-person Colvir team worked on the client side almost around the clock. The project involved specialists from different countries who were on site at KMF and provided continuous support for the transformation at every stage of the bank launch."

Case 2: MyCar Finance

Niche strategy as a competitive advantage

About the company: MyCar Finance is the leader in Kazakhstan's auto lending market and part of the Astana Motors group of companies. Its network includes more than 130 partner, dealer and auto centres.

Company challenges:

• growth in the volume of operations and the client base

• increasing complexity of business processes

• tighter regulatory requirements

• stronger market competition

• cost optimization and efficiency improvement

• risk management

• the need to respond quickly to changes in legislation and market conditions

• the ability to develop the system independently without constant requests to the vendor

Implementation specifics:

• Launch of the Colvir core banking system in October 2024

• Installation within a unified infrastructure with 1C

• Data exchange with the servicing bank implemented

• Savings on Oracle licences

• Smooth transition to production operation with a minimal number of errors

Dionis Metaksa, Account Manager:

"The decision to choose our core banking system, which is used by more than 30 banks worldwide, was an important and responsible milestone for Colvir. MyCar Finance has already established itself as a stable, profitable and long-term player in Kazakhstan's financial market, and we are proud to have become part of this project."

Every MFO Chooses Its Own Horizon

MFO transformation cannot be reduced to a single scenario, but it does follow a common pattern: the microfinance market is gradually moving beyond the era of simple solutions. Regulatory requirements, risk management, complex products, integrations and reporting are becoming part of the daily operational workload.

Choosing a platform is therefore a decision about the level of complexity an organization is ready to handle tomorrow. For some, that horizon ends with stable operations within their own niche. For others, it leads to banking transformation. In both cases, the technology foundation is increasingly becoming the factor that opens the path forward.