The National Bank of the Kyrgyz Republic expressed interest in working with the Organisation for Economic Co‑operation and Development (OECD) on an analysis of household savings and investment behaviour. Ultimately, it wanted this analysis to help the Kyrgyz banking sector embed climate change into financial decisions and macroeconomic analysis. The bank monitors several indicators of financial sector breadth such as branch, automated teller machines and deposit penetration. Savings behaviour and the particular demands of the Kyrgyz population for financial products and services, however, are still little understood.

The government of the Kyrgyz Republic (Kyrgyzstan) needs structural reforms to strengthen macroeconomic performance, reduce poverty and address challenges posed by human-made climate change. In recognition of these challenges, the government has set out the National Sustainable Development Strategy towards 2040. In addition, it has launched the Green Economy Program 2019-2023, which guides its transition towards an economy that is green and inclusive. Managing the COVID‑19 pandemic and its consequences presents the opportunity to accelerate this transition and embed principles to implement it into short and medium-term economic planning.

This chapter outlines the background to the OECD’s study and the household survey. It describes how the National Bank of the Kyrgyz Republic expressed interest in working with the OECD to source new evidence on the extent to which households access and use (green) financial products and services. It describes how the Kyrgyz National Sustainable Development Strategy for 2018-2040 and the Green Economy Program contain targets on sustainable finance. Finally, the chapter presents the socio-economic context of the Kyrgyz Republic, and outlines how the banking sector could help the country achieve its sustainable development goals.

This chapter describes the challenges facing the Kyrgyz banking system. It then briefly explains why financial access and use of formal financial instruments are important for economic development. It suggests ways to increase financial access in the Kyrgyz Republic. Several instruments are proposed to improve financial literacy; to provide affordable, targeted financial products by lowering credit risk, alleviating collateral constraints and pooling demand; to increase trust in financial institutions; and to improve access to physical banking infrastructure. Some of these instruments already exist in the country and could be scaled up. Others have worked in countries from the region and beyond, and could be adopted.

This chapter briefly describes the motivation for the household survey, noting the demand among the Kyrgyz population for financial products and services is poorly understood. It suggests better understanding can help commercial banks, as well as policy makers and central bankers, to design more targeted interventions. The chapter outlines methodology and content of the 2019 survey of 1 000 households on their access to and use of (green) financial products and services in the Kyrgyz Republic. It notes the survey helps fill a gap in evidence on access to and demand for green financial products and services in the Kyrgyz Republic, and supports developing solutions to promote green finance-related activities.

This chapter presents the results of the household survey. The survey covers experience with green financial instruments, access to and use of formal banking services, including credit and use of mobile banking. It also provides insights on differences in financial behaviour and experience by region, level of education and gender. The key findings shed light on the experience of households with formal financial instruments, including green instruments. It examines perceptions of respondents around barriers for taking out a green loan, including the role of high interest rates, short lending terms, insufficient collateral and inconvenient repayment schedules. It also explores other barriers such as awareness, knowledge and understanding of green investment.

This chapter suggests interventions that can help improve access to and use of green financial products and services in the Kyrgyz Republic. Policy can play a role in making green investments more attractive. The central bank can consider mandatory requirements for financial institutions to improve their environmental governance, such as adequate pricing and disclosure of climate risks. Several other interventions are outlined, such as subsidies for climate and disaster risk insurance and information on green financial instruments within Kyrgyz financial literacy strategies. The chapter also presents options to provide long-term risk capital and alleviate collateral constraints through scaling up credit guarantees. This would especially help those household members that are individual entrepreneurs.