Introduction of Entrepreneurship Development Fund for Startups and Small and Medium-sized Enterprises: Case of Kazakhstan

This chapter addresses the efficiency of financing mechanisms and tools of the state implemented in Kazakhstan through the national small and medium-sized enterprise (SME) development institute Entrepreneurship Development Fund (hereafter Damu). This study considers the data on Damu financing provided to SMEs during 2005–2019 and the relationship of this financing to the overall contribution of SMEs to the GDP of the country during this period. This chapter analyzes whether Damu’s activities promoted the economic development of the country and whether Damu is overall financially efficient as an organization, how Damu has promoted startup businesses, and the factors by which microfinancing affects economic development in Kazakhstan. The results indicate that Damu has been successful, as shown by the number of SMEs financed and the number of jobs created, to reduce regional disparity in financing SMEs. The results also show that many small firms cannot grow into medium-sized enterprises in a competitive market, even with government support. Public financial institutions are recommended to help SMEs improve their management quality and to reduce information asymmetry between loan providers and clients so SMEs can grow with a long-term strategy in a competitive market.