Kazakhstan: ecosystem development
Timur Turlov’s philosophy that the future lies in ecosystems, not individual companies, was the driving force in Freedom’s transformation into a large-scale holding company. Today it is not just a financial holding company, but a digital universe where technologies and financial services are connected into a single network. The company’s goal is to reduce costs and save time by creating conditions under which the customer can receive any service. It is not surprising that Freedom Holding has become a leader in various segments of the financial market and has grown successfully, building bridges between countries and continents.
It is highly likely that the company will surpass the $1 billion revenue mark by the end of fiscal 2024. In the first and second quarters of this financial year (from April to September 2023) the holding has already earned $751.8 million (2.1 times increase compared to the same period in the previous year).
The regional segment of Central Asia, including Kazakhstan, where the holding’s main business center and headquarters are located, brought revenue in the amount of $ 387.2 million in the reporting quarter. Since 2012, Freedom has built a whole ecosystem in the republic. Brokerage and banking businesses, insurance companies, lifestyle segment, telecom. The company is also actively investing. social and environmental initiatives (chess federation, support for youth football, etc.), taking full responsibility of the business world in the development of Kazakhstan’s economy.
Sunflower seed ecosystems It became Freedom Bank in Kazakhstan in the second quarter of Fiscal Year 2024. It brought in $167 million in revenue. The company is gradually transforming from an intermediary group into a banking group. The bank is achieving the fastest growth in the entire sector in Kazakhstan. Within two years, it rose to the 8th place among the top 10 banks with assets exceeding 4.4 billion dollars. The number of bank customers is currently over 1 million, and according to the development strategy, Freedom Finance is expected to exceed 3 million in 2025. By 2026 – growth to 6.5 million customers.
Integration with digital government services has enabled products such as: digital mortgage And car loanAnd online loan for small and medium businesses. The bank ranked first in the country in providing mortgages. The numbers are impressive: Mortgage loans – more than 14 thousand loans worth $ 488.8 million, auto loans – more than 19 thousand loans worth $ 310.7 million.
The number of applications from businesses exceeds lending capacity (more than $241.1 million has been loaned to date). The bank’s plans include additional capitalization to increase its liquidity and the amount of loans to businesses, including IT entrepreneurs. Timur Turlov states that despite the very high rates in Kazakhstan, the need for money from SMEs is very high. He sees the potential for loan volume in this area to reach up to 500 thousand dollars per month. The company has created a digital technological pipeline to lend to businesses and select quality borrowers very quickly.
The brokerage business is Freedom Finance, which provides access to Kazakhstan stock exchanges, and Freedom Finance Global, which operates under British law in the International Financial Center in Astana. The broker in Kazakhstan was opened in 2012 and currently serves more than 220 thousand people, is represented in 13 locations throughout the country; The company’s strategic forecast is to grow to 977 thousand customers by 2026.
Freedom Finance Global was launched in 2020. This broker provides access to the world’s largest exchanges such as Nasdaq, NYSE, London Stock Exchange and others. Non-residents trade in this way, including Russiansafter passing compliance procedures (checking the legality of sanctions restrictions and origin of funds).
Freedom Finance Global and Freedom Finance reported revenue of $86 million and $35 million, respectively, in the latest quarter.
Tradernet’s own technological application has become the key to success, making trading very easy for investors (tracking the movement of funds in accounts, buying or selling stocks, currencies, funds, etc., as well as participating in IPOs and SPOs). This is a real hub that brings together hundreds of thousands of customers, 15 brokers and two banks around the world. In terms of capabilities and complexity of architecture in the financial world, this platform has no analogues.
The mobile brokerage app works in 16 languages and currently uses artificial intelligence. For example, the app has a news feed where the AI is trained to recognize the tone of information (positive, negative, neutral) for the organization providing the information and can color the news with appropriate colors. This is a useful and visual indicator for traders. The app also publishes stock analysis and investment ideas. Among the interesting plans, it is stated that the company will soon launch Freedom Chat on Tradernet, which will become a safe environment for the investor community, communication and exchange of ideas.
Digitalization has also given a strong impetus to the development of the insurance segment of Freedom’s business (Freedom Life and Freedom Insurance). This is not only an opportunity to apply for insurance online, but also to receive payment without going to the office. The holding’s insurance companies were the first to implement such a function in Kazakhstan. In 2QFY24, these two companies generated combined revenue of $81 million.
Liberty Telecom, appeared recently The ecosystem is intended to be a unifying neural network within the orbit of the holding companies. The company’s mission is to expand access to quality and cheap internet throughout the country and to establish fiber optic infrastructure and 5G mobile communications. Now the operator has more than 1 thousand km of optics in Almaty and backbone networks in 10 cities of Kazakhstan.
“Our confidence in the success of this project is rational: we use the latest technologies and our costs will be significantly lower than those of our competitors, which means a lower price tag for customers,” said the holding’s CEO.
The ecosystem is completed by companies in the lifestyle segment that expand services to customers. This is a retail network for the sale of Freedom Mobile smartphones, e-commerce services (Freedom Payment) and online ticket booking (Ticketon), foodtech Arbuz.kz, ticket purchasing services Aviata and ChocoTravel.
Cooperation is the fundamental principle of Freedom. “We are always building bridges and trying to unify the market. This is our strength,” Turlov emphasizes. The company’s ecosystem currently provides certain services to 7 million users; There are plans to create a super application – this application will integrate all the company’s services in Kazakhstan.
A world famous company
Turlov sees Kazakhstan as a unique environment in which the holding creates an ecosystem and continues to test new products and introduce them to other markets in which it operates.
“We see digitalization actively permeating all the financial products we offer to our customers, from banking and insurance to brokerage and lifestyle sectors. Kazakhstan and our company are in a unique position: we can and must integrate both our business areas and regions of presence to create benefits for our customers around the world, says Turlov. “In addition to infrastructure, this business model also requires data synergy, where each of the FRHC business areas is concentrated within itself.”
He believes that the company has no chance of remaining only a regional player. At the same time, the geographical diversity of the holding is supported by the flexibility and scalability of its products, a deep understanding of the principles of creating financial infrastructure and the value of talented personnel.
Europe – here Freedom Finance Europe serves more than 210 thousand customers in seven cities. There are plans to open 7 more offices, to become a member of the largest stock exchanges in Europe, including the London Stock Exchange (more recently, the company became a direct participant in the Athens Stock Exchange ATHEX). Freedom Finance Europe is currently a member of Euroclear, the largest international central securities depository, and is also working to become a member of the UK market’s central depository. New card products are also planned to be released in Europe.
The company is represented in the USA with its shares traded for 4 years. on NASDAQ. The path to the stock exchange took about five years to pass all the checks, consolidate assets, make reporting transparent; This was a great challenge and success for the company. Now FRHC shares (company ticker) are in the portfolios of large institutional investors and individuals. Over the years, capitalization has reached almost $5 billion and stock prices have increased more than five times.
The holding’s business in the United States focuses on investment banking. The company received brokerage licenses (Freedom Capital Markets) and has already become the organizer of IPOs and DPTs of many companies on American stock exchanges.
With the acquisition of local broker Prime Executions in 2020, a conference hosting platform for small-cap companies in 2023 LD Micro. The holding acts as an advisor on public offering issues and accompanies companies at all stages of the initial or secondary public offering of shares. A strategically important step for the company in the United States will be to obtain a clearing license that will allow it to independently carry out non-cash payments between counterparties.
“Thanks to the synergy of all the holding companies, through deep integration and data analysis, we will ultimately obtain the capital that is interesting for us. “This is much cooler than investing in a startup and selling it for several times more expensive,” says the head of the holding, confident that the company’s market indicators will grow further.
The growth story will continue
What other areas does the holding target? The markets are currently under review and negotiations are ongoing with regulators in the UAE, Armenia, Turkey and Azerbaijan. This is one of the plans that the company has previously announced publicly. For example, in Armenia, there is already an office in Yerevan and a brokerage activity license has been obtained.
Freedom Holding does not expect active expansion into new countries; relies on organic growth. At the same time, it plans to focus on creating synergies by integrating data from different countries and expanding its successful activities in America and Europe. Freedom Finance’s strength is its ability to integrate products. According to the top management, the most important tasks of the holding now include the development and coordination of adaptation policies both at the national (in Kazakhstan and individual countries) and international level. “Ineffective alignment can destroy a business, but effective alignment will make it a winner,” Turlov is confident.
“We are still a complete growth story supported by our shareholders. “Our return on capital and earning power exceeds the returns of most indices,” he adds.