At first glance, Central Asia’s banking sector looks like somewhere you just wouldn’t want to go.

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In Uzbekistan and Turkmenistan, banks remain predominately state-controlled.

In Tajikistan and Kyrgyzstan, remittances rule, with observers suggesting a priority should be the development of mobile banking to boost liquidity and encourage savings and investment, thus reducing the immediate consumption of most earnings. Tajikistan’s banking sector—which comprises some 16 banks—remains dominated by Agroinvestbank, where poor transparency and governance remain major concerns. So attention naturally focuses on Kazakhstan, though memories are still raw of the losses incurred after bank restructuring started in 2009—most banks still have a large bad-loans portfolio, with nonperforming loans averaging 30%. A single foreign bank, Citi, remains dominant after most of the rest withdrew.

However, observers say that after several false starts the authorities in Kazakhstan are now getting serious about restructuring the sector, with further consolidation possible following the merger of two of the country’s largest banks, KKB and BTA. The new bank is to be divided into good and bad banks with the latter—comprising much of BTA’s former loan book—expected to lose its license. Central bank governor Kairat Kelimbetov, who assumed the position in October 2013, has said he hopes to see nonperforming loans fall to 15% to 20% this year, with 10% targeted for the end of 2016. This year has already seen $500 million injected into a distressed assets fund, which should help restructuring, although NPLs could grow if there is a further devaluation of the tenge.

“This is a big country, so the market has potential in the medium to long term,” says Agris Preimanis, lead economist for Central Asia for the EBRD in Almaty. Preimanis notes that better access to liquidity and improved commercial terms should make the sector more attractive to foreign players, but says, “First it needs to be restructured and the issue of NPLs properly addressed.”