Kaspi’s business model is well explained by this research note by Meditation capital, link attached below:

https://www.horizonscapitals.com/s/Meditation-Capital-4Q-2023-Letter-Website-21.pdf

Some excerpts that we really like:

The runway is longer in lending, where Kazakhstan’s consumer loans to GDP percentage is still lower than in peer countries and only 40% of Kaspi’s users have tried its BNPL, and even longer in ecommerce, which as a sector is underpenetrated at just 12% of retail sales. Overall, we project teens growth above inflation in 2024 and 2025 before slowing to single-digit growth above inflation in 2026 and beyond. In our model we assume no international expansion (discussed below). But despite these arguably conservative assumptions, we see a >30% IRR in USD for Kaspi stock, driven by its earnings growth, an unreasonably low starting multiple (8x 2024 earnings, which we assume re-rates to 10-11x), and its high cash return yield.
Lomtadze became focused on the customer, studied Amazon and Google as inspirations, and in 2012 picked NPS as the top KPI for the organization – which was music to our ears as product-focused investors
We’ve spoken with numerous former employees about the company’s culture, its business, and management’s character. Kaspi is not an overnight sensation, but rather the result of 17 years of steady business-building, product by product, to reach where it is today.

We mostly focused on the Macro factors, using Mr. Sharma’s The Rise and Fall of Nations as our template:

1. Economic Growth: "Sustainable Growth over Rapid Growth"

Sharma emphasizes sustainable, balanced growth over short-term booms fueled by unsustainable factors.

Current Growth Drivers: Kazakhstan’s economy heavily depends on commodities, especially oil, natural gas, and mining. High global energy prices have supported its growth. The country has averaged 4-5% GDP growth over the past two decades, but this growth is volatile due to its dependence on global energy demand.
Diversification Challenges: The government is attempting to reduce reliance on commodities by developing non-extractive industries, such as technology and manufacturing. However, progress remains slow.
Key Risk: Commodity dependence makes the economy vulnerable to global shocks (e.g., a collapse in oil prices).

Huge reliance on oil and natural gas exports, supplemented by minerals export.

Forecasted GDP tied to energy prices but remain in the top quartile of growth.

2. Governance: "Strong Institutions vs. Strong Leaders"

Sharma places great importance on governance quality, transparency, and institutional strength.

Leadership and Stability: Kazakhstan transitioned from the long rule of Nursultan Nazarbayev to Kassym-Jomart Tokayev. While the government has promoted reforms, it remains highly centralized.
Reform Efforts: The government has introduced economic reforms aimed at improving transparency and reducing corruption, but the pace is slow.
Protests in 2022: The mass protests highlighted public dissatisfaction with inequality, governance, and corruption. Kaspi experienced significant stress during period of turmoil.

The President is incentivized to maintain close partnership with Kaspi because it’s the single most powerful company driving technology productivity boost to Kazakhstan. Kaspi, through its government ultility, public record, and tax filing applications, greatly improved the efficiency of government agencies, so much so that the tax collection rate actually went up when people don’t have to wait in lines to gain access to public services and face the confusing tax codes applied to their income.

Kaspi is widely popular in Kazakhstan and is viewed as a national pride as its neighboring countries do not have the convenience provided by the technologies offered by Kaspi. So any political party is cautious to sanction Kaspi at risk of losing the popular vote.

According to available data, Kaspi.kz’s largest shareholders are the Baring Vostok Fund (28.8%), Vyacheslav Kim (23.35%), and Mikhail Lomtadze (24.55%), with the remaining shares held by public investors and company management.

The old leadership used to held shares in Kaspi but was ousted in the 2022 revolution. I believe the change of leadership is a good sign for the country open to business, and Kaspi does not appear to be penalized by new leadership for its relationship with the old leadership.

3. Population: "Demographics Drive Growth"

A young, growing population is a key ingredient for long-term economic growth.

Demographics: Kazakhstan has a population of ~20 million, with a relatively young median age of 31 years. Population growth is modest (~1.2% annually), but the demographic dividend is still in play.
Urbanization: The country is increasingly urbanized, with cities like Almaty and Nur-Sultan driving economic activity.
Migration Risks: Outmigration of skilled workers due to better opportunities abroad (especially in Russia and Europe) poses a challenge.

Sharma would view Kazakhstan’s demographic situation as moderately favorable but at risk of losing its working-age talent.

4. Global Integration: "Export-Oriented and Open Markets" Kazakhstan as a favorably positioned Middle ground, at the crossroad of Asia and Europe.

Sharma values countries that integrate with global markets and maintain competitive, open economies.

Trade and Exports: Kazakhstan’s economy is heavily export-driven, with oil, metals, and minerals accounting for a significant share of GDP. Its location makes it a key player in China's Belt and Road Initiative. Kazakhstan has the biggest Uranium reserve which increases its strategic importance with the Nuclear powers.
Dependence on Russia and China: Kazakhstan relies heavily on trade with these two nations, exposing it to geopolitical risks.
FDI and Openness: The government has actively sought foreign direct investment (FDI) and improved the business climate, but bureaucracy and corruption remain barriers.

Sharma would view Kazakhstan’s integration into global markets positively but note the risks of overdependence on a few trading partners.

Kazakhstan recently opened a new natural gas pipeline from Russia to China, improving its export capacity and strengthening its relationship with its neighbors. Russia used to shut off the Blacksea pipeline, cutting offexport pipeline as a threat for Kazakhstan to stay neutral at the Ukraine conflict. Russia has since reopened and restored in good terms with the new leadership.

5. Debt and Financial Stability: "Watch for Over-Borrowing"

Low debt and prudent fiscal management are key to avoiding crises.

Government Debt: Kazakhstan’s debt-to-GDP ratio is relatively low (~27%), indicating fiscal prudence.
Sovereign Wealth Fund: The National Fund of Kazakhstan provides a buffer against oil price shocks, which Sharma would likely see as a key positive.
Banking Sector: The financial system has been under pressure in recent years, with high levels of non-performing loans and underdeveloped capital markets.

Sharma would likely commend Kazakhstan’s fiscal discipline but caution against its fragile banking sector.

Kazakhstan Trade Balance has always remained positive unless there is significant distress in oil market.

Risks:

As you can see, Kaspi is a great business, highly profitable and cash generative, returning capital to investors and growing at a double digit pace through increased product penetration, user interaction, and new product launches.

The reason why we did not put a sizeable position on Kaspi is because its correlation with energy prices, and the overall lack of knowledge on Kazakhstan made investors assign a larger than usual country risk premium, resulting in the extreme valuation levels. In addition, we have not done any on the ground research and have to rely on management word or mouth and third party research on the company.

We do believe that Russia and Ukraine ceasefire would be a catalyst for Kaspi for investors to revaluate country and regional risk premiums. We expect the ceasefire to happen this year, following Trump administration’s agenda on pulling out international conflicts and focus on domestic affairs.

We are trying to incorporate momentum and technical factors to our investment model. We will add to our position accordingly if market starts to revaluate Kaspi.