Scandalous loans: decide whether the problem microloans to restrict the number

Why limit the number of microloans?

The Bank of Russia may prohibit microfinance institutions (MFIs) to give one customer an unlimited number of loans. The Central Bank together with the self-regulatory organizations is going to determine the maximum number of loans that can be issued to a single borrower, as well as how many times you can renew a loan, to the reply of the Central Bank at the request of the Council of Federation on regulation of activities of MFIs (the answer is posted on the website of the regulator). This restriction is intended to put an end to the practice where a borrower pays a debt due to the new and gets into debt, the Central Bank specifies.

Representatives of microfinance organizations do not agree with the opinion of the regulator. Limiting the number of loans “in one hand” does not solve the problem of over-indebtedness, confident CEO of MoneyMan Boris Batin. The problem is the debt load — not the number of microloans, and in the magnitude of the debt burden, says the Chairman of the Council of NP “World” Alexander Arifov. “We need a more responsible policy of all financial institutions — banks and MFIs — assessment of solvency of borrowers. The issue should be resolved at a more global level, rather than at the level of limiting the number of microloans”, — concluded Arifov.

How is the market of microloans?

The microfinance market is divided into three segments: 38% of the market account for loans to support small businesses and aspiring entrepreneurs with interest rates of 10% per annum, 44% are consumer loans with interest rates from 40% per annum, 18% – “payday loans” (for a period up to one month amounting to 30 thousand rubles.), said in a statement the Central Bank.

It was around the last segment is catching the greatest number of scandals that caused high interest rates and penalties for late payment. According to the chief of the main Directorate of market MFIs the Bank of Russia Mikhail Mamuta, the cost of “payday lending” can make 2% per day, since high default risk. “If such loan is repaid on time, after a few days or weeks, the percentages do not reach a significant size,” he adds. However, the annual rate is over 700%.

Half of loans that microfinance institutions have given out to citizens, overdue for more than 30 days, reported earlier by analysts of the rating Agency RAEX. In the review of the company “Bystrodengi” indicates that 25-30% of the total number of issued micro-loans overdue for more than 90 days.

13% of the 4 million clients of microfinance institutions have two or more loans, says marketing Director of National Bureau of credit stories Alexey Volkov. For comparison: in the banking sector, two or more of the loan are 17.6 per cent of borrowers, according to United credit Bureau.

In 2015, the market MFIs grew at a rapid pace — the microloan portfolio increased by 36% to 10.2 billion rubles, according to a review of the company “Bystrodengi”. Demand for the services of MFIs grew out of the difficult macroeconomic situation in the country and reducing the level of real income and wage arrears. The main clients of microfinance organizations are the workers, state employees and retirees, to the review. The average amount of such loan is 8 thousand rubles.

As the Central Bank had already restricted the activities of MFIs?

The Central Bank began to regulate the market of microfinance organizations at the end of 2013. From 1 July 2015, the Central Bank limits the total cost of the loan, including loan till payday. According to the law “On consumer credit” bet cannot be more than one third above the average in the market, which expects the Central Bank on a quarterly basis.

Reduce debt is the intended amendment to the law “On microfinance and microfinance organizations”, specifies the Central Bank. According to this amendment, from March 29, 2016 accrued interest and other payments on the loan will not exceed fourfold the amount of the loan. The Bank of Russia plans in the future to reduce this ratio to twice the amount of the loan stated in the message controller.

The Central Bank also proposes, with the consent of the borrower to give MFIs access to the data of the Pension Fund and Federal tax service. A number of banks already using such communication during the pilot project, and it can significantly reduce credit risk, stated in the message controller.

The Central Bank hopes that these measures will force microfinance institutions to more carefully approach the choice of the borrower, to reduce the risk of non-repayment of the loan.

In addition, the Central Bank is cleaning up the market from unscrupulous companies: for 2015, the regulator has excluded from the register 898 MFIs. A list of companies on the register decreased by 12%, at the beginning of 2016 it had 3 683 organizations, according to a review of “Bystrodengi”.

At the end of February “Газете.Ru” with reference to the press service of the Prosecutor General’s office reported that after a series of large-scale checks, the Department made submissions to the Chairman of the Central Bank Elvira Nabiullina. According to the publication, the office considers that the Central Bank has not exercised proper control and supervision of the organizations issuing consumer loans. The reason for the inspections of the Prosecutor’s office was activists of the Russian popular front “For the rights of borrowers” and the self-regulatory organization the World.

Found any justice in the collectors?

The problem of regulating MFIs will not be able to fix the problem automatically the procedure of debt collection, points in the same reply to the senators, the Bank of Russia.

The methods of collection there is a lot of scandals. On March 1 the Prosecutor General’s office reported on the inspection of illegal actions of employees of MFIs and collection companies in Yekaterinburg. According to preliminary information the Agency, the collectors came to the apartment of the borrowers, which at the time without their parents was a small child. They cut the telephone wire, poured glue in the locks and has locked the child in the apartment. Another resonant case occurred in Ulyanovsk, where allegedly former collector, who worked in MFO “Rottenly” threw “Molotov cocktail” in the house of debtors, whereby also the child suffered. On Wednesday on the website of the Prosecutor General’s office has another message concerning actions of collectors. At this time we are talking about the Lipetsk region, where came to court a criminal case against collectors who murdered the borrower and shaved bald his wife. According to the investigation, all the accused were employees of microfinance organizations LLC “microfinance Unified solutions”.

“Working towards the collection of overdue debt regardless of who does it — a special Agency, Bank, or microfinance organisation, credit consumer cooperative shall be governed by rigid standards,” indicates the Central Bank in response to the senators. The government should identify the Federal Agency responsible for the regulation and supervision of collection activities, highlighted in the report of the Central Bank.

As mentioned before, in Russia soon there will be a law restricting the rights of collectors. The project will contribute to the Parliament the Chairman of the Federation Council Valentina Matviyenko and state Duma speaker Sergei Naryshkin. Also on 2 March, the head of the Federation Council Valentina Matvienko has addressed to the head of the Ministry of internal Affairs Vladimir Kolokoltsev with a request to conduct check illegal micro-Finance organizations, according to RNS.