In Russia intensified illegal microfinance institutions

Russians increasingly place funds in microfinance institutions (MFIs), follows from the data of market participants. According to the Bank of Russia, the interest on the investments attracted in MFI for about 1% of the adult population. Along with this breed and shadow companies that rely on low financial literacy investors, recognize the Central Bank.

Across Russia can now operate hundreds of illegal and semi-legal MFIs, says General Director of the company “Migkredit” Oleg Grishin. Risk increasing their number, it is assessed as “high”. “I personally met the posters, which are small MFIs offer interest rates on “investments” (as they call them) to 30% or more for several months. It is clear that about any guarantees here of the question and designed the ads, judging by their form in the population with low financial literacy,” says Grishin. Such companies attract the amount of several thousand rubles, and operate on the principle of financial pyramids, he said.

Investments in microfinance institutions similar in nature to Bank deposits, but are issued under the investment agreement and carry higher risks.

According to the Director General MoneyMan Boris Batin, shadow MFIs do offer citizens contributions even from 1 thousand rubles. under ultrahigh interest rates. “They also entice customers with guarantees that all investments are insured,” adds the Batin. Illegal draws of money from the population approximately every seventh company, says managing Director of online lending “E loan” the League of dead.

About the threat of pseudo-MFIs and warned the Bank of Russia. The regulator noted that almost all regions have intensified legal entities, non-MFI (not a member in the registry of the Central Bank) and attracting money from citizens under quite a high percentage. “Often such companies use names similar to the point of confusion with the actually existing microfinance institutions, and mimic the activities of MFIs”, — said on the website of the Central Bank. As said the representative of the Central Bank for the first nine months of 2016, the regulator received more than 500 complaints and appeals to raise money by organizations that are not included in the register of MFO Central Bank of Russia.

According to the Bank of Russia, relatively safe can be considered as income from investment in MFIs 20% per annum. “If any organization offers investments for a much larger percentage, then it is likely that she engaged in fraudulent activities”, according to the Bank of Russia. Now in some cases the rates the MFI can reach 30-32% per annum, says of the Corpse. While interest income subject to personal income tax, then the real rate is approaching 20%. Deposits in MFIs in contrast to the Bank by the state are not insured.

“If we talk about the market as a whole, the main driver of growth was primarily the very lower interest rates on Bank deposits. This has influenced the revitalization of the largest players in the market of MFIs”, — says Andrey Bakhvalov, chief Executive officer of the company “Home money”. Compared to the maximum interest rate on ruble deposits in banks of the top 10 in terms of deposits rates in MFIs can be four times higher. According to the Central Bank, in early November 2016, it was only 8,735%, down compared with the beginning of 2015 almost doubled.

Since then, the population has increased the volume of placed in MFIs funds, follows from the review of the Bank of Russia for microfinance organizations in April—June. Thus, only in the second quarter of 2016 MFIs attracted from individuals 3.6 billion rubles, which is seven times more than in the second quarter of 2015, says the review. The evaluation of the Batinah, in the ten months of 2016, compared to the same period last year, the volume of placed individuals in the microfinance companies funds, as well as the number of new investors has increased more than two times.

The number of people willing to invest in MFIs will continue to grow, says of the Corpse. “This is evident from the results of the first two quarters of 2016. In the future this may be a multiple of the growth of crisis phenomena in the economy are not so noticeable, the citizens, on the one hand, I prefer to save money, and with another — are ready to invest in unconventional instruments,” she said.

Last year in Russia their money in MFIs invested 0.8% of the adult population of the country mentioned in the first review of the Bank of Russia as of financial inclusion. Thus, the number of investors approached 1 million people. According to the Central Bank, has actively placed the money in MFIs residents of Moscow and St. Petersburg, and also inhabitants of cities with a population of 50 thousand people and towns. Actively carried their money in MFIs, according to the Bank, and low-income population groups (from families where income is less than 3 thousand rubles per person per month). The MFI has deposited the funds in the form of the loan agreement are also persons older than 66 years old and retired (including disability).

According to the Central Bank, older Russians were attracted by the opportunity to obtain higher interest income, which speaks of the inability to compare risks and possible benefits, and low financial literacy. The Deputy Director of SRO “Mir” Andrey Paranich admits that it may be so-called serial investors, who have informed the capital, but now do not have regular sources of income.

According to FZ “About microfinance performance and microfinance organizations” MFO could not attract from individuals of less than 1.5 million rubles, if they are not the founders and not the shareholders. “People who make such a significant investment, can hardly be called non-professional investors,” said Batin. According to the League of dead bodies, mainly in MFIs invested men with higher education and middle age, whose income is 150 thousand rubles.

According to the forecast Batinah, at the end of 2017 the volume of placed in MFIs Russians investments will increase at least twice. From March 29, 2017 microfinance market finally divided according to the level of capital for microfinance (IFC) and micro-credit (IWC) of the company. The first is to be able to raise funds from individuals, non-participants and shareholders, the money from the amount of 1.5 million rubles. the Second is the right will lose.

“We expect that microfinance companies can be from 40 to 90 MFIs, perhaps a little over a hundred”, — said the representative of the Bank of Russia. Now there are two organizations that received the status of IFC, he added.

According to 23 November 2016 in the registry of the Central Bank consisted 2914 MFIs. Until the end of December the Bank of Russia will withdraw from about 400 companies, said a spokesman of the regulator. Assessment all interviewed market participants, limiting the number of microfinance companies in the next year will only increase the influx of investors.