The return of the pawn: what does the new law about microloans

Возвращение ломбардов: что принесет новый закон о микрозаймах

From 1 July in Russia has changed the rules for issuing microloans developed by the Central Bank. According to the enforced amendments, the daily interest rate is limited to 1%. The maximum amount of payments that the creditor may demand from the borrower, fell to double of the loan amount. That is now the borrower who took a loan, for example, 1 thousand rubles, at no point in time should not be the lender of more than 3.5 thousand rubles.

Some experts are already predicting the bankruptcy of a number of microfinance institutions, noting that popular with the public payday loans will now become unprofitable.
“MIR 24” has asked to comment on the situation with the new amendments of the independent financial analyst Anton Shabanov.

According to the expert, changes dictated by the Central Bank, can lead to several problems especially for microfinance institutions. One of them is the chance of some MFIs in the segment of the shadow economy.

“Of course, with stricter laws are always the weaker players who just entered the market and who have no financial reserves, will leave the market. Therefore, the market MFIs will clean up. Small players will either leave, or suffer bankruptcy. Therefore, for the market, the MFI is probably not the most positive solution. At the same time, on the other hand, MFIs will be a little easier to work with the borrower, because there are more transparent rules.

But, again, we should not forget that we are talking about the official market of MFIs, because many microfinance institutions are not just close – they will go into the shadows. That is, will appear, roughly speaking, pawnshops, which will be informal, under the counter to give money and maybe some contracts of civil nature. But the official market of MFIs will become more transparent. Is this the first step in the long journey of resolving this market and prescribing clear rules on how this should work”, – said the expert.

While Shabanov said that in Russia the danger of a shift of a number of small entrepreneurs in the shadow has always existed. “Still always the force of action is equal and opposite reaction: even when we had prohibition, all drove moonshine; when I was banned the currency everywhere were money changers,” – said the economist.

Also Shabanov noted that the Central Bank is concerned about another problem. The fact that lowering interest rates to 1%, will inevitably encourage people to take out new payday loans. It should be noted that the growth of microlending in the first quarter of 2019 year-on-year was 28% (51 billion against 36 billion rubles in the first quarter of 2018). And in the third quarter of 2018, the issuance of consumer loans in Russia reached a historic high of 4 million were granted loans totaling over RUB 729 billion, the Average loan size has updated the record and increased by 43% to 178 thousand rubles.

“It is also a question that the Central Bank actually puzzled. It exists in two forms: the first is the so – called scoring, that is, how do microfinance institutions evaluate their borrowers. And, of course, the Central Bank will gradually to step in, once adjusting the scoring system. Give all the money left and right, of course, is not necessary – it leads to the commonplace refinancing”, – said the interlocutor of “WORLD 24”.

An important role in the situation with microloans in Russia is also playing the financial literacy of the population, the expert added.

“Borrowers also need to understand that, although they are not the most fun, but even more to drive themselves in bondage – also not a good scenario. Therefore, borrowers also need (I’m not saying it’s simple and with a smile) to be able to to restrict. Unfortunately, some simple tips to keep everyone happy, here to fail,” concluded Anton Shabanov.