Bank of Russia holds first consultation meeting with microfinance companies

The regulator invited representatives of major microfinance companies to a consultation meeting, flagging up a number of non-compliance issues recent supervisory probes have revealed. Microfinance companies were also asked to focus on business areas that draw the most regulatory attention as they review and improve their business models.

In the microfinance market, the legal differentiation between microfinance and microcredit companies was legally introduced in 2016, with 51 organisations registered as microfinance companies; their total loan portfolio is over half of all microloans. Compared to microcredit companies, microfinance companies have more sizeable business capabilities. They are however subject to a tighter regulatory regime and limitations including, for example, requirements for capital (which should equate or surpass 70 million rubles). Under current legislation, a microfinance company can change its legal status to that of a bank holding a basic licence.

The meeting agenda included the financial stability of microfinance companies and the specifics of building their risk profile. As a separate agenda item, microfinance companies’ handling of consumer complaints and Bank of Russia-implemented conduct supervision were discussed. Also, Microfinance Market Department representatives reiterated the need for microfinance market players to regularly engage with credit history bureaus. Proprietary methodologies for calculating borrowers’ loan debt caps should be developed.

Furthermore, the discourse centred on the evolution of the self-regulatory organisation as an institute: the meeting touched on key components in the concept of an evolving regulatory environment and the Bank of Russia's oversight of microfinance companies undertaken jointly with self-regulatory organisations.

‘Sustainability and robustness of microfinance companies, and their thorough approach to regulatory compliance are key directions in the development of market players, whose operations should primarily meet investors’ and consumers’ – that is citizens’ – interests’, said Ilya Kochetkov, BoR Microfinance Department Director.

There are plans to make such regulator and microfinance company meetings a regular occurrence.