Bank of Russia approves basic standard for MFO operations in financial market
The basic standard establishes conditions, procedure and key principles for microfinance organisations (MFO) to issue microloans and borrow funds from individuals.
In particular, MFOs should provide borrowers with complete and detailed information about contract terms and conditions. If lending conditions provide for a contract of insurance, they should give borrowers information about the insurance company, subject of the contract, insured events stipulated in the contract and exceptions, insurance premiums, contract terms and payment procedure. Should a microfinance organisation transfer the right to assign the claim on loan to another person, the standard stipulates that it should communicate this to the borrower within a
In addition, the basic standard provides for requirements for the procedure of creditworthiness assessment of a financial customer. This is an obligatory assessment that includes not only the analysis of the potential borrower’s documents, but also borrower information received from other sources (e.g., credit history bureau).
Also, the basic standard establishes requirements for agreements on fund borrowing from individuals and MFO internal documents. MFOs that borrow funds from individuals should disclose on their website the accounting statements for the past five years, information on important facts and insurance contracts (if any). These requirements of the basic standard become effective on 1 July 2018.
Starting from 1 July 2019, MFOs will also have to use a QR-code with links to websites covering the information which financial consumers may need.
The basic standard was elaborated by financial market self-regulatory organisations (SRO) comprising MFOs, in accordance with the Bank of Russia’s requirements. The standard will be mandatory for all MFOs regardless of their participation in the SROs.
This basic standard will help improve the quality of financial services rendered by MFOs (unifying MFOs’ operating procedures), and raise transparency of MFOs’ activity for both supervisors and consumers.