Setting the requirements for calculating the debt burden ratio of an MFO borrower

The Bank of Russia has issued regulations (Ordinance No. 5114-U and Ordinance No. 5115-U) obliging microfinance organisations to calculate a borrower's debt burden ratio (DBR) in accordance with the established requirements (the ordinances were registered with the Russian Ministry of Justice at the end of June 2019).

Starting from 1 October 2019, when taking a decision whether or not to provide a consumer loan of over 10,000 rubles, microfinance and microcredit companies will have to calculate the DBR for each borrower to account for it in their own capital adequacy ratios (RMFC1 and RMCC1).

If an MFO provides a microloan to a client whose DBR exceeds 50%, the organisation will have to bear an additional capital load equal to 50% of the loan amount (65% starting from 1 January 2020).

In addition, the Bank has adjusted the procedure for calculating the indicators accounted for in the economic ratios of a microfinance company. The ordinances have been brought into line with the Bank of Russia regulations on the accounting, preparation and presentation of accounting (financial) statements. To make the calculation of the ratios more convenient and to increase the quality of the information provided about the activities of MFCs and MCCs, a grouping of accounts has been developed.