Bank of Russia analyses efficiency of microfinance companies’ initiatives
The regulator has concluded that implementation of nine initiatives of the market participants corresponds with the goals set.
The estimate is based on the results of the professional community survey and information and analytics provided by the Bank of Russia divisions.
Ban on advertisements for loans and deposits from unregulated companies is among implemented initiatives. Analysis shows a significant decline in media advertisements for consumer loans from unregulated companies (so-called predatory lenders), highlights that inspections are now taking place (conducted by the Federal Anti-Monopoly Service and the Prosecutor’s Office) and that microfinance companies approach to advertising more responsibly. Market participants report increased confidence of financial services users.
Limiting the activities of unregulated companies was another important step towards protecting consumers from financial pyramid schemes. Market participants point out that competition in the microfinancing became more transparent and consumers better perceive the distinction between regulated and unregulated companies. Consumer lending altogether became more transparent. However, predatory lenders seek new ways to continue their activities.
Initiatives also include improving tax legislation (implementing special loan loss provision regime); mandatory external audit for companies with balance-sheet total over 300 million rubles; digital reporting for microfinance organisations (MFOs) and consumer credit cooperatives; rights to issue low-par bonds under tighter requirements for capital and liquidity adequacy for MFO issuers; periodic indexation of microloan amount for the SMEs (1 million rubles, as set out in the Federal Law No.
These initiatives are in the list of ‘233 KPIs’: the proposals of the financial market development community, designed after the Bank of Russia had become the megaregulator.