The State Duma proposed reducing rates in microfinance organizations: what will this lead to?

CrimeaPRESS reports:

The betting situation

The limit on overpayments on loans in Russia since July 2019 has been 1% per day or 365% per annum. Since July 2023, the Central Bank has set a new maximum overpayment of 292% per year. Get money to card online right now you can get it at 0.8% per day.

The maximum overpayment on loans for up to a year (the full cost of the loan), taking into account fines, penalties and other payments, today is no more than 130% of the amount of the original debt.

The measures are aimed at increasing the accessibility of financial services. They also help curb lending to highly leveraged borrowers.

A State Duma deputy of the Federal Assembly of the Russian Federation noted that it is necessary to continue tightening rates in 2024. The bill could appear in the spring session.

Earlier, the Parliamentary Gazette wrote that on December 4, 2023, the first deputy chairman of the State Duma Committee on the Financial Market proposed considering the possibility of lowering rates.

Parliamentarians agree that 292% per annum is a lot. At the same time, the State Duma considers a complete abandonment of microfinance organizations to be a risky step. Even if the business goes into the shadows, the demand for payday loans will not decrease.

What do citizens think about the activities of MFOs?

According to SuperJob analysts, 70% of respondents believe that the activities of IFC and MCC should be banned. Most often, citizens with incomes from 50,000 to 100,000 rubles (77%) spoke out in favor of the ban.

Only 6% were against the liquidation of MFOs. But Russians who have had to apply for a microloan at least once are less likely to support the idea of ​​closing microfinance organizations than those who have never taken express loans. They are convinced that all citizens should have access to borrowed funds, regardless of income.

Interviewed supporters of 24-hour microloans emphasized the need to conduct educational programs with potential borrowers. They also noted that microloans are often the only solution to a difficult financial situation. They help when money is needed urgently, and banks refuse to issue loans immediately.

In November 2023, astv.ru reported that the debt of compatriots to microfinance organizations reached a record high of 350 billion rubles.

How the changes will affect the market and customers

After the rate reduction, loans will become more accessible. But don’t forget about the risks: companies will have to compensate for lost revenue by implementing additional paid services.

Some microfinance market participants with ineffective business models will leave the market. More competitive players issuing loans to a bank card via the Internet will continue to unite, which may lead to the formation of oligopolies. There is a risk of even more illegal lenders emerging.

Participants in the microfinance market will have to more carefully monitor the quality of loan portfolios, change approaches to scoring clients and revise risk policies. As a result, microfinance organizations will begin to more scrupulously evaluate potential clients and set more stringent conditions for issuing loans. After all, the rates will not cover the risk of non-repayment of the debt.

The segment of short-term loans (PDL, payday) will become unprofitable. Lenders will promote medium-term loans (Installment, IL), offer insurance and additional services to clients.

Many experts believe that the state should concentrate its efforts on developing additional measures to support socially vulnerable segments of the population, so that citizens do not have to frequently turn to lenders. Namely, to provide targeted subsidies, stimulate employment and increase financial literacy of the population. The feasibility of further reducing rates in microfinance organizations remains questionable.

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