For the first time, industry participants proposed to the Bank of Russia to soften regulation

Consistent tightening of regulation by the Central Bank could lead to a significant reduction in the microfinance market, its participants believe. They propose to relax some requirements for companies. In particular, allow the use of one’s own models for assessing the client’s solvency and introduce some restrictions in stages. The Central Bank is ready for dialogue, but emphasizes that bypassing regulation leads to its tightening.

For the first time, microfinance market participants proposed to the Bank of Russia to make adjustments to the process of introducing strict regulatory standards. Their ideas were published on October 5 at the MFO Russia forum. Thus, in the speeches it was said that microfinance companies need to be able to calculate the debt burden indicator (PDI, the ratio of loan payments to the borrower’s income) using their own methods.

Until recently, borrowers with a personal income tax of more than 80% should have accounted for no more than 30% of loans. In the fourth quarter, macroprudential limits (MPL) are tightened. Now, over-leveraged borrowers should account for no more than 15% of issuances, and the share of borrowers with a personal income tax of 50–80% should account for no more than 30% of issuances. The restrictions did not apply when issuing loans of less than 10 thousand rubles, which companies actively used (see Kommersant on February 27). However, from January 1, 2024, a requirement will be introduced to take into account loans of less than 10 thousand rubles when calculating the debt load. Therefore, market participants are asking the regulator to introduce this restriction in stages, gradually reducing the amount below which loans may not be taken into account in calculating the PIT.

Also, a global task for the industry is to check the level of income that a potential borrower indicates when filling out the application form. Often, MFO borrowers, especially in the regions, do not have an official and permanent income, and therefore cannot confirm it. To verify data on the solvency of clients, MFOs are asked to provide them with access to state databases for recording the personal income of a potential client.

According to the risk director of Eqvanta Group of Companies, Ion Boloboshencu, tightening the MPL could lead to a reduction in microcredit volumes by 15–20% and a decrease in MFO profits by 30–50%, depending on the company’s ability to adapt its strategies. According to the director of risk management at Finbridge Group of Companies, Eldar Kakushev, maintaining the regulatory plan in its current form could lead to a radical reduction in the number of microfinance organizations and the active development of the segment of illegal lenders.

The Bank of Russia admits that market volumes will decline by the end of the fourth quarter due to the introduction of more stringent MPLs. At the same time, the regulator is “open to dialogue” with market participants. At the same time, the Central Bank notes the significant contribution of microfinance organizations to the growth of the population’s debt burden. Thus, according to the Bank of Russia, 53% of borrowers of non-bank and 50% of banking MFOs have a debt burden above 50%.

The share of MFO loans in the total portfolio of MFOs and credit institutions is small and amounts to 2.5%. However, MFOs account for 27% of the payment of the total debt of borrowers, says Dmitry Maistrenko, head of the department for risk analysis of development institutions and the parallel banking system of the financial stability department of the Central Bank. And the ratio of a one-time payment to the body of debt for MFO borrowers is significantly higher than for borrowers of credit organizations—almost 55% of the amount of debt under the agreement.

The Bank of Russia also notes an increase in cases of PDN manipulation and attempts to bypass the MPL. In particular, companies are increasing their issuance of loans worth less than 10 thousand rubles—in the first quarter, their share accounted for 52% of issuances. Some loans were issued in one day. At the same time, to calculate the personal income tax, in some cases, personal data of borrowers were used, in which they indicated income in millions of rubles. And such practices, the Central Bank emphasizes, only lead to new regulatory restrictions.

Polina Trifonova