Anar Baibolatova, head of the Center for Consumer Rights Protection in Online Microloans, is confident that a huge number of self-employed people take microloans because they cannot and do not know how to legalize their income. The current requirements of the regulator for banks do not take into account Kazakhstanis who do not make pension contributions. This is a huge segment of the self-employed, including taxi drivers, sellers, housewives who cook to order, and rural residents.
"The audience of online microfinance organizations in Almaty and Astana is only 27%. The rest (over 70%) is evenly distributed across the country. Most often, clients in this segment live in small settlements. It is worth noting that in the overall credit portfolio of financial organizations in the country, online loans before payday account for only 1%, so it cannot be said that online microloans are to blame for over-indebtedness," said Anar Baibolatova at a press conference at the Kazakhstan Press Club.
Representatives of the TALAP research center share a similar opinion. According to the director of this center, Askar Kysykov, specialists currently working in the microfinance segment fear that ultimately all the rhetoric about over-indebtedness will lead to the regulator simply banning online microfinance organizations.
"Although the problem, if we look at the number of people 'in arrears', is systemic. The main creditor in Kazakhstan is second-tier banks (STBs). Their installments account for half of all consumer loans. The number of borrowers is from STBs, the amount of loans is from STBs. Online microfinance organizations account for only 1% of the credit portfolio. The amounts are small and the loans are short-term," said Askar Kysykov.
There is regulation
As noted at the event, over the past four years, the reward rate for online microfinance organizations has been reduced five times, and now the measures to protect consumers of financial services are more than adequate. In particular, measures such as the calculation of the debt burden ratio (DBR), a ban on new loans in case of arrears exceeding 60 days, and on commissions have been introduced. In case of arrears, a limit on overpayment of 50% has been established. In 2021, additional measures were introduced: biometric identification, an obligation for pre-trial resolution of situations with debtors. The maximum reward rate was reduced from 30% to 15-20%. The last reduction occurred at the end of last year.
"We are often compared to banks, but it is not possible to apply banking approaches to microfinance organizations. MFOs issue loans with a one-time payment, risking their own money. Banks issue loans based on deposits and with a payment schedule. We issue loans for a maximum of 45 days, but we provide clients with information like banks do, and indicate the annual effective rate. This does not reflect the real cost of the loan because our consumer does not take money for a year. The maximum amount of such a microloan is 184,000 tenge. On average, our clients take 70,000 tenge for three weeks," says Alexey Sidorov, chairman of the KazFinTech Association.
Experts are confident that tightening regulation of the sector will lead to its disappearance.
The problem is deeper and broader than it seems
Renowned economist Aydarkhan Kusaynov believes that the issue of closing online microfinance organizations is much broader and could ultimately lead to serious consequences.
"The demand for online loans is evenly distributed across the country. It concerns people who do not have pension contributions, who are 'making ends meet from paycheck to paycheck', and they cannot get a loan from banks. They do not need large loans either. Today, their needs are met by online microfinance organizations. Banks do not fill this niche; they are not interested in such clients. Everyone says people can go to the unregulated market, to loan sharks or bandits, but a person still needs to find a loan shark or a bandit. Most likely, in this case, he will go to a 'mutual aid society' – a cult. And you know how they operate. They will always sympathize, help with money, and listen, in return asking for loyalty and some services," notes Aydarkhan Kusaynov.
When hasty decisions harm the consumer
Rinat Mustafin heads the Center for Financial Rehabilitation and Bankruptcy 'Femida Komek'. The lawyer helps insolvent borrowers resolve their debt issues through mediation and other official procedures. He is confident that hasty decisions always turn against consumers of financial services.
"In Karaganda, there was an MFO 'Everest Finance'. It is unclear how the company obtained a license, who checked it. For a long time, no one noticed its activities. But after receiving complaints from clients, the ARRF conducted an inspection and revoked the MFO's license. Now this company is suing former clients one to three. People borrowed 500,000 tenge, but now, by court decisions, they are returning more than 1.2 million tenge. Today, thousands of borrowers are having money deducted from their salaries and pensions by a company that was once an MFO but is now an ordinary LLP, unregulated by anyone and has a large portfolio," shared a case from his practice Rinat Mustafin.
Timur Zhantikin, a representative of the NPP 'Atameken', also believes that "a realistic and pragmatic economic assessment is necessary, rather than simplified solutions that do not take into account long-term consequences and can lead to undesirable results in the economy and society".
"Studying the experience of neighboring countries that are part of the EAEU, we see that, for example, in the Russian Federation, the interest rate on MFO loans is 292% per annum. Given the ongoing harmonization of legislation in the field of financial market regulation in the EAEU, I believe this should be taken into account," notes Zhantikin.
He also reminded that President Kassym-Jomart Tokayev clearly expressed support for entrepreneurship, emphasizing its importance for economic growth and the prosperity of the nation. However, the expert notes that the current policy regarding the online microcrediting sector contradicts these theses. In this regard, he suggests revising the approaches to regulation to ensure protection and support for both businesses and consumers of financial services.