Kapital.kz: MFI leverage ratio will stagnate business

On July 3 of this year, the President of Kazakhstan signed amendments to the Law on Microfinance Organizations, which will enter into force on January 1, 2020. Some of them appeared thanks to the initiative of the Association of Microfinance Organizations of Kazakhstan (AMFOK) and should improve the funding situation for MFIs. However, others question not only the future of this segment of the financial market, but also the implementation of state business support programs, Yerbol Omarkhanov, director of the Association of Microfinance Organizations of Kazakhstan, announced in an interview with Kapital.kz.

- Yerbol, what is the ambiguity of recent changes in microfinance legislation?

- In general, AMFOK has a positive attitude towards them, as this will bring many positive changes that will positively affect the development of microcredit. We have long been proposing to expand additional activities of MFIs, as today they are limited in additional activities and mainly provide only microloans. Now the maximum amount of microcrediting will be increased from 8 thousand MCI to 20 thousand MCI, which is approximately 20 million tenge.

Also a positive point for us is that MFIs were allowed to issue bonds and securities on the organized stock market, as well as assign rights of claim on microloans to third parties.

- To collectors?

- No. I will explain now. We had a problem, which was that MFIs could not apply to the bank for funding, since they did not have liquid collateral. Even large MFIs do not have the material base to the extent that they provide it as collateral. Therefore, the only asset of MFIs is their loan portfolio, at the moment we can not provide a loan portfolio as collateral and assign rights of claim for this loan portfolio. Accordingly, MFIs have difficulties with funding, therefore, AMFOK proposed to adopt this norm by the National Bank, he supported.

In addition, according to the adopted changes, we were given the opportunity to perform the functions of an agent of the electronic money system, payment agent, subagent, removed restrictions on the participation in the authorized capital of other legal entities. In general, these are the positive aspects.

But along with them, additional responsibilities are established for MFIs. The first is to increase the minimum amount of equity capital. The second one is the introduction of the coefficient of debt load (KDN) for microloans.

- How much will the authorized capital be increased?

- Until the exact size is determined, it will be regulated by by-laws of the National Bank. Now the minimum size is 30 million tenge. According to statistics, in our country 47% of MFIs have authorized capital from 30 million to 50 million tenge. If the National Bank increases it to 100 million tenge, this figure sounded in the concept of the bill, then for half of MFIs this will become a problem. AMFOK advocates that during the development of a by-law a company should be given a transition period so that MFIs, which currently do not have the ability to increase their authorized capital, can gradually increase their assets. One of the essential obligations established by this law is the abolition of all commissions and payments related to the issuance and servicing of microloans.

source: https://kapital.kz/expert/80213/koefficient-dolgovoj-nagruzki-dlya-mfo-privedet-k-stagnacii-biznesa.html

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