Kapital.kz: Yerbol Omarkhanov: The public has a distorted opinion about the activities of MFIs

Since the beginning of the year, amendments to the legislation of the Republic of Kazakhstan on microfinance activities came into force, including changes to the requirements for the size of the authorized capital, a new formula for calculating the annual effective interest rate was established, and a ban on loans to citizens with income below the subsistence level was introduced.

At the same time, non-bank credit organizations have the opportunity to further invest their own assets in securities and other financial instruments.

How these innovations will affect the development of the microcredit market in the future and why the problem of funding MFIs is still relevant in an interview with Capital.kz correspondent Yerbol Omarkhanov, director of the Association of Microfinance Organizations of Kazakhstan, ALE.

- Erbol, let's turn to the statistics, how many MFIs are functioning today in the Kazakhstan market and how much has the microcredit portfolio grown over the past year?

- As of January 1 of this year, the number of operating MFIs amounted to 200 entities, which is 27% higher than in 2018. The loan portfolio, according to the First Credit Bureau (PCB), amounted to 290.6 billion tenge, an increase over the past year by 37%. If we talk about the amount of loans issued by microfinance organizations, then in 2019 it reached 389 billion tenge, compared with 2018, an increase of 36.5% was observed. A total of 531,050 loans were issued. At the same time, NPL 90+ overdue debts at the end of 2019 amounted to only 4%.

- What is the share of entrepreneurial and consumer loans in the portfolio structure?

- According to the Statistics Committee of the Republic of Kazakhstan, the structure of the loan portfolio of MFIs is 85% represented by entrepreneurial loans.

In this regard, I would like to note that since some time the public has a distorted opinion about the activities of microfinance organizations and their impact on the debt load of the population. Based on the information of the PCB, the total loan portfolio of the banking sector and all non-bank credit organizations amounted to 24.9 trillion tenge, of which, as mentioned earlier, the loan portfolio of MFIs amounted to 290.6 billion tenge, which corresponds to 1.2% of total volume. That is, you understand that such an insignificant share of loans of microfinance organizations can not in any way affect the problem of high debt burden of citizens on unsecured consumer loans.

In addition, last year, as part of the execution of the decree of the President of the Republic of Kazakhstan “On measures to reduce the debt burden of citizens of the Republic of Kazakhstan”, according to the Fund for Problem Loans JSC, the state allocated 114.9 billion tenge to repay loans to the population, of which in second-tier banks 109.6 billion tenge were transferred, and in MFIs only 5.3 billion tenge or 4.4%. This also proves that the activities of microfinance organizations are mainly aimed at supporting small and medium-sized businesses, and not at purchasing goods for consumer needs.

- Since the beginning of the year, a ban has been introduced on the collection by microfinance organizations of commissions and other payments related to the issuance and servicing of microloans. At the same time, this norm did not apply to STBs. How appropriate is this amendment, in your opinion?

- Despite the fact that we are not competitors for STBs, because we have completely different niches and categories of borrowers, we believe that the abolition of the commission for MFIs and at the same time the absence of a ban on its collection for banks seems somewhat unfair. Indeed, in our opinion, equal conditions should be created for all participants in the credit market. This is also stated in the mission of the Agency for regulation and development of the financial market.

On the one hand, recent changes in the legislation on microfinancing in terms of lending have brought MFIs closer to banking regulation, for example, in calculating the debt burden ratio (DLC), the annual effective interest rate (HESA). At the same time, the maximum size of HESV for microloans is the same as that of STBs (not higher than 56%). At the same time, microfinance organizations were banned from levying payments, unlike banks.

We don’t know why this happened, but we believe that this was done unintentionally, and the situation will change in the near future. It should be noted that MFIs lending is the only type of activity: unlike the same banks, we do not attract deposits, we do not conduct payment transactions, and so on.

In addition, I would emphasize that before the introduction of amendments to the legislation, MFIs never abused the use of commissions. Earlier we had our own specific list of commissions approved by the National Bank, which we strictly adhered to.


Sourse: https://kapital.kz/finance/84888/yerbol-omarkhanov-u-obshchestvennosti-slozhilos-iskazhennoye-mneniye-o-deyatel-nosti-mfo.html

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