; Will MFIs find their place in the banking market?

Professional participants told  LS what they think about the regulator's initiative to transform large MFIs into banks and what this will bring to the market.

The head of the Association of Microfinance Organizations, Yerbol Omarkhanov, recalled that MFOs specialize exclusively in supporting SMEs, mainly living in rural areas. Therefore, in the new status, they will retain this profile, which will have favorable consequences for this segment.  

"The transformation of  MFIs into a bank will not become widespread, but will enable the most financially stable, stable and large organizations to continue their activities in the status of a bank. At the same time, the transition process should take place on a general basis, without any concessions for MFIs," he believes .

Omarkhanov is sure that such  changes are  necessary first of all for clients of microfinance organizations, especially those living in rural areas.

"We are seeing an increased need for borrowers to expand the financial services provided by MFOs. These are transfer operations, opening and maintaining bank accounts, accepting deposits, and the like. The transformation will be effective in terms of developing financial inclusion, wider involvement of the population in the field of financial services, especially in rural areas Therefore, it will have a multiplier effect on the economy,” explained the head of AMFOK.

At the same time, Omarkhanov stressed that it would be difficult for microfinance organizations to withstand high competition, given that banks have made great strides forward in introducing advanced digital, innovative technologies and services.

“It is more important to provide clients with a wide range of financial services, rather than compete with banks, and even more so with large players. MFIs operate in an established market segment, occupy a certain niche and lend to those clients who are not particularly interested in financial institutions. will continue to provide small amounts to support SMEs. This is the main difference between microfinance products and traditional banking products," he said.

In turn, commenting on the initiative of the Financial Market Regulation Agency, Jusan Invest analyst Meirshat Turemuratova recalled that in Kazakhstan, MFIs occupy niches that are not fully covered by banks. As, for example, support for SMEs in rural areas.

"On the other hand, the ARRFR definitely sees that individual microfinance institutions have grown into large companies and begin to bear systemic risks. At the same time, they continue to report on limited regulation, avoiding the implementation of prudential standards for commercial banks. From this position, the desire of the ARRFR seems understandable on the transformation of their businesses and, possibly, on their additional capitalization," she said.

In her opinion, the transformation of some MFIs into commercial banks will also solve the issue of funding by opening and maintaining customer accounts. And this, in turn, will lower interest rates on loans. At the same time, Turemuratova added that the arrival of new players is unlikely to bring anything new to the market, but will make the financial sector safer and its products more accessible.

In the meantime, speaking about the benefits of transformation, analysts of the Association of Financiers considered that for consumers of services this means more attractive price and non-price lending conditions. As well as speeding up the service, launching new products and services, reducing various costs. But for the segment of small banks - increased competition, especially in the provision of payment services, attracting deposits, and so on.

"At the same time, the quantitative indicators of the sector will not undergo noticeable changes due to the relatively small size of the MFO market (their assets account for 1.8% of the assets of banks)," the AFK explained.

MFI Solva also expressed its opinion on this matter. The general director of the company, Anna Maksimova, has previously announced the desire of the organization to retrain as a bank. 

"We will be able to provide not only loan products, but also related products. For example, business needs insurance, tax reporting services, and so on. I note that the goal of MFIs is to help SMEs in various directions, but the main focus is on micro and small businesses ", she reported.

At the same time, Igor Dodonov, an analyst at Finam, expressed concern that the entry of MFOs into the banking market could  adversely  affect the country's financial stability.

“Citizens with poor solvency who cannot get a loan from a regular bank mainly apply to such organizations. This can lead to a further increase in the debt burden of the population. Ultimately, this situation can cause a significant increase in the number of bankruptcies of individuals and, as a result, an increase in social tension," he said.


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