Micro-credits have three main dangers: high cost, short-term, and ease of obtaining them. About this “Lente.ru” said Candidate of Economic Sciences, financial expert Vladimir Grigoriev.
He explained that the most popular type of microloans are advance loans at a rate of 1-1.5% per day, and an applicant will repay them two to three weeks after receiving the money. The problem, according to the economist, is that borrowers often go into delay and then it becomes more difficult to repay the microloan.
“Gradually one begins to withdraw into this swamp. Moreover, many people take the latter to solve the problem with a loan, and then the classic story that has been told over and over in the literature begins.”
He explained that microfinance institutions (MFIs) offer interest-free loans to customers for a short period of time. The economist described it as a marketing gimmick and warned that such a loan could involve uncomfortable repayment terms.
Grigoriev added that mainly borrowers who are not given loans by banks, that is, those who are in financial difficulties, resort to MFIs. Grigoriev noted that it is more difficult for them to repay the debt.
From January 1, 2023, the Central Bank of the Russian Federation tightened the rules for issuing MFIs. The Central Bank of Russia has introduced macroprudential limits for market participants. that is, quantitative restrictions on the granting of loans. For microfinance institutions (MFOs), the share of loans with PTIs in the total volume of spending (for consumer loans and line of credits, when more than 80% of revenue is allocated to repayment) should not exceed 35. % for each loan type. In the third quarter of 2023, the figure will be 30%.