Starting July 1, a new Russian law takes effect, aiming to curb the cost of microfinance by lowering the maximum daily interest rate on microfinance institution loans. This change matters for borrowers across the country because it sets a clearer ceiling on how much one can owe over the life of a microloan and reduces the risk of spiraling debt for everyday needs. The legislation, signed by President Vladimir Putin late in 2022, signals a shift toward greater consumer protection in the small-loan market, where rapid borrowing has become a common option for households and small businesses alike.
Under the new rules, the marginal rate on microloans is reduced from 1% per day to 0.8% per day. This adjustment translates into a cap on the annualized cost of such loans, with the total borrowing cost no longer allowed to exceed 292% per year. Previously, the ceiling hovered at 365% per annum, a figure that drew criticism for its steep burden on borrowers. By lowering the daily rate and the annual cap, the law aims to create more predictable repayment terms and lessen the potential for surprise increases in debt when borrowers miss a payment or incur additional fees.
Another significant tightening concerns the overall debt limit tied to a microloan. The maximum allowed debt relative to the principal loan amount has been reduced from 150% to 130%. Once a borrower’s outstanding debt hits 130% of the original loan, MFIs may no longer pursue fines, penalties, or any additional charges tied to the compliance of the loan. This change is intended to curb punitive fees and to provide a clearer, more transparent framework for what borrowers owe over the life of the loan, reducing the risk of sudden, unaffordable settlements that can trap borrowers in cycles of debt.
The reforms also extend to payday lending products, covering loans with a maturity of up to 15 days and a maximum nominal amount of 10,000 rubles. In these short-term credits, the daily rate has been cut from 2% to 1% per day, and the maximum loan amount has been cut from 30% of the consumer’s income to 15% of income, depending on the lender’s assessment and the applicable policy. With a 10,000-ruble loan, the revised framework can lead to a total debt situation around 11,500 rubles if the maximum terms are met, accounting for the new rate and cap. These provisions are designed to prevent excessive rapid borrowing that can create immediate financial stress for borrowers who rely on quick cash for urgent needs.
In February, the Federation Council’s Committee on Economic Policy put forward a proposal to the Ministry of Finance to raise the upper limit on microcredit volumes for small and medium-sized enterprises from 5 million rubles to 10 million rubles. The objective behind this suggestion is to support entrepreneurs who require modest funding to maintain cash flow or to bridge gaps in revenue, while still maintaining safeguards intended to prevent reckless lending. If adopted, this increase could open doors for more SMEs to access essential working capital, potentially influencing local economies and small-business resilience across the country.
Industry observers have noted that new safeguards are essential in the Russian lending landscape. Legal professionals have previously warned about new fraud schemes where unauthorized individuals attempt to obtain microcredits on behalf of citizens at rates approaching 365% per year. The emergence of these schemes underscores the importance of robust verification processes and consumer awareness as the reforms take effect. In parallel, regulators emphasize that lenders must adhere to the revised caps and debt limits, ensuring that lending practices align with the updated protections while still serving the legitimate financing needs of households and smaller firms. These developments reflect an ongoing effort to balance access to credit with responsible lending and borrower protection across Russia.