The key developments in the MFO market in 2023 were related to the issue of household over-indebtedness and the subsequent regulatory restrictions on the growth of consumer lending, noted Yerbol Omarkhanov, Director of the Association of Microfinance Organizations of Kazakhstan (AMFOK), in an interview with Kapital.kz.
«Given that the microcredit market is not homogeneous and can be условно divided into MFIs providing loans for the development of small and medium-sized businesses and companies specializing in consumer lending, the main changes over the past year primarily affected the second segment», - he explained.
This is not surprising, as the consumer microcredit market demonstrated significant growth in 2023. According to Yerbol Omarkhanov, the volume of PDL loans issued (microloans with a term of up to 45 days and an amount not exceeding 50 MCI) more than doubled compared to the same period in 2022, reaching 499 billion tenge by the end of the third quarter of 2023.
Thus, in an effort to curb the aggressive growth of unsecured consumer lending and overdue debt, the financial regulator introduced a number of legislative restrictions throughout the year and actively conducted inspections to ensure compliance with the law, the head of AMFOK noted.
«At the beginning of the year, the maximum remuneration rate for PDL loans was differentiated and reduced from 20% to 15% for microloans exceeding 30 times the MCI. A cap on the daily interest rate was introduced, which must not exceed 1%. A prudential standard for overdue debt over 90 days was set at 20%, and capital adequacy requirements were strengthened», he specified.
In addition, to reduce fraud in online lending, dual authentication was introduced for issuing microloans electronically.
«Currently, as far as we know, a package of legislative amendments is being prepared that will significantly restrict unsecured consumer lending», added Yerbol Omarkhanov. Parliamentary hearings on this issue were held in October.
At the same time, he noted that there were no significant changes in 2023 regarding the regulation of MFI loans for entrepreneurial purposes. «This segment operates steadily and reliably, performing an important socio-economic function by increasing business activity and supporting SMEs, particularly in rural areas», he emphasized.
Nevertheless, Yerbol Omarkhanov expressed concern that in the fight against household over-indebtedness, excessive barriers could be introduced for business loans. «Otherwise, as the saying goes, “we may throw the baby out with the bathwater”, which would create unjustified legislative restrictions for traditional MFIs financing microbusinesses», he commented
According to him, many market participants already understand that chasing short-term profits while ignoring restrictions can lead to the loss of their business. Therefore, companies that are focused on long-term operations in the market are beginning to pay more attention to developing the social aspects of their activities, improving service quality and corporate governance, Yerbol Omarkhanov noted. This trend is being set by large traditional MFIs that have been financing the real sector of the economy for more than 25 years, he added.
For its part, AMFOK, with the support of the International Finance Corporation (IFC), conducted training this year on the implementation of ESG principles in MFIs. The Association also joined the memorandum on improving financial literacy among the population «Qaryzsyz Qogam», he said.
«In our view, there are no serious or significant problems for MFIs that operate transparently and responsibly. The state has created favorable conditions for the development of this business, a regulatory framework has been established, and any legislative amendments are discussed with the market in advance through constructive dialogue», emphasized Yerbol Omarkhanov.
In his opinion, the main problems arise among those players who ignore regulatory requirements.
Speaking about forecasts for the coming year, Yerbol Omarkhanov noted that with the adoption of the planned legislative amendments, the growth rate of consumer lending is likely to decline significantly. At the same time, risk management policies and procedures in MFIs will continue to strengthen, the issue of transition to self-regulation will be considered, and risk-based supervision of microfinance organizations will be gradually introduced.
Ultimately, all this will lead to the displacement of unscrupulous players from the market, believes the head of AMFOK.
«As for traditional MFIs working with SMEs, we hope that the state will gradually expand their potential, as microfinance is one of the most effective tools for financing the real sector of the economy», he said.
Yerbol Omarkhanov also noted that this year some MFIs have actively begun the process of transforming into banks. This opportunity emerged after the President of Kazakhstan, Kassym-Jomart Tokayev, signed the law «On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Issues of Regulation and Development of the Insurance Market, Securities Market and Banking Activities».
«We hope that new banks will soon emerge in the financial market from among large MFIs, continuing their core focus on financing microbusinesses», concluded the Director of the Association of Microfinance Organizations of Kazakhstan.
Source:
https://kapital.kz/finance/121786/v-2023-godu-nablyudalsya-agressivnyy-rost-potrebitel-skogo-bezzalogovogo-kreditovaniya.html
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