Microfinancing

Microfinancing allows individuals and small businesses to quickly take out small loans for short periods of time. These are easier to obtain than bank loans, but the interest rates on such loans are usually much higher. 

Microfinance market participants are microfinance organisations, consumer credit cooperatives, agricultural consumer credit cooperatives, housing savings cooperatives, and pawnshops. 

The Bank of Russia maintains state registers of microfinance market participants, supervises their activity directly and through self-regulatory organisations, and regulates the microfinance market.

To make sure that microloans help people in different circumstances, rather than worsen their financial situation, the following restrictions on MFO loans have been imposed:

• a restriction on the maximum ratio of debt under a short-term (up to 1 year) consumer loan agreement to the consumer loan principal amount — 1.3 times starting from 1 July 2023
• a restriction on the daily interest rate— no more than 0.8% per day starting from 1 July 2023
• a ban on microloans secured by residential property.

The activities of illegal creditors who misrepresent themselves as microfinance organisations or other financial market participants remain a serious problem. Applying to them for loans is dangerous: illegal creditors may fraudulently force a borrower to sign a loan agreement with a criminally high interest rate, against the pledge of property or housing. Litigation proceedings against illegal creditors can take a lot of time and efforts. To avoid falling victim of such creditors, borrowers must check whether the organisation from which they plan to take out funds is listed in the Bank of Russia Register.