A bill requiring microfinance companies to review loan terms has been passed in parliament. Experts say that this will radically change the approach in the consumer loan market.
The adoption of Bill 9422 on improving government regulation of financial services markets will force microfinance institutions (MFIs) to change their business models. writes about it Focus in a new article “Goodbye, fast loan. How Parliament plans to reassure lenders 1000% a year”.
In particular, in the draft law numbered 9422, deputies propose the following:
- Enter the “consumer loan daily interest rate” indicator.
- to organise its maximum size is 1% of its total size per day.;
- prohibit the lender and new lender from demanding payment of payments not specified in the contract and/or not taken into account in calculating the daily interest rate;
- Authorize the NBU to establish additional requirements for assessing the creditworthiness of the borrower and the components of the daily interest rate calculation;
- oblige the lender assessing the credit worthiness of the consumer, taking into account the requirements set by law.
Approaches as in banks: what awaits the consumer loan market?
Experts say that if initiative 9422 is adopted, it will force MFIs to change their approach, bringing them closer to banking, almost limitless and almost instantaneously, and around-the-clock lenders who only demand a passport and code from the borrower. .
“The consumer loan market is on the verge of a major revolution,” says Yury Melnichuk, member of the board of directors of Unex Bank and director of risk department. In fact, according to this model, few conscientious borrowers cover the losses incurred due to non-payment of a dozen loans.“.
If the document is accepted, the marginal cost of advance loans will decrease from 1000% to 365% per annum.
If the document is accepted, the marginal cost of quick loans will decrease from the current 1000% to 365% per annum. The expert said that the rate cuts will happen gradually and this should soften the transition for market players. During the first three months, the maximum daily interest rate on consumer loans will be limited to 2.5% per day, and the rate will be 1.5% per day for the next three months. Such dramatic changes will require time and significant resources for MFIs.
“It is necessary to understand that interest is not a number in the system, but a fundamental parameter for processes. In order for innovations to be implemented, companies must establish credit products, information systems, scoring systems, etc. Alla Savyuk, President of the All-Ukrainian Association of Financial Companies (WAFC), said,
Currently, the business community is analyzing the proposed changes, examining their impact on current business models, and preparing their informed proposals for the bill.
Recall that the parliament passed bill 9051, which proposes the mandatory restructuring of consumer obligations on loans that are not secured during the martial law period and within 30 days of its cancellation. This should solve the problem of accruing excessive and disproportionately high interest on loans to consumers who live or live in (where) hostilities or areas under temporary occupation.
Focus He also wrote that despite the active recovery of retail loans to the public from MFIs in the last three quarters, the market situation has not yet recovered to pre-war levels. In particular, the number of loan agreements concluded with real persons, including financial loan terms, increased by 18 percent in the first quarter of this year, but decreased by 16 percent and 43 percent compared to the 1st and 4th quarters of 2022. quarter 2021.
Source: Focus
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