The central bank intends to reduce the number of microfinance loans issued to one borrower to the most common types of citizens, often called “payday loans”.
Payday loans will be limited in quantity
It is proposed to do this by the efforts of the market participants themselves – by self-regulating organizations and credit cooperatives, by changing and supplementing the basic standards, which, in turn, are mandatory for any microfinance company.
SROs themselves, better than others, will be able to develop all the necessary detailed requirements, both for borrowers and for companies issuing loans before paycheck. Among the innovations should be indicated the number of microloans for a short period, which will be allowed to issue to one borrower. The conditions for the possibility of extensions will also be described. The proposed changes will be submitted to the Central Bank for approval.
Opinion of some microfinace organizations about Payday Loans
Microfinance organizations have expressed positively about this limitation. Moreover, innovations should simplify the task of assessing the risks of the company associated with the issuance of such loans.
Loans before paycheck
For the time being, only such types of services will be affected as loans before paycheck – microloans that are issued for a short time. As for the larger loans that are issued by the MFI, it is still considered impractical to introduce such requirements.