Microcredits could Aid Russia’s Economic Recovery
May 25 – The development of microfinancing credit opportunities could help the Russian economy recover from the recent economic downturn, stated members of the Association of Russian Banks during the first edition of the State Duma’s approval of the microfinancing bill, reports RosBusinessConsulting.
According to data from the National Institute for System Studies of Entrepreneurship (NISSE), Russia’s requirement for microcredits stands at 250 billion rubles per year, and there is a potential demand for another 150 billion rubles.
The main advantages of the microfinancing credit system are a rapid registration procedure, a simple money receiving regime for small-businesses and the self-employed, and the ability for advanced payments. As in other countries, this type of loan is suitable for small businesses and business beginners.
According to the bill, the sum of microcredits might be from 300 thousand to one million rubles between the consumer credit for an individual interest rate and the loan to usual business rate, which is extremely high for the small businessman, RosBusinessConsulting speculates. At the same time, even expensive credits are very hard to obtain by the majority of small businesses in Russia. In some regions of the country there isn’t even a bank branch where one can apply.
According to the head of the Russian Micro Finance Center, Mikhail Mamuta, the country’s micro credit market experienced financial hunger due to lack of investments in the sector. “The little money that finally comes to the sector is usually very expensive because investors used to put into them payment for additional risks,” Mamuta said.
In spite of the fact that the State Duma only this year has started to work over the bill, the de facto microfinancing market already exists in Russia and is partially regulated by civil code norms.
However, this market exists as a shadow economy sphere of informal money lending. While moneylenders are often demonized and accused of usury, their services are convenient and fast, and they can be very flexible when borrowers run into problems. Meanwhile, no taxes and duties are paid. These deals contain very big risks both for the creditor, and for the payee.
“This bill directs the sector, which is already well developed and has proved the solvency and necessity of its existing to a legal channel,” Vice President of NISSE Vladimir Buev concludes.
“Development of the micro-finance credit market can help increase the number of self-employed and population incomes. Besides that, the government will get a sensitive indicator of economic health,” said a member of the Association of Russian Banks.