Think three times: The State Duma is attacking the microcredit market with a new law
The State Duma is ready to radically change the rules of the microfinance organizations (MFOs) market. The bill, supported by the Financial Market Committee, imposes significant restrictions on the issuance of loans and overpayments. Such measures are aimed at protecting citizens from dangerous debt traps and over-crediting, common among borrowers. Experts warn of a new wave of demand for micro-loans due to behavioral changes, especially among young people: status and impressions exceed savings, as was the case with their ancestors. Details can be found in the Izvestia article.
The law against the debt trap
The main innovations of the bill are the introduction of a three-day pause before issuing a new microloan after paying off the previous one, Anatoly Aksakov, chairman of the State Duma Committee on the Financial Market, told Izvestia. This measure is designed to prevent MFIs from reissuing the old microcredit, including it in the body of the new debt on less favorable terms for the borrower.
"Also, starting in 2027, MFIs will not be able to issue more than one loan to citizens with a full cost of over 100% per annum," says the parliamentarian. The maximum overpayment on micro-loans will be reduced from the current 130 to 100%.
During the transition period from July 1, 2026 to January 1, 2027, the limit will be two loans with a total value of no more than 200%. Currently, there are no such restrictions, he recalled.
The innovations are not aimed at the microloan market, but are designed to reduce the chance of citizens falling into a debt spiral, especially in the regions.
"Today we are faced with a situation where microfinance organizations formally comply with the letter of the law, but circumvent its spirit by imposing new loans on citizens under the guise of refinancing," said Olga Epifanova, Senator, arbitration manager of the Ministry of Justice of the Russian Federation. — In fact, this leads to looping debts and further burdening people who are already in a difficult situation.
According to her, the bill, which restricts the possibility of issuing a new loan immediately after the closure of the previous one, is a step towards restoring order in the market and protecting Russians from abuse.
"We must stop the practice of turning a microloan into an endless debt trap," the legislator stressed.
The growth and reasons for the popularity of microloans
Falling incomes, the rigidity of banking requirements and the lack of alternatives to lending make microfinance institutions a tempting option for many Russians.
According to Romir researchers, 68% of Russians save on essential goods, more than half have abandoned their usual products or have chosen cheaper analogues, says Polina Dontsova, an analyst at FinIQ (channel of the National Financial Association).
— All this indicates a drop in real disposable incomes of the population. Against this background, banks are reducing retail lending due to the growth of "bad" debts. They only give money to customers with an impeccable credit history, and most of the population is simply cut off from the banking market.
As a result, the MFO's microloan portfolio grew by 37% in nine months, reaching 628 billion rubles, the expert notes.
"The demand for micro—loans is also growing due to behavioral changes, especially among young people," adds Svetlana Solyannikova, Vice—rector of the Financial University. — Young people are used to living "here and now", preferring status and impressions to savings. In addition, MFIs offer convenient mobile applications, bonuses and flexible terms, which makes them attractive.
Polina Dontsova cites data from an analysis of the financial marketplace, according to which 77% of potential borrowers have a bad credit history, so banks simply refuse to issue them.
— MFIs are convenient and accessible where banks are often absent. Fast registration, minimal paperwork, and algorithms that do not require proof of income make microloans in demand," Solyannikova confirms.
A high proportion of citizens without confirmed official income and a great faith in myths, rather than in a real analysis of microfinance, explains the growth of microloans, Director General of the Association for the Development of Financial Literacy Elman Mehdiyev.
— It will not be possible to limit the price of money as long as there is demand. We need to regulate the debt burden," he said.
Debt looping and re-crediting
The danger of massive microloans is compounded by the fact that MFOs continue to secretly refinance debts, widening the debt spiral, says Alla Khrapunova, an expert at the Popular Front For Borrowers' Rights project.
— In practice, there are many cases when, having borrowed 25 thousand rubles, a person owes about half a million in six months. MFOs are building "chains" of re-crediting, bypassing restrictions on the accrual of interest on delinquency. The new loan covers the body of the old one, the interest and adds its own percentage, which is why the debt is growing rapidly," she explains.
The bill on a three—day pause is a harsh measure necessary due to the behavior of the market players themselves, emphasizes Alla Khrapunova. But without the exchange of information between MFIs through credit bureaus and stricter controls on illegal lending, this measure may remain formal.
— Despite the limitation of overpayments to 100%, the debt spiral may not stop, as a new loan is formed for a larger amount. This may only slow down the growth of debt a little, but it will not solve the problem," agrees Igor Dodonov, an analyst at Finam Financial Group.
The role of the Bank of Russia and the state
Government agencies and the Central Bank are trying to balance borrower protection and financial accessibility, but they are doing it inconsistently.
—The Bank of Russia carries out formal supervision and stricter requirements for MFIs, revoking licenses and adjusting limits," says Vladimir Vinogradov, CEO of Pro—Vision Communications. — However, at the same time, it allows for a market with extremely high rates, which undermines confidence in the regulator.
In this sense, the role of the regulator is twofold, adds Mehdiyev.
— The Central Bank justifies high rates by saying that if MFOs are banned, borrowers will go to illegal immigrants, and this is more dangerous. Thus, the "financial accessibility" racket creates conditions under which debt traps flourish, he believes.
However, there are still few directions for alternative credit models, adds Vladimir Vinogradov. The state does not have the resources to develop large-scale social credit projects for the poor, the expert believes.
Izvestia sent a request to the Central Bank of the Russian Federation.
Foreign experience and Russian realities
International practices show that strict restrictions and rules can really protect borrowers.
— In the USA and Canada, limits on annual rates are set at 25-36%, and in some states microloans are even prohibited. In the UK, the FCA limits the overpayment of a loan to 100% of the amount, and the daily percentage should not exceed 0.8%,— says Polina Dontsova.
In Germany, there is a law on usury that prohibits transactions with rates significantly higher than the average market rate, recalls Vladimir Vinogradov.
"In Russia, the powerful lobby of MFOs is holding back the introduction of such restrictions," the expert says. — The government's priority is the "availability" of loans at any price, which allows the market to remain very expensive for borrowers.
Financial illiteracy and hopelessness are a double challenge
The question remains, why do Russians still turn to microfinance organizations, despite the risks? Experts see several key factors.
"This is not only financial illiteracy, but also deep despair,— explains Mehdiyev. — Borrowers are often aware of the risks, but are forced to choose between an expensive loan or no money at all.
There are many among those who find themselves in debt who understand the true cost of microloans and their consequences, says Dmitry Trepolsky, a business expert at Pronline. Aggressive marketing reduces the perception of risk, and simplicity of design promotes impulsive decisions, the expert notes.
— For many MFIs, this is the last chance to get money for urgent needs, for example, treatment or repairs, — says Igor Dodonov. — Here we are not talking about the choice of "good / bad", but about the struggle for survival.
Petr Shcherbachenko, associate Professor at the Financial University, summarizes: low financial literacy and limited financial airbag lead to debt pits and dependence on new loans.
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