“I see the market is in need of standards. We have recently drafted the SRO Act. It has been submitted to the government and I hope it is passed next year. The Act will force microfinance companies to become SRO members, and these SROs will register business standards with the Central Bank, primarily information disclosure in the process of lending to private individuals”, he told Business FM.

He also said that microfinance needs improved infrastructure. Often, high loan rates in microfinance are due to high cost of borrower analysis and small short-term loans. “There is some leeway here, costs can be reduced, which will translate into lower interest rates”, Shvetsov said.

The Head of FMS added that some microfinance companies’ business models are based on the ‘good borrower covers the bad’ principle, which leads to “higher rates and injustice”. “We will attempt to force microfinance, through SRO pressure, to pay more attention to risk analysis, and create infrastructure mechanisms to enable them to do so quickly and efficiently”, said First Deputy Chairman of the Bank of Russia.

Speaking on raising private deposits by microfinance companies, Shvetsov opined that credits to microfinance are not an ‘amateur investor’s instrument’. According to available microfinance reports, even experienced investors are unable to assess the financial standing of a company, you have to know the owners and their business, he says.

Shvetsov also highlighted the importance of preserving trust in the financial sector. “The task of the CB as an authority charged with maintaining trust in the financial market, along with its performance – is to disqualify players who undermine this trust”, he said.

First Deputy Chairman of the Bank of Russia stated that the Bank of Russia has set up a special department “to counter insider trading, market manipulation, financial pyramids and other malpractices”. The Bank of Russia will investigate these cases and forward them to the police for prosecution.

Project Group №1