Financial literacy of citizens still tends to zero
Where do Russians run when they run out of money? They used to go to their parents, friends, or, in extreme cases, neighbors. Then, in the fat zero years for our country, many switched to banks, indiscriminately, distributing loans literally right and left. But now access to such loans is becoming more difficult – large borrowers carefully check the client’s credit history.
“Dark spots” in the form of overdue interest on already borrowed amounts put an end to the allocation of a new loan. Debt-entangled people are looking for salvation in microfinance organizations, whose services are growing by leaps and bounds. Today, almost every fifth borrower in Russia has a debt to MFIs. Of course, you can talk about the organic transformation of the financial market of our country, but the essence of this philosophy will not change: when there is not enough money even for bread and butter, and large banks turn up their noses from you because of delays, you have to turn to small usurers who strive rip off debtors at exorbitant prices.
To begin with, dry statistics. In the first quarter, the share of Russians who have loans only from microfinance organizations reached 7.6%, and those who received loans from both banks and MFOs simultaneously – 9.1%. This is the maximum since 2017, when such calculations began. The peak for the consumer lending market was the period from June to October 2020, when a significant part of “pure” bank clients moved into the category of “mixed” ones, having decided to take microloans. MFOs were in a trend, as last fall MFOs softened the requirements for borrowers and to some extent were able to meet the deferred demand of citizens for credit funds. In this sense, the banks actually lost to them, not being able to navigate the situation in time.
In addition, MFOs began to actively develop medium-term loans, which are issued not for a couple of weeks, but for several months at 40% or even 30% per annum. And this is already quite comparable with the rates in the banking sector.
You can cite many similar examples, but by and large these are particulars, technical nuances. The tendency is that during the pandemic, many Russians who have lost their wages and incomes have a “cash gap” that continues to grow. There is no money, but the costs are still valid. As a result, people have to take out loans for urgent needs. According to the Bank of Russia, by the end of 2020, the population’s debt on microloans increased by 10%, to 188 billion rubles. In total, MFOs approved the issuance of loans for 417 billion rubles for the year.
Of course, MFIs are not competitors to banks, which have an incomparably larger loan portfolio. But the fact is that the history of microfinance organizations does not fit into the framework of official statistics. It has much more purely human, truly dramatic, if not tragic moments. And this is alarming for the Central Bank, which has been working for several years to limit the cost of microloans and withdraw unscrupulous players from the market.
The question to what extent this work solves the problem remains open. Yes, as of 2019, Russia has a new limit on the maximum debt on loans for a period of up to one year. Interest, penalties and other charges on such a loan cannot exceed the debt itself by more than 2.5 times. Upon reaching this amount, the calculation of payments should be stopped. So, a borrower who has borrowed 1 thousand rubles, at no point in time will owe the lender more than 3.5 thousand (principal debt plus accrued interest).
Well, that’s great. However, there are hidden circumstances, certain generic features of MFIs that are unlikely to ever change. This is a classic example of existence “by concepts.” Thus, according to Pavel Medvedev, Doctor of Economics, the federal law on collectors does not always work. The existing system of relations with debtors in Russia boils down to the fact that debts are collected either by MFOs or collection agencies. Often this “dirty work” is performed by people with low salaries, sometimes burdened with loans and mortgages themselves. It happens that they pass “bad” debts to a familiar bandit or they themselves act in such a role. Accordingly, if the collector does not act as an official, if he does not represent himself, then he does not bear any responsibility. The bailiff service does not interfere, and no criminal cases are initiated.
The situation is aggravated by the inability of people to calculate their spending, the habit of living in the moment. Due to low financial literacy, they take out a loan at a high interest rate for a long term. In addition, unlike banks, MFOs for the most part inform clients in passing: many do not know the final loan rate to the last. But microfinance specialists provide money at lightning speed, even if it is not large sums. For citizens burdened with several loans, “bad debts” and found themselves on the black list of the banking system, this is a real, albeit momentary, salvation. And then – get out of the hole as you want. The state, unable to slow down the process of degradation of the real incomes of Russians, which has been going on since 2014, is clearly not an assistant here.
Newspaper headline:
Pawnbroker from the Underworld
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