Ukraine to fight microfinance loan sharks, central bank says
Andriy Pishnyi, head of the NBU (Photo:Олександр Медвєдєв / NV)
The National Bank of Ukraine is preparing to target microfinance lending sharks preying on Ukraine’s vulnerable by ensuring a transparent ownership for the market of non-bank financial institutions and insurance companies, the central bank’s head has told NV.
Governor Andriy Pyshnyy said in an interview with NV Business published on March 14 that there were “a huge number of issues with the microfinance lending market that have become particularly pressing during the war.”
"We’re talking about loans at 1,400% per annum," he explained.
“70% of such loans are usually granted to cover an immediate need, or rather a person's addiction, to bet in an online casino. With the use of digital technologies, the speed of granting such loans reaches a few minutes. Therefore, the decision to take out loans under such conditions can hardly be called a conscious one. In such circumstances, it is hardly a loan — it is financial murder or slavery.”
Governor Pyshnyy added that just two weeks ago, the NBU for the first time deprived two microcredit organizations – among the 10 largest in Ukraine – of their operation licenses.
According to the NBU, the regulator will not limit itself to acting against such companies, it will also propose to amend Ukrainian law on consumer lending.
First, the maximum real daily interest rate will be set at no more than 0.8% per day, as opposed to the 3.5% current daily average.
Secondly, the NBU wants a mandate to set minimum requirements for the process of checking the borrower's credit.
"I feel that we’re going to have an interesting process," Pyshnyy said.
“After all, such irresponsible actions of financial institutions aimed at obtaining exorbitant profits without understanding the harm they cause primarily to the vulnerable population with a rather low level of income is unacceptable. And during the war, I would call it criminal.”
In September 2020, the Verkhovna Rada passed a law limiting the amount of fines on microloans.
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