Kazakhstan bans microfinance organizations from hiding information associated with loans

The Agency for Regulation and Development of the Financial Market in Kazakhstan (ARDFM) has amended the microloan issuing rules. Starting from May 15, 2023, microfinance companies will be banned from hiding any details of their loans.

The current rules require microfinance organizations to ensure they have written annual effective rate of return with typestyle of the exactly same size as other rates mentioned in a loan agreement. Starting from May 15, this rule will be applied to all visual information associated with microloan rates.

Moreover, microfinance organizations will be obliged to put the annual effective rate of return on a separate line if loan rates are indicated in a table.

On March 10, 2023, President Kassym-Jomart Tokayev ordered the ARDFM to improve the regulation of microloan rates by June 2023. Within this schedule, the regulator should also introduce new rules for banks, microfinance organizations and debt collection agencies. They will be required to have a detailed plan for a problem loan settlement.

The ARDFM, along with the National Bank, also needs to limit the growth of debt load for regular customers with non-performing loans (past due 90+). For example, banks and microfinance organizations will be able to sell their distressed loans and micro credits only after a procedure of debt settlement.

In December 2022, President Tokayev spoke on the topic during a meeting with the cabinet. He said that there are more than one million people in Kazakhstan who don’t meet their financial liabilities. Many of them are forced to take a new loan in order to repay the previous one.

According to the First Credit Bureau, the volume of unsecured loans in the country increased by 28.3% to $16.1 billion in 2022. Even though the average loan decreased from $686 to $537, the average debt didn’t change and was $441 last year.