Mikhail Mamuta, Improving the Framework for Microcredit and Microenterprises
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Transcript of Mikhail Mamuta, Improving the Framework for Microcredit and Microenterprises
Improving Regulatory
Framework for Microfinance:
Russian Case
Mikhail Mamuta
1
Mikhail Mamuta
President
Russian Microfinance Center
President
National Partnership of the MF
Market Stakeholders (NAMMS)
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RMC MissionTo promote and build an all – inclusive financial system through
the development of a strong, sustainable microfinance sector in
Russia that will result in:
• Access to financial services for small
businesses and unbanked population;
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• Creation of employment opportunities;
• Increase in the living standards of low-income
people and entrepreneurs
RMC Strategy for Financial Inclusion and
Microfinance Development (2008-2011):
�RMC Strategy’s become an important component of the overall
Policy & Advocacy and a solid foundation for the continued
policy reform in 2009 – 2011
�While started to develop it in 2007 we based our approach on
research of situation with Financial Inclusion in Russia
Regional disproportions in banking
Color explanation (white – less than 5% to
near to black – 80% of Moscow ). Mostly
financially underserved are rural area and
small settlements.
Who is mostly underserved financially?
Urban poor
Rural population
30
40
50
Size
of a
gro
up, m
il pe
ople
Self -entrepreneurs
Micro and small business
Urban poor
0
10
20
0 1 2 3 4 5
Size
of a
gro
up, m
il pe
ople
Social priority level
Average microcredit:
• 4,000 USD for non-banks;
• 25,000 USD for banks;
Average interest rate:
• 5 - 8 points higher than interest rates on conventional
Microfinance Market in Russia
• 5 - 8 points higher than interest rates on conventional
credit to SME;
Microloans portfolio of MFI as of 01.07.2011 - 1 billion USD
(including MFOs and Credit Unions), of which:
• business loans - 45%
• consumer loans - 55%
• 70% of microloans were provided in rural area, 60% - to
women; 25% - to youth entrepreneurs
Microfinance: Development Dynamic
in 2003 – 2010
25
30
Microfinance Sector Growth in Russia (2003 - 2010)
7
0
5
10
15
20
янв.03 янв.04 янв.05 янв.06 янв.07 янв.08 янв.09 янв.10 янв.11
Influence of the crisis and lessons
learned
• A need for smart regulation and supervision that would
set appropriate standards of MFI performance, financial
sustainability, consumer protection, transparency and
insolvency procedures;
• A need to develop Industry Standards, implemented by
majority of MFIs;
• A need for independent institutions that would be able
to estimate healthy of the sector and help to decrease
risks of MFI.
What has been done since 2009?• Legislation
- Credit Union and Microfinance laws (2010 and 2011)
- Special Taxation Privileges for MFI (in process)
- Special Insolvency Procedures for Credit Unions (in process)
• Regulation and Supervision
- Financial rates for MFI set under both special laws
- Any MFI should develop Consumer Policy available to clients- Any MFI should develop Consumer Policy available to clients
- Delegated supervision of credit coops, direct supervision of MFOs
• Industry Standards
- “Russified” SMART Campaign Principles and Ethic Code for MFI
• Institutional development
- Russian Rating Agencies come to MF sector
- MFI are joining credit bureaus – to avoid over indebt nesses
- Loans and Savings Insurance - is a new opportunity to share risks
Measures Implemented
in 2009-2010: Microfinance
Federal law of July 18, 2009 on Credit Cooperatives:
- Defines a credit cooperative, its registration and liquidationprocedures
- Appoints a government regulator (MinFin)
- Defines 8 financial and operational performance standards to limit
10
- Defines 8 financial and operational performance standards to limitrisk concentration
- Credit coops are required to join a self – regulated organization (SRO) for delegated supervision
- Legal framework for a multi-tiered system of credit cooperatives
- Protection of shareholders and depositors
Measures Implemented
in 2009-2010: Microfinance
Federal law of July 2, 2010 on Microfinance Activities and Microfinance Institutions:
- Defines microloan (K33 USD), microfinance institution
- Establishes procedures for acquisition and loss of an MFO status
- Defines rights and responsibilities of MFOs
11
- Defines rights and responsibilities of MFOs
- Risk management and control preventing financial piramids; limited depositary – taking rights are in place; must maintain capitaladequacy and liquidity vis-a-vis other borrowings
- Disclosure and consumer protection standards for MFOs
- State regulation and supervision
Government’s support to microfinance
sector – legislation’s “follow up”
• Based on new legislation and better visibility, microfinance was recognized by the Government as an effective tool to reduce unemployment through support of new and existing MSE’s
• Anti– crisis support of microfinance included (2010-2011):• Anti– crisis support of microfinance included (2010-2011):
o Involvement of MFI to state program for unemployed people “Start your own business” – more than 7000 start ups from unemployed were supported by MFI between July 2010 – June 2011
What's next? Possible expectations in the end of 2012
• Total number of MFOs may increase from 300 in 2007
to 700-800
• Total number of credit cooperatives and SROs may • Total number of credit cooperatives and SROs may
increase from 800 in 2007 to 1200 - 1300
• Aggregate portfolio of microloans is predicted to grow
to 1,3 – 1,5 bln. USD
Challenges:
• Pay Day Loans (PDL) companies associate themselves with
MFOs. What should we do with a policy risk related with
extra – high interest rates?
• A lot of start-up MFOs can create industry risks if they are • A lot of start-up MFOs can create industry risks if they are
unable to perform in accordance to the microfinance law
standards
• Should Social Performance Indicators become an obligation
for the MF market? Otherwise, extra commercialization
without social goals can make sector too greedy. 11
The Role of Microfinance in SME
Development
During G20 Business Summit in Seoul in November 2010,
Russian President, Mr. Medvedev, spoke on the Role of
Business for Sustainable and Balanced Growth and he
emphasized the following:
• "Microfinance has become an important element of • "Microfinance has become an important element of
Russia's financial system, its volumes have grown,“
• "We will make sure this work continues in our country,“
• "Expansion of microcredit and availability of innovative
financial services will help small business create new
jobs and thus help fight unemployment”. 15
«Russian Microfinance Center»
107031, Moscow, Petrovka str., 15/13, building 5, office 500
Tel./Fax:
+7 (495) 258-87-05, +7 (495) 258-68-31, +7 (495) 258-87-09
Web and E-mail: