Reform Index 147: Microcredit Regulation and Bankruptcy of Budgetary Institutions

In the previous round, the index was negative, -0.8 points.

Law on Regulation of Microcredit, +2.0 points

The laws protect the rights of borrowers and require banks to indicate the actual interest on the loan when advertising credit products. They must also inform the consumer about the estimated cost of third party services (insurers, appraisers), if they know it.

These and other requirements did not apply to non-bank credit institutions providing microloans. These are loans issued by non-bank credit institutions for up to one month and the amount of which does not exceed one minimum wage. The interest rates that consumers actually paid on such loans were very high, reaching 650% per annum. In providing microcredit, these institutions had advantages in competition with banks, to which the law imposed stricter disclosure requirements.

Law 891-IX of 15.09.2020 solved this problem and extended the requirements for consumer loans to non-banking institutions and obliged non-bank credit institutions to submit information on microcredit to the Unified Register of Credit History Bureau.

The provision on the impossibility of bankruptcy of budgetary institutions has been clarified, 0.0 points

In 2019, a code of bankruptcy procedures was adopted. However, a number of provisions on the bankruptcy of budgetary institutions required clarifications, which were introduced by the Law 686-IX.