Microfinance organizations: list. A microfinance organization is ...

Today we will talk about what the microfinance organizations (MFIs) are, what kind of money they are, who controls their work, and what benefits the borrower can get from them. But first of all it is necessary to determine the term itself.

What is microfinance?

Immediately after its appearance, the term "microfinance" referred to the lending services that were provided to representatives of small and medium-sized businesses. This method was more affordable than the procedure that needed to be taken in order to get a loan for business in an ordinary bank.

However, over time, this term has lost its original meaning. MFIs still continue to issue business loans, but now their clients are also private individuals. They are given the opportunity to receive a microloan - this is an instant loan, for which there is no need for a thorough analysis of the financial condition and creditworthiness of the borrower.

MFIs - what is this?

Thus, a microfinance organization is a non-banking organization whose activities are aimed at issuing loans to legal entities and individuals. The scheme for issuing these loans is much simpler than in the bank. Like any other organization, the full-fledged work of the MFI requires capital. A microfinance organization can attract resources from various sources. First of all, these are high interest rates from loans provided, as well as cooperation with investors. They can be both private individuals and banking organizations. In the latter case, the MFI is a subsidiary of such a bank.

It is quite easy to learn about MFIs among other financial institutions. They attract attention with their advertising slogans in the spirit of "Money to pay," "Credit for 15 minutes," "Quick money," etc. Their services are distributed in places of mass congestion. Often such organizations have no more than 1-2 employees.

Types of MFIs

Each country determines its types of MFIs through a legislative framework. It also determines the form of their registration. The main criterion, which indicates that you are a microfinance organization, is a simplified system of lending. Thus, all legally operating non-banking structures that carry out lending under such schemes can be conditionally divided into such types:

• Financial group.
• Entrepreneurship Support Fund.
• Credit union.
• Credit society.
• Credit agency.
• Credit Cooperative.

As already mentioned, many MFIs are subsidiaries of banks. Such an activity is advantageous for the latter. The fact is that the bank has the opportunity to issue loans, interest rates for which are several times higher than those that are issued directly to them. Naturally, there is a big risk that such a loan will remain outstanding.

Who controls the work of MFIs

The main body that controls the work of MFIs is the Central Bank of the state in whose territory the organization exists. Licensing of these facilities is also carried out by the Central Bank. Microfinance organizations should also be included in the state register. In addition, they can obtain permits in those institutions that control the work of other financial institutions.

ФЗ "On microfinance organizations"

If to speak about Russia, then this direction in business appeared not very long ago. Accordingly, the laws that regulate their activities were adopted only a few years ago. At the moment, there are two laws that regulate microfinance:

• FZ "On microfinance activities and microfinance organizations" (adopted on 02.07.2010).
• FZ "On Amending Certain Legislative Acts of the Russian Federation in Connection with the Adoption of the Federal Law" On Microfinance Activities and Microfinance Organizations "(adopted on 05.07.2010).

In accordance with the named laws, there are some limitations of the forms and laws of the contribution. If we talk about the amount of the loan issued, it should not exceed 1 million rubles. At the same time, it is forbidden to issue a loan in foreign currency, regardless of the amount. In the case of investment, the bank can accept a deposit of at least 1.5 million rubles (from one depositor).

In addition, all microfinance organizations in Russia must ensure that information on financial transactions of borrowers will be preserved. This means that when issuing a loan, an MFI does not have the right to require the provision of contact numbers for "friends" who can be informed of the delay in payment under the loan agreement if it is not possible to contact the borrower himself.

Loans

There is an opinion that the MFI is ready to give credit to almost everyone who will turn to it. But this is a misconception. Before working with a client, any organization should find out the client's creditworthiness. To do this, use credit scoring. It is this system that allows a potential borrower to obtain a decision on granting or refusing a loan within 10-15 minutes. In addition, this service is available even in online mode.

Credit scoring is a system for analyzing the borrower's solvency, which is based on a certain algorithm and is carried out by processing personal data. The result of processing this data is expressed in points. Almost all microfinance organizations use this scheme of solvency of the client. Loans, therefore, are not issued by an MFI employee, but by a computer program, since the decision depends only on the results of its work.

If the potential borrower is solvent by the results of credit scoring, then it can receive a loan almost on the same day. However, the amount for which a loan is issued is often less than the amount that was originally claimed. The fact is that with the help of credit scoring you can more realistically assess the client's solvency than based only on his personal opinion, which is often overpriced.

Interest on the loan is calculated for each day, not for a month or a year, as it happens in banks. Therefore, in most MFIs, loans are issued only for two weeks or a month. Otherwise, overpayment on the loan may amount to an amount that is two or three times more than that received by the borrower.

Investments

It is necessary to talk in more detail about where the MFI gets its capital from. A microfinance organization can cooperate with investors. Since the state does not give its guarantees for deposits in MFIs, it is quite dangerous to invest their money in them. There is a rather big risk that the depositor will not only not receive interest, but will lose his contribution. Investments in microfinance institutions have a number of differences from bank deposits :

1. The income that can be obtained from such investments exceeds the bank by 1.5-2 times.
2. The risks of investments, respectively, are also significantly higher.
3. In case of investing in MFIs, early withdrawal of the deposit is impossible in most cases (exception - this possibility is additionally stipulated in the contract). In banks, this right is guaranteed to the depositor by law.
4. An investor who has received income from an MFI must pay the state income tax. Deposits in banks are subject to taxation only in some cases.

As you can see, the profitability of such investment is quite high, but the risk is maximum. In addition, it is significantly increased during financial crises, when the majority of borrowers sharply lower their income level. In the event that such an organization is declared bankrupt, the investor will not be able to return even his contribution, not speaking about interest, because often a microfinance organization is an institution that does not have its own property, which could be sold as debt.

Rating of leading MFIs in Russia

Despite all the risks and high interest rates on the loan, every year there are more and more people who turn to microfinance organizations. The list of such companies is increasing along with the demand for similar services. The most popular are:

1. "Platys".
2. MoneyMan.
3. "Quick money."
4. "Loan".
5. MigCredit.
6. "Seymour".
7. VIVA Money.
8. Mani Fanny.
9. "Rusmicrofinance".
10. MFO "Summit".

Microfinance organizations, listed above, occupy the top ten leading positions in the rating, which was compiled in accordance with user requests and frequency of mention in the media.

Instead of concluding

Given all the pros and cons of such an organization, we can conclude that loans in such companies are unprofitable primarily to the borrower. A microfinance organization is an institution that was created primarily for the purpose of earning money. Therefore, an MFI can be interesting from an investment perspective.

However, the financial illiteracy of the majority of the population and the habit of living on credit contribute to an increase in the number of such organizations on the territory of the country. The main thing that attracts people is the ease of obtaining a loan, the lack of the need to provide a package of documents, the speed of cash in cash, as well as the ability to borrow even those who have been damaged by credit history.