MICROCAPITAL BRIEF: Association of Microfinance Institutions Plans to Appeal New Law “On Restriction of Usurious Activities in the Kyrgyz Republic”

Almazbek Atambayev, the President of the Kyrgyz Republic, reportedly has signed a law entitled “On Restriction of Usurious Activities in the Kyrgyz Republic” that establishes an interest rate cap on microloans. The law establishes the National Bank of the Kyrgyz Republic (NBKR), the nation’s central bank, as the regulator of private moneylenders, pawnshops, microcredit companies and non-bank financial institutions that engage in moneylending. Under the new law, NBKR will update the interest rate cap each month based on the weighted average nominal annual interest rate of loans provided by financial institutions in the country, plus an additional 15 percent per year.

According to a statement attributed to Nargiza Joldosheva, the Executive Director of the Association of Microfinance Institutions (AMFI), which advocates on behalf of 32 organizations involved in microfinance, the new regulation is expected to diminish the growth of the microfinance sector. AMFI reportedly intends to apply to the Constitutional Chamber to challenge the law.

As of July 2013, NBKR reported total assets of KGS 105 billion (USD 2.16 billion). According to Ms Joldosheva, there are approximately 600 microfinance institutions (MFIs) operating in Kyrgyzstan, and these institutions charge their members an average annual interest rate of approximately 33 percent.

By Adrija Vaiciulionis, Research Associate

About the National Bank of the Kyrgyz Republic (NBKR):
The National Bank of the Kyrgyz Republic (NBKR) is the central bank of Kyrgyzstan. Its objective is to achieve and maintain pricing stability through the exercise of monetary policy. Its primary task is to maintain the purchasing power of the national currency as well as the safety and reliability of the banking and payment system of the country. As of July 2013, NBKR reported total assets of KGS 105 billion (USD 2.16 billion).

Sources and Additional Resources:

Times of Asia Article, “Kyrgyzstan Adopts a Law to Restrict Usurious Activities,”
http://www.syminvest.com/news/kyrgyzstan-adopts-a-law-to-restrict-usurious-activities-/2013/8/8/3857

MicroCapital Article, November 4, 2012, “MICROCAPITAL BRIEF: Absolute Portfolio Management Dual Return Fund Loans $2.5m to KazMicroFinance of Kazakhstan, Imon International of Tajikistan, Frontiers of Kyrgyzstan, Thaneakea Phum of Cambodia,” https://www.microcapital.org/microcapital-brief-absolute-portfolio-management-dual-return-fund-loans-2-5m-to-kazmicrofinance-of-kazakhstan-imon-international-of-tajikistan-frontiers-of-kyrgyzstan-thaneakea-phum-of-cambodia/

MicroCapital Article, October 25, 2012, “MICROCAPITAL BRIEF: Microfinance Institution Bai Tushum and Partners of Kyrgyz Republic to Transform to Bank Status,” https://www.microcapital.org/microcapital-brief-microfinance-institution-bai-tushum-and-partners-of-kyrgyz-republic-to-transform-to-bank-status/

MicroUniverse Profile: National Bank of the Kyrgyz Republic (NBKR):https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=National+Bank+of+the+Kyrgyz+Republic

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