The Russian Finance Ministry recently announced that a supervisory unit of the Finance Ministry may be established due to the expanding microfinance institution (MFI) industry in Russia and in connection with new microfinance regulation recently signed. According to the deputy finance minister Alexei Savatyugin, a legal and regulatory framework for the microfinance industry will be established by the end of the year, after which a supervisory unit may be established to strengthen controls in this market.

The new law regarding MFI oversight was signed by Russian President Dmitry Medvedev on July 2, 2010, and will be effective 180 days after its publication. The law was intended to develop industry regulation and encourage MFI activity subsequent to the economic crisis. The law defines the way that MFIs can be structured and registered and regulates MFI operations. Provisions of the new regulation prohibit MFIs from participating in the securities market, borrowing funds from individuals, securing obligations of MFI owners, providing loans in foreign currencies, penalizing borrowers for pre-payment and unilaterally changing interest rates or the method of rate determination. Additionally, the law caps loan sizes at RUB 1 million (USD 32,000) and imposes unspecified limits on fees and the length of loan terms.

By Jennifer Shevock, Research Associate

Sources and Additional Resources:
“Finance ministry poised to establish unit to control microfinance institutions” July 15, 2010.
http://www.banki.ru/news/engnews/?id=2081156

“Microfinance Comes to Russia” July 6, 2010. http://www.rmcenter.ru/en/news/detail.php?ID=3366

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